Overview of changes and
impacts to Corporate
Regulation Z, Truth In Lending (TIL)
Regulation Z was created to protect customers from undesirable credit practices and to assist them in making
informed decisions regarding the cost of consumer credit.
These three changes - took effect July 1, 2009:
– Initial disclosures must be provided within three days of application. Expanded to include refinance
transactions and non-owner occupied properties.
– A seven business day waiting period is now required between the delivery of initial TIL disclosures and the
signing of closing documents.
– If the interest rate or fees change, causing the Annual Percentage Rate (APR) to increase by more than
0.125%, the TIL must be re-disclosed to the customer. The customer must be in possession of the re-
disclosed TIL for three days before closing may occur.
RESPA Reform, the new Good Faith Estimate (GFE) and HUD-1 Settlement Statement (HUD-1)
Effective January 1, 2010, all lenders will provide an enhanced, easy-to-read document that clearly discloses loan
terms and closing costs. Primarily, the new GFE will accomplish the following:
– Answer common questions consumers have about their loan (i.e. term, interest rate, pre-payment penalties,
balloon payments, closing costs).
– Consolidate closing costs into major categories and display total estimated settlement charges prominently
on the first page.
– Limit the amount a fee can change and require lenders and settlement service providers correct errors and
violations and repay consumers any overcharges within 30 days of closing.
Benefits to the customer
The HUD -1 has also been modified to incorporate line-by-line references to corresponding amounts on the GFE.
It is estimated that by improving up-front disclosures on the GFE, and limiting the amount estimated charges can
change, consumers will save nearly $700 in total closing costs.
Updates- Government and Agency
Home Buyer Tax Credit
The full tax credit is available for incomes up to $125,000 (single) and $225,000 (married) and will gradually
phased out to maximum of $145,000 (single) and $245,000 (married).
NEW-The First-Time Home Buyer Tax Credit has been extended into 2010:
– 10% of the purchase price, not to exceed $8,000.
– Extended until June 30, 2010 closing must occur.
A new Move-Up / Repeat Home Buyer Tax Credit was created.
– 10% purchase price credit not exceed $6,500. Home priced above $800,000 are not eligible.
– Effective for purchases after November 6, 2009 and before June 30, 2010, contract must be fully executed
by April 30, 2010.
– A “move-up” / repeat home buyer is defined as a person who has owned and resided in the same home for
at least five consecutive years of the eight years prior to the purchase date.
Fannie Mae and Freddie Mac- Conforming Loan Limits for 2010
No Change for 2010.
Expanded conforming loan limits we call “Super Conforming “or “High Balance Conforming” have been
extended through 2010 to keep credit available for people in high cost markets at lower rates.
*The following chart contains the 2010 minimum and maximum loan limits for single and multi-unit homes.
The maximum allowable loan amount is determined as the greater of the minimum amount
or 125% of area median home prices, not to exceed the maximum amount.
Contiguous States and Alaska and Hawaii
Units District of Columbia
Minimum Maximum Minimum Maximum For single family loans the maximum allowable
loan amount is determined as the greater of
One $417,000 $729,750 $625,500 $938,250
$417,000 or 125% of area median home prices,
Two $533,850 $934,200 $800,775 $1,201,150 not to exceed $729,750.
Three $645,300 $1,129,250 $967,950 $1,451,925
Four $801,950 $1,403,400 $1,202,925 $1,804,375
Federal Housing Administration (FHA), Statutory Loan Limits for 2010
FHA loan limits will remain unchanged for 2010.
The following chart contains the 2010 FHA loan limits for single and multi-unit homes. The maximum loan amount is
determined as the greater of the Floor amount or 125% of area median home prices, not to exceed the ceiling
Units Floor Ceiling
One $271,050 $729,750
For single family loans the maximum allowable
Two $347,000 $934,200 loan amount is determined as the greater of
$271,050 or 125% of area median home prices,
Three $419,000 $1,129,250
not to exceed $729,750.
Four $521,250 $1,403,400
What is RESPA Reform?
RESPA Reform was enacted by the U.S. Department of Housing and Urban
Development (HUD) to protect borrowers by standardizing the industry and:
– providing a more thorough explanation of key loan terms and settlement charges;
– including a side-by-side chart to compare estimated charges on the GFE with actual charges at closing; and
– requiring that fees not increase between issuance of the GFE and closing except under limited circumstances.
RESPA Reform facts
Applies to all lenders and mortgage brokers
Mandatory by January 1, 2010
New RESPA Reform requirements
New Good Faith Estimate (GFE)
New Settlement Statement (HUD-1)
Closing timeline impact
New RESPA Reform GFE
should help transferees avoid surprise charges at closing, have the ability to shop for the best loan, and feel more
comfortable with their decision,
breaks estimated total settlement charges into 11 blocks of charges, and
bundles certain fees previously itemized on the old GFE.
New RESPA Reform HUD-1
Includes side-by-side comparison chart to compare GFE charges to final charges shown on the HUD-1
Section 800 - Items Payable in Connection with Loan:
– Line 801 reflects origination fee and all other lender non-pass through fees
– Line 802 reflects discount points
– Line 803 is a sum of lines 801 and 802
Section 1100 – Title Charges:
– Title charges in this section are limited to fee line items for settlement/closing fee and title insurance
– Previously itemized fees may be bundled into these new, limited line items, OR
– Closing agent may choose to bundle ALL fees from section 1100 into line 1101 (with exception of owner’s title insurance)
Closing timeline impact
If the HUD-1 shows an increased charge versus the latest GFE, closing may be delayed. This applies only if there is a valid changed
circumstance by the borrower. Otherwise, borrower is refunded.
If a revised GFE must be issued, transferee must be allowed at least one business day to review prior to closing.
If APR increases more than .125%, Truth in Lending (TIL) disclosure must be reissued at least seven days prior to closing (allows three
business days for mailing and time for transferee to review)
Example of allowable fee increase
A fee increase can only be charged to the borrower if it occurred due to what HUD
refers to as a “valid changed circumstance”.
For example, if the borrower chooses to make a significant change to his/her loan, such
as a product change, a “valid changed circumstance” has occurred and the associated
fee increases can be charged to the borrower, provided a new GFE reflecting the new
fees is issued.
Impacts to Direct Bill
Direct Bill Agreement / Reimbursement policy
Relocation Policy Updates
The U.S. unemployment rate fell to 9.7% in January from 10% in December, while 20,000 nonfarm payroll jobs were
lost, the government says.- By one measure the labor market showed signs of healing in January. Labor Department
The housing market appears to be slowly improving.
We should expect home sales to strengthen in the spring market due to low prices, low interest rates and the Home
Buyer Tax Credit.
Unemployment fell to 9.7% in December (down from 10%), but unemployment continues to be a problem and until
we get a handle on jobs, we should not expect sustainable growth.
There is talk about investors offering a principal reduction program to help homeowners who are upside down on
their loans. Reducing the principal balance to 96.5% of the current value would pave the way for homeowners to
refinance. There is no definitive guidance on whether or not this will come to fruition.
The mortgage market in 2010 is forecasted at $1.2 trillion, heavily weighted on purchase volume (60%).
Foreclosures are by far one of the biggest threats to the U.S. housing market, which remains highly vulnerable to
setbacks and heavily reliant on government intervention. If foreclosures continue dropping it would be one of the
strongest signals yet the market is on the path to recovery.
Second straight week rate drop -U.S. mortgage rates dipped below 5 percent again, a key level that may boost
home loan demand, 4.93% for a 30 year products. Reuters News 2/18
Fed bumps the discount rate up .25% on 2/18, first increase in 4 years. 10 year T- bill goes up from 3.81 from 3.74
and interest rates rose .25 percent on Friday 2/19- US Today 2/19
18 months after the government seized Fannie and Freddie they are no longer to participate with purchase of loans
through originators. Focus will be on preventing foreclosures and saving taxpayers money and are asking lenders
to buy back defective loans. American Banker 2/18
Single Family Housing starts are up 1.5% from one year ago this month to 484,000. Regionally, housing starts last
month climbed 1% in the South, 10% in the Northeast and 8.9% in the West and construction fell 3.2% in the mid
west. Wall Street Journal -2/18
Obama announces $1.5 billion dollar home owner assistance program - to the 5 hardest hit states. Florida,
California, Nevada, Arizona and Michigan. Funds are coming from the TARP . Assistance is to help unemployed
homeowners and homes that have dropped in value below what they owe.- WSJ 2/20
Rates are expected to rise by end of March when the Federal reserve stops buying mortgage related securities.
Reuters News 2/18
Update on Short Sale Trends
The lowest mortgage rates in decades and high affordability helped the hard-hit housing market find some footing last
year after a three-year slump. Attractive rates bode well for the housing market, which remains highly vulnerable to
setbacks and heavily reliant on government intervention.
In December, 2009 Treasury issued new guidelines to streamline the short sale process, integrating short
sales into the Home Affordable Modification Program (HAMP) and servicers are expected to
implement the Home Affordable Foreclosure Alternative program by April 5, 2010. The program
provides cash incentives for homeowners, servicers and investors.
As short sales are becoming more popular, Moody’s Economy.com estimates that 490,000
homeowners will use short sales and deed-in-lieu transactions as an exit strategy in 2010, compared to
300,000 in 2009.
Loan Resolution Corporation has seen a tremendous increase in short sales in the past
“The industry is recognizing that many people don't want or don't qualify for home
retention options. They want to get out," Travis Olsen, COO.