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New RESPA Rules

New RESPA Rules

  • Final Rule amending RESPA Regulations issued on November 17, 2008
  • The majority of the amendments are not effective until January 1, 2010
  • If a Lender elects to use the New Good Faith Estimate prior to January 1, 2010, Escrow Officers must comply with new Regulations (includes issuance of New HUD-1)

Good Faith Estimate:

  • Lender/Mortgage Broker must provide potential borrower with GFE within three (3) business days of application
  • New GFE must state dates and terms related to the loan, i.e.
    • loan amount
    • term
    • rate
    • rate lock date
    • requirements for impounds
    • pre-payment penalties
    • balloons
    • adjustments

Charges associated with the loan, i.e., loan origination, appraisal, credit report, etc.

  • The terms and prices quoted (except for the interest rate and charges related to the interest rate must be available for at least 10 business days after issuance of GFE.
  • Additionally, quoted costs are subject to “tolerances”
  • Tolerances: Defined as maximum amount by which the charge for a category or categories of settlement costs may exceed the amount of the estimate for those category or categories on the GFE.  Broken down into three “tolerance categories”:
    • Zero Tolerance – Includes lender charges for taking, underwriting and processing the application, i.e., points, origination fees (yield spread premium)
    • 10% Tolerance – Includes settlement services, where the lender selects the provider, settlement services where the borrower selects the provider from the lender’s list, title services and title insurance if the lender selects the provider and recording fees.
    • Unlimited Tolerance – Includes services where the borrower can chose the providers, including escrow and title insurance, impounds for taxes, per diem interest and the cost of homeowners insurance.
    • Final Page of the GFE also contains worksheet like charts to compare different loans and terms that the borrower can use to “shop” pricing.
    • First Page essentially the same
    • Second Page added info to make form more closely align to GFE
    • Third Page has been added for purpose of “calculating the tolerances” and setting forth key terms

New HUD-1/1A:

  • First Page essentially the same
  • Second Page added info to make form more closely align to GFE
  • Third Page has been added for purpose of “calculating the tolerances” and setting forth key terms
    What if there is a difference between the GFE and the final HUD? The final rule provides a loan originator with an opportunity to “cure” any violation of the tolerance by reimbursing the borrower any amount by which the tolerances were exceeded, which can be made either at settlement or within thirty (30) calendar days of settlement.  HUD deems payment “timely” if it is placed in the mail by the loan originator within 30 calendar days after settlement.
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