FPF Wholesale Presents:
FPF RESPA Broker Support
Webinar
Introduction
As we all know, the past several years have been devastating for the mortgage industry. Countless
hardworking lenders have been shaken to the core during this crisis and the consequences are still
far-reaching. As a way to strengthen the checks and balances, industry leaders put into place several
regulatory measures.
One of these measures is the Real Estate Settlement Procedures Act, or RESPA. Originally passed by
Congress in 1974, the current RESPA regulations were published in November, 2008 and went into
effect on January 1st of this year. Due to all of these changes, there has been widespread confusion.
But at FPF Wholesale, we understand these concerns and strive to make a difference.
As the Senior Vice President of Compliance, I work hard to ensure that FPF Wholesale is current with
all of its regulatory measures. In addition to communicating with my team, I also make a point of
reaching out to the broker community to make certain compliance regulations are followed.
To that end, I have put together a comprehensive presentation on RESPA Compliance. As you read
through these pages and participate in the FPF RESPA Broker Support Webinar, I hope you will find it
both productive and informative.
Sincerely,
Pamela Kroger,
SVP, Compliance
Agenda
FPF Wholesale Home Page
Introduction of new Auto GFE tool
GFE Illustrations
Settlement Services Providers List Illustration
Certification of Receipt of GFE and Intent to Proceed
Illustration
Broker Fee Worksheet
Changed Circumstance Form
Pre-Approvals
Changed Circumstances
Common Errors
Conclusion
Pre-Approvals
The 2010 changes to RESPA were not intended to stifle the purchase market, but initially did
have an impact on purchase lending. Because of this, HUD has clarified its position regarding
the preapproval process.
In a nutshell:
1. The Pre-Approval allows a consumer to shop for a property
2. The GFE allows a consumer to shop for a loan
•A pre-approval is a document issued by a lender, stating that a consumer qualifies for a
specific loan amount.
•A prospective homebuyer with a lender-issued pre-approval can present a strong offer to
purchase a home.
•The pre-approval demonstrates to the seller that the buyer is approved by a lender for a given
loan amount.
Pre-Approvals
RESPA does not want a consumer to feel bound to a lender prior to understanding the cost of their
loan and being able to shop. It is okay to process a pre-approval provided the following:
•The applicant(s) chose to provide information regarding their income and assets.
•A fee is not charged to the applicant(s) other than a reasonable credit report fee.
•The applicant(s) understands he/she is under no obligation to close the loan with you.
•You can process the pre-approval using your own assets to verify information provided by the
applicant (VOE, VOD) – as long as there is no cost to the applicant for doing so.
Pre-Approvals
FPF Wholesale will issue a pre-approval under the following conditions:
•Transaction must be a purchase.
•1003 must state TBD for the property street address.
•The borrower was not charged a fee for the processing of the loan or verification of
information, except for a reasonable credit report fee.
When the borrower selects a property:
•Once the borrower selects a property, the pre-approval has turned into an application and
is subject to RESPA.
•The broker will issue a GFE within 72 hours of the executed sales contract, with the 10
business day shopping period starting on the date the GFE is prepared.
•An updated 1003 is prepared, reflecting the property address.
• Borrowers must give their intent to proceed prior to the collection of any fee, other than
a credit report fee.
1003 Application Dates
What is the application date?
Most often, the application date is the date the loan officer takes the application, whether by phone
or face-to-face. The application date on the 1003 determines if a loan falls under RESPA 2009 or
2010. Typically, when taking an application, the applicant will provide the following six pieces of
information:
•Borrower’s name
•Borrower’s monthly income
•Borrower’s social security number
•Property address
•Borrower’s estimated value of the property
•Loan amount
Please note: If you don’t have these six pieces of information, you do not have a complete application for RESPA
purposes. A GFE is not required to be issued until you have all this information.
If you choose to issue a GFE without this information, you will not be able to revise a fee due to a changed
circumstance relating to the missing piece of information.
GFE Important Dates
(Float)
Line 1: Enter the date Line 1: At a ppl ication, enter
Line 2: RESPA requi res all other Line 3: If the l oan is floating,
through which the quoted the da te or date and time
s ettlement charges quoted at the enter N/A.
interest rate will be through which the interest
ti me of application to be binding for
available. ra te i s available.
a mi nimum of 10 business days
from the date of the i nitial GFE
Line 4: On a refi nance with a three-day Line 4: Ea ch l ender has its own
Line 4: Thi s fi eld represents the ca ncellation policy, allow for three days; allow i nternal procedure which will impact
number of days prior to settlement one a dditional day to s ign; and allow for yet the number of days i n this box. For
tha t the rate must be locked. a nother additional day i f there is a changed l oa ns closed by us, your loan must
ci rcums tance requiring a revised GFE prior to fund pri or to the l ock expiration
docs . This process totals five days. da te.
Enter the date the
interest rate is available
10 business days from the date of initial GFE
Number of day s bef ore closing, the
interest rate needs to be locked.
GFE Important Dates
(Lock)
Line 1: Enter the date
through which the quoted Line 1: Once the l oan is l ocked Line 3: Thi s box s hows
Line 2: If the GFE i s reissued,
interest rate will be the l ock expiration date is borrowers the term of their
the da te entered on this l ine
available. s hown here. ra te l ock – i .e., 30 da ys or 45
does not change.
da ys .
Line 3: Once l ocked, reissue a Line 3: A ra te l ock is a changed
Line 4: Once the l oan is l ocked,
GFE a nd complete this field ci rcums tance that will require a
enter N/A i n this box.
wi th the rate l ock term. new GFE.
Rate-lock expiration date
10 business days from the date of initial GFE
When locked, enter
N/A
Changed Circumstances
“When do I re-issue a new GFE?”
“When can a fee be quoted on the initial GFE change?”
These are some of the questions that arise when dealing with changed circumstances. A
changed circumstance is something that is discovered during the processing of the loan that
is different than the information the broker had at the time of the application. The loan
originator has three days to prepare a new GFE, notifying the borrower of the change in fees
as a result of the changed circumstance. If this notification does not happen within 72 hours,
the loan originator may be required to pay this fee at the closing table.
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Changed Circumstances
Changed Circumstances include:
•Acts of God, Disaster, Emergency
o A federal disaster declared by the President (fire, flood, tornado, earthquake or hurricane)
•Inaccurate information used in good faith to provide the GFE
oLoan amount, credit quality, property value, income
•New information obtained that was not relied on in providing the GFE
oProperty type (SFR – Units), Occupancy Change, FICO, underwriting conditions require additional services
•Locking the Loan
oLoan locks after GFE is issued; lock period expires
•Other information particular to the borrower or transaction
o Includes boundary disputes, flood insurance, environmental problems, unique property characteristics not
known to the originator
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Changed Circumstances
Borrower Requested Changes
•Changes to the loan application originated by the borrower can be cause to create a new revised GFE,
changing only those sections of the GFE related to the borrower’s choice.
Examples include:
•Changed loan program; i.e., from ARM to fixed
•Rate lock
•Borrower chooses another property
•Borrower requests different loan amount
Rate Lock
When borrowers lock their interest rates, only the charges related to that interest rate may change.
•Charge or credit for interest rate chosen (box 2 on page 2 of the GFE)
•Per Diem interest
•Charges related to the loan terms
•All other charges remain the same
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Changed Circumstances
Changed Circumstances may also include the following:
•Borrower does not proceed to closing quickly enough.
•GSE, FHA, Mortgage insurance program changes.
•Regulatory changes.
•Property address deemed to be incorrect.
•Parties added or removed from title.
•Property use changes.
•Signing documents using a POA.
•Vendor for a settlement service goes out of business.
•AVM problem, Appraisal Review.
•Investor Rejection of appraisal requiring new appraisal.
For additional information about changed circumstances and their fee impact, please refer to the
Changed Circumstance chart found on our website in the RESPA Tools section.
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Changed Circumstances
Changed Circumstances do not include:
•Broker prepared GFE which does not describe/support current loan programs offered by the Lender.
•GFE is issued without property information and the property information is provided later in the
process (pre-approval).
•GFE is issued by the mortgage broker for one lender, which is later submitted to a different lender.
•Market fluctuations on a locked loan.
•Changes that should have been known at the time the GFE was provided; for example, the requirement
of two appraisals for the loan program/amount requested.
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Changed Circumstances
Timing
•A new GFE must be prepared disclosing the fees that have changed as a result of the
changed circumstance.
•This new GFE must be issued within three days of discovery of the change.
•During processing, and prior to submission for underwriting, the broker is responsible for
documenting the changed circumstance and preparing the revised GFE.
•After submission, we are responsible for preparing the updated GFE due to a changed
circumstance.
•To meet this timeframe, it is important that the broker complete the Changed
Circumstance form and submit it, along with the documentation supporting the changed
circumstance to his/her RESPA Specialist within 24 hours of discovery.
•By working together, we will meet the three-day deadline imposed by RESPA.
Changed Circumstances
Documentation
In order to prepare a revised and accurate GFE, the originator must complete the RESPA
Changed Circumstance Detail Form. This form can be completed on line via the new AutoGFE
program or completed manually, emailed to your Compliance Specialist.
This form includes:
• The date of the change
• The date of the re-disclosure
• Details regarding the change
• Fee changes associated with the change
The changed circumstance documentation is reviewed by the Compliance Specialist who will
approve or decline the request. If approved, the Compliance Specialist will prepare the revised
GFE and TIL disclosures, if needed. If the loan is already approved, the underwriter will review
and approve or decline the request before forwarding to the set-up person for re-disclosure.
The form will be kept in the loan file along with the appropriate GFE.
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Request for
Revised GFE
If the loan has been submitted for
underwriting, and a changed circumstance
occurs, the broker will complete the Changed
Circumstance form, found on our website or
through the new Auto GFE.
This form describes the change and the
impact on the interest rate/program or fees.
The RESPA Specialist will review the
documentation provided and prepare the
revised GFE.
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Broker Fee
Worksheet
While not required, we encourage you to use the
Broker Fee Worksheet. This document is dynamic
and will subtotal reflecting the various boxes of
the GFE. It’s a great tool to make sure you have
captured all your fees on the GFE.
A better tool is to use the Auto GFE we talked
about earlier!
Common Errors
The following are the most common errors we see with our loan files:
1. GFE – Page 1:
2. Date of the GFE vs. the Application Date
We are seeing files that have a GFE dated prior to the application date. Per RESPA the
GFE must be dated within three days after the application date.
We will be comparing the earlier of the date of the loan officer signature or the
applicant’s signature on the 1003 to the date on the GFE for compliance.
If the application is a ‘TBD’ or preapproval where no property has been selected, we will
compare the date on the purchase/sales contract to the date on the GFE for
compliance.
Common Errors
Important Dates Section
Line 2 – Business Days, we define business days as any day you are open for business, not
calendar days but business days. If you are open on Saturdays, we will count Saturday in
the 10 day calculation.
Terms of the Loan Section
Payment:
Please remember to include the MI portion of the payment when quoting the payment in
this section.
Impounds:
We are seeing loans where the box Yes Ask Us is checked for impounds, but impounds are
not quoted on page 2 of the GFE, box 9.
Common Errors
GFE page 2
Block 1:
Block 1 should include all the money you want to make on the loan plus all fees for origination
and processing the loan as well as lender fees. This includes the following charges: processing fee
including contract processing, application, administration fees, underwriting, document
preparation, mortgage broker fee, commitment fee, DU/LP fees and other miscellaneous
origination services provided by or on behalf of the loan originator.
Any portion of the YSP that makes up your compensation is included in Box 1.
If any part of your compensation is based on a percentage of the loan amount, that portion will
change as the loan amount changes.
Block 3:
We are seeing files where the initial PMI premium is missing or miscalculated. Please check our
website for links to calculate the PMI premium.
Block 4:
Common Errors
Mobile Notary fees are a part of block 4 as they are a part of the settlement of the loan. If you plan on
using a mobile notary, remember to allow for their fee here. The Mobile Notary fee is not included in box 6
nor is it a part of the 1300 series of the HUD.
Block 5:
Not quoting Owner’s Title Insurance is the error we see most often. Even if it is not being paid by the
buyer, you need to put the Owner’s Title Insurance premium on the GFE.
Block 8 - Transfer Taxes:
(note: this is also known as Recordation Tax, Intangible Tax, Excise Tax, Doc Stamps, Deed Stamps, Mortgage Stamps)
This is a zero tolerance field with brand new clarification! The amount the borrower is likely to pay for
transfer taxes is disclosed on the GFE. In some areas, this amount, as a matter of practice, is governed by
state or local laws. If state or local law is unclear or does not specifically attribute transfer tax to a seller
or borrower, the amount to be disclosed on the GFE is governed by common practice or experience in the
locality of the property.
Common Errors
If the seller is paying a portion of the transfer tax that was not disclosed on the
GFE, then that portion should be listed in the seller’s column in the 1200 series
on the HUD-1.
1. Statute – if state or local law defines how much the buyer and seller pay,
then disclose the amount by law the buyer is paying.
2. If the law does not tell you how much each is required to pay and you have
the sales contract – enter the amount per the contract that the borrower has
agreed to pay.
3. If these are unclear, then show the amount the borrower is paying that is a
matter of common practice in the area.
Common Errors
Block 9 – Impounds:
Please make sure that when you check the impound box on the first page of the GFE, Yes
Ask Us, that you check the boxes in block 9 and include the initial deposit amount.
Settlement Service Prov ider List:
Please complete the Settlement Service Provider List! We are seeing many submissions
with blank Settlement Service Provider Lists.
If a borrower shops for service providers and chooses someone other than whom you
listed on the Settlement Service Provider List then that fee is not included in the 10%
tolerance bucket.
If you provide a blank Settlement Service Provider List, then all provider fees are subject
to a 10% tolerance over what you quoted with out knowing who the borrower will
choose.
Common Errors
Closing:
Settlement Agents are using 2009 HUD-1 forms on 2010 applications.
Line 801:
Line 801 cannot increase at closing from what was disclosed on the initial GFE unless there is an
increase in the loan amount and a portion of your compensation is calculated as a percentage of
the loan amount.
Settlement Fees:
Settlement agents are often placing some of their fees in the 1300 section of the HUD-1 instead of
including them in 1101.
Mobile Notary Fees not being included in 1101.
Transfer Taxes:
At close, when transfer taxes are finalized, we are seeing loans where transfer taxes quoted on
the GFE are less than at closing.
Based on the revised HUD interpretation described previously, we should see some relief in this
area and will review these prior to closing on an individual basis.
Questions?
Conclusion
Thank you for participating in the FPFs RESPA Broker Support Webinar. We hope that you found this
session useful and will continue to make compliance a priority. If you have any further questions as
a result of this webinar or if you have RESPA questions in general, please contact your Account
Executive.
At FPF Wholesale, “We Can Help You!”