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RESPA 2010:
What consumers need to know!
April 6, 2010 IHOEP Spring Conference 1
Consumers should expect…
Application Disclosures:
Within 3 days of “application”
1. Settlement information booklet
– http://www.hud.gov/offices/hsg/ramh/res/settlement-
cost-booklet03252010.cfm
2. An estimate of closing costs (GFE)
– At minimal (or no) cost
– On a standardized format from one
lender to the next
April 6, 2010 IHOEP Spring Conference 2
Consumer should expect…
Closing disclosures
• Standardized HUD form
• Itemization of all FINAL 3rd party
settlement charges
• Costs cannot increase by more than
permitted tolerances from GFE to
HUD
April 6, 2010 IHOEP Spring Conference 3
An “application” starts the process
Good Faith Estimate is triggered by submission of:
• Borrower’s name
• Monthly income
• SSN
• Property Address
• Estimated value
• Loan amount
• Other info required by lender
– EXCEPT verification docs
April 6, 2010 IHOEP Spring Conference 4
The lender cannot require as a
condition of providing the GFE:
• Payment of fee (other than credit
report) until GFE is “received” by
applicant
• If mailed, considered “received” 3
business days after mailing
• Verification docs
• W-2, tax return, income docs
• Appraisal, Lien search, etc.
April 6, 2010 IHOEP Spring Conference 5
Good Faith Estimate (GFE)
• New standardized format
• Cannot be changed or altered!
April 6, 2010 IHOEP Spring Conference 6
GFE – Important Dates
Product specific – Bank decision
Could be 6 seconds or 6 months!
May be
“NA”
Must reflect
bank policy At minimum 10
“business days”
April 6, 2010 IHOEP Spring Conference 7
GFE
Expiration of GFE
• Estimates must be
available for 10 Binding GFE
business days
• If borrower accepts
• If borrower does not loan offer, Lender is
express intent to bound to GFE (within
proceed w/in 10 tolerances) unless
business days, the “changed
GFE expires circumstance” occurs
April 6, 2010 IHOEP Spring Conference 8
GFE – Loan Terms Summary
Must disclose monthly
payment even if legal
obligation is different!
Variable Rate Info
Variable Rate Info
Escrow Info
April 6, 2010 IHOEP Spring Conference 9
GFE – Cost Summary
• All lender-required costs
disclosed in 11 “blocks”
• Charges from GFE to
HUD can only increase
by certain tolerance
levels
• All costs are not itemized
• No POC items!
April 6, 2010 IHOEP Spring Conference 10
Good Faith Estimate
• Block 1 – All lender & broker fees for origination
• Block 2 – Charges for interest rate selected
– Loan level price adjustments, discount points, yield
spread premiums, etc
• 0% tolerance applies – CANNOT Change
April 6, 2010 IHOEP Spring Conference 11
Good Faith Estimate
Blocks 3-8
• Other settlement services
• May or may not be lender
required providers
• Provider list if consumer
can shop
• 10% tolerance applies to
most this section
April 6, 2010 IHOEP Spring Conference 12
Good Faith Estimate
Blocks 9 -11
• Not subject to tolerance; may change
April 6, 2010 IHOEP Spring Conference 13
GFE Tolerances
GFE Item Tolerance
Each item in Blocks 1, 2, & 8 0%
May Not Change
The Sum of costs of from Blocks 3, 4, 5, 6 & 7 IF lender
requires use of provider OR borrower uses lender-identified 10%
provider.
Any service in Blocks 4, 5 & 6 IF borrower is allowed to shop May Change
for service and does NOT select provider on lender’s list of
providers as well as Blocks 9, 10 & 11.
April 6, 2010 IHOEP Spring Conference 14
GFE Page 3 – Trade Off Table
• Lender required to complete 1st column
• 2nd & 3rd columns show higher & lower rates
using same loan amounts
April 6, 2010 IHOEP Spring Conference 15
When the GFE can change…
(“Changed Circumstance”)
• Borrower requested • Change affecting
– Loan program costs
– Loan amount – Locking in rate
• Change affecting loan – Boundary dispute
– Borrower eligibility – “Muddied” title
– New information or – Unique property
inaccurate information warranting expanded
• Appraised Value appraisal
• Verified Income
April 6, 2010 IHOEP Spring Conference 16
Changed Circumstance
Lender can provide revised GFE
• Must be provided within three days of
“changed circumstance”
• Only fee or terms related to “changed
circumstance” can change
• Multiple GFEs can be provided if
necessary
• No waiting period between last revised
GFE & closing
April 6, 2010 IHOEP Spring Conference 17
What the GFE does not tell the
consumer:
• If interest rate is “locked”
• Total PITI payment
• Amount of cash needed to close
– Purchase agreement negotiations for seller paid items
– Other “credits” such as application deposit, grants & tax proration
• Down payment amount
• If fees will be paid by 3rd party
• That all fees disclosed are not “required” by lender
– Owner’s title insurance
April 6, 2010 IHOEP Spring Conference 18
HUD Statement
• Now 1 page longer
• Pages 1 & 2 mostly unchanged
• References GFE Block number
• Itemize most 3rd party fees
• Actual, FINAL costs
• New final page provides:
– GFE & HUD comparison table
– Final loan summary
April 6, 2010 IHOEP Spring Conference 19
HUD – Page 3 Comparison Chart
Charges that Cannot Increase
• GFE - Amounts in Block 1 & 2 and Line A, Block 8
• HUD – Lines 801, 802, 803 & 1203
• Each line has separate 0% tolerance
Comparison of GFE & HUD-1 Charges GFE HUD
Charges that Cannot Increase HUD Line Number
Our Origination Charge #801 $2,000 $2,000
Your Credit or Charge for Interest Rate Chosen #802 $ -500 $ -500
Your Adjusted origination charge #803 $1,500 $1,500
Transfer Taxes #1203
April 6, 2010 IHOEP Spring Conference 20
HUD – Page 3 Comparison Chart
Charges that Cannot Increase in Total by More Than 10%
• Include POC Amounts
Charge That in Total Cannot Increase by More than 10% GFE HUD
Government Recording fees #1201 $ 74.00 $ 74.00
Appraisal Fee #804 $ 250.00 $ 275.00
Credit Report #805 $ 30.00 $ 30.00
Flood Certification #807 $ 14.00 $ 14.00
Termite Inspection #1302 $ 80.00 $ 80.00
Title Charges #1101 $ 915.00 $ 930.00
Total $1,363.00 $1,403.00
Increase between GFE & HUD $40.00 3%
April 6, 2010 IHOEP Spring Conference 21
Curing Tolerance Violations
• Tolerance errors must be “cured” within 30 days
following closing to avoid a violation
• Cure process is the Lender’s responsibility
• Settlement agent is not required to stop closing
• Correct prior to closing if possible
• Lender is responsible for cure process
April 6, 2010 IHOEP Spring Conference 22
Tolerance Cure Sample
2 0 0 A m o unt s P a id by o r in B e ha lf o f B o rro we r
201 Depo sit o r earnest mo ney $ 250.00
202 P rincipal amo unt o f new lo an(s) $ 75,000.00
203 Existing lo an(s) taken subject to
204 HUD
205 Page 1
HUD 206
207 Seller Credit fo r Termite Inspectio n $ 85.00
Page 3 0%
208 Lender Credit to Cure "1 To lerance Catego ry" $ 42.85
209
Charges That in Total Cannot Increase More Than 10% Good Faith Estimate HUD-1
Government recording charges # 1201 $93.00 #REF!
Appraisal # 804 $100.00 #REF!
Credit Report # 805 $30.00 #REF!
Flood Determination # 807 $18.00 #REF!
Title Services # 1101 $460.00 #REF!
Ow ner's Title Insurance # 1103 $0.00 $0.00
Lender Cure for "10% Tolerance Category" # -$42.85
#
Total $701.00 $768.70
Increase between GFE and HUD-1 Charges $67.70 or 9.66%
April 6, 2010 IHOEP Spring Conference 23
Questions?
Ronette Schlatter, CRCM
Senior Compliance Coordinator
Iowa Bankers Association
800-532-1423
rschlatter@iowabankers.com
April 6, 2010 IHOEP Spring Conference 24