Understanding RESPA Reform

Understanding
RESPA Reform
It’s your business
Federal Title &

Escrow Company www.miami.federaltitle.com RESPA Reform | 04 Nov 2009
Sponsored by Federal Title
• Independence
• Value
• Technology
• Leading the pack since 1996
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New RESPA Rule
• Transparency
• Accountability
• Reliability
• Federal Title’s role
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Transparency
• Consumer protection
• Up-front disclosure
• Eliminate surprises, “hidden fees”
• Federal Title’s approach all along:
• Guaranteed quote
• REAL Credit™ Program
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Accountability
• For lenders, precision is more vital than ever.

• Penalties
• Closing delays
• For title companies, accuracy is key.
• Tolerance violations
• Federal Title welcomes new RESPA rule
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Reliability
• Title service providers MUST deliver quotes:

• Instantly
• Accurately
• Efficiently
• Federal Title takes it a step further, introducing:
• ‘Zero Tolerance’ Guarantee – NEW!
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‘Zero Tolerance’ Guarantee
• Online settlement orders comply with Good

Faith Estimate tolerance requirements.
• If the Order and final HUD-1 differ, Federal Title
will indemnify the lender for tolerance violations.¹
• Online orders only
• Up to 30 days after closing
¹ Full details coming in December.
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Now Playing:
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RESPA Background
• RESPA reform going on since 1992
• Never without controversy, as proposed
changes typically pit settlement service
providers against each other
• 2002: when HUD introduced a proposed rule
calling for a guaranteed mortgage package
• 2004: Settlement service industry led
movement to have the rule withdrawn
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RESPA Background (cont.)
• 2005: HUD conducted a series of roundtable
discussions with industry representatives, trade
associations and consumer groups
• March 14, 2008: HUD published its proposed
RESPA rule and received around 12,000 public
comments in response to the proposed rule
• Nov. 17, 2008: HUD published its final rule
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Main Components
• 3-page Good Faith Estimate
• Controversial YSP disclosure
• Tolerance limitations on settlement charges
• 3-page HUD-1 settlement statement
• Average charges
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Good Faith Estimate
• Centerpiece of RESPA reform
• Goal was greater clarity and transparency
• Only HUD could simplify the process by taking
a 1-page GFE and turning it into 3 pages
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Good Faith Estimate
• Provide a GFE within 3 days of receiving an
“application”
• Settlement charges must remain open for 10
business days
• Initial interest rate is available until specified
date
• Limits GFE fees to the cost of a credit report
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Good Faith Estimate – Page 1
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Disclosure of Yield Spread Premiums
• A YSP is disclosed as a “credit” to the lender

or broker’s origination charge
• Discount points are disclosed as a “charge,”
which is added to the lender or broker’s
“origination charge”
• HUD includes comparison chart on Page 3 of
final GFE
• Lender’s completion of chart is optional
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Hypotheticals
Par interest rate = 6%
Total origination fee = $1,500
3 Possibilities
i. Loan closes at par rate
$1,500 origination fee
ii. Loan closes at 6.5% interest rate
$1,500 origination fee to lender
$2,000 YSP to mortgage broker
iii. Loan closes below par at 5.5% rate
Borrower charged $2,000 in discount points
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1,500
X 6 0
1,500
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3,500
X 2,000 6.5 -2,000
1,500
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1,500
X 2,000 5.5 2,000
3,500
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GFE – Yield Spread Premium Litigation
• Dec. 19, 2008: NAMB sues HUD

• Sought permanent injunction
• Claim rule is
• Arbitrary and capricious
• Violates APA
• Unlevel playing field = lower fees
• July 2009: Court denies NAMB request
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Good Faith Estimate - Tolerances
• 3 buckets of settlement charges
• Fixed fees
• 10% tolerance
• No restrictions
• Absent “changed circumstances,” cannot
provide new GFE
• HUD gives lenders 30-day cure period
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HUD-1 Settlement Statement
• Modifies Page 2 of HUD-1 to compare final
settlement charges with the GFE
• Includes “(from GFE #_)” next to itemized
charges
• Uses language consistent with GFE
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HUD-1 (cont.)
• Groups previously itemized lender, title
insurance charges into single fees
• Breaks out settlement fee from bundled
title services fee
• Itemizes title agent’s and title underwriter’s
portions of premium
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HUD-1 Settlement Statement – Page 1
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• Adds Page 3 to the HUD-1

• Requires comparison chart between GFE
and final settlement charges on HUD-1
• Includes a summary of loan terms
• Replaces the proposed closing script
• Obligates lender to supply settlement agent

with sufficient information to complete Page 3
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Average Charges
• Final rule permits any settlement service
provider to use average charges for settlement
services obtained from third parties
• Average charge not allowed for services
that are priced based on loan amount or
price of home, or for a provider’s own
internal charges
• This is optional – rule doesn’t require use of
average charges
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Average Charges (cont.)
• No specific method prescribed to determine
average charges
• Must be calculated every 6 months
• Average charge must be used for every
transaction within a specific class of
transactions
• If average charge used, must retain
documentation of calculation for 3 years
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Effective Dates
• New GFE and HUD-1 forms go into effect
January 1, 2010
• Average charges went into effect
January 16, 2009
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Questions?
Federal Title &

Thanks for your attention!
Amy and Matt Bales
Federal Title & Escrow Company
4000 Ponce de Leon Blvd.
Suite 470
Coral Gables, FL, 33146
QUESTIONS@FEDERALTITLE.COM
305-777-0211 (Phone)
305-375-3577 (Fax)
www.miami.federaltitle.com
Federal Title &

Please keep in touch …
Amy and Matt Bales
Federal Title & Escrow Company
4000 Ponce de Leon Blvd.
Suite 470
Coral Gables, FL, 33146
QUESTIONS@FEDERALTITLE.COM
305-777-0211 (Phone)
305-375-3577 (Fax)
www.miami.federaltitle.com
Federal Title &


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Understanding

Federal Title &

Federal Title &

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• For lenders, precision is more vital than ever.

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• Title service providers MUST deliver quotes:

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• Online settlement orders comply with Good

¹ Full details coming in December.

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• A YSP is disclosed as a “credit” to the lender

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X 2,000 6.5 -2,000

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X 2,000 5.5 2,000

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• Dec. 19, 2008: NAMB sues HUD

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• Adds Page 3 to the HUD-1

• Obligates lender to supply settlement agent

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