New Markets Tax Credits Challenges

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New Markets Tax Credits Challenges Powered By Docstoc
					 Broker RESPA Training

         December 2009
   Presented by Melissa Brown
Director of Single Family Lending
       Clearinghouse CDFI
            HUD FAQ:
http://www.hud.gov/offices/hsg/
     ramh/res/respa_hm.cfm
       Presentation Overview
• What triggers the need to provide the GFE
• Fee restriction
• New rules regarding issuance and re-disclosure of
  GFE. (Tolerances, changed circumstances.
• Walk through of the GFE, including how to complete.
   – Mandatory disclosures associated with the GFE
• Loan Scenario Examples
• GFE Violations
• Overview of the new HUD 1 and HUD-1 Violations
    When do you send a GFE?
• Loan originator must send the GFE within 3 business days of
  receipt of an application.
• “Business day” is any day on which the offices of the loan
  originator are open for business.
• Definition of Application is when ALL six items listed below have
  been received:
   – Borrower’s Name
   – Borrower’s SSN to obtain a credit report
   – Borrower’s Income
   – PROPERTY ADDRESS
   – Estimate of the property value
   – Loan amount sought
              GFE Requirements
• Mortgage broker will be responsible for issuing the initial GFE in
  compliance.
• Clearinghouse CDFI is responsible for assuring that the GFE is in
  compliance, and will require a copy of it upon submission.
• If the Broker GFE is issued incorrectly, it may result in a decline of
  your loan.
• Service Provider list must accompany GFE. This list must provide
  at least one service provider for each required service that the
  Borrower is allowed to shop for. List MUST include the
  following services: Home Inspection, Termite Report, Title
  Services, Escrow Services (if applicable), Attorney (if applicable),
  Homebuyer Education provider (if service is a paid service), any
  other service that is required.
• You are only subject to the 10% tolerance if the borrower
  chooses a provider from your list.
   GFE Related Fee Restriction
• Like the TIL requirement- other than a credit report
  fee, no other fee can be charged prior to the
  consumer receiving the GFE.
   – If the GFE is mailed, the consumer is deemed to receive the
     GFE 3 calendar days after mailing, exclusive of Sundays and
     Federal holidays .
• A fee beyond the credit report fee may be charged
  after a loan applicant both receives the GFE AND
  indicates an intention to proceed.
  What about pre-approvals and pre-
          qualifications?
• Definition of “application” requires a property address and the
  HUD rule does not address pre-approvals.
• If you issue a GFE without all 6 items (i.e. property address and
  exact loan amount), you are still presumed to have received all 6
  items and this cannot constitute a changed circumstance to be
  re-disclosed later on.
• HUD FAQ’s state that you cannot “process” a loan until the
  Borrower has received the GFE and given their intent to
  proceed. They do not want the borrower to be overburdened
  with documentation at this point in the process.
• Clearinghouse CDFI will no longer accept pre-approval loans in
  underwriting. (see new submission sheet and minimum
  documents checklist)
        GFE Initial Availability
• GFE terms must be available for at least 10 business
  days , except for the interest rate and interest rate
  charges.
• The interest rate dependant charges are:
   – Any thing in Box 2 on Page 2 of the GFE
   – Per diem interest
• New GFE and HUD-1 will apply to any applications
  taken after January 1, this includes people already
  pre-approved that go into contract after January 1.
          The New GFE- Page 1
Important dates section



Line 1: If loan is not locked, this box will show N/A. At the time the
   loan is locked, Clearinghouse CDFI will issue a new GFE with the
   actual lock period.
Line 2: This date must be at least 10 business days from the date of
   the GFE and refers to all other non-interest rate related fees.
Line 3: Will be filled in at the time of rate lock by Clearinghouse
   CDFI. Initial GFE should say N/A
Line 4: This is the deadline to lock before settlement. 15 days is
   typically a good cushion.
               GFE Page 2
• Page 2 of the GFE identifies settlement
  charges in various categories
• Paid outside of closing (POC) items are not
  separately itemized or designated on the GFE.
• If the seller is paying the fees, they are still
  included on the GFE.
• Fees that are not required by the lender are
  not disclosed on the GFE.
                     GFE Page 2

• Box 1- Our charge includes ALL broker and lender compensation.
See Clearinghouse CDFI Fee list for our portion of the origination
charge. It is not the same for each program, so you will have to set
defaults for each program into your system.

• This box will include ALL fees paid to the broker and lender
including processing, admin, application, underwriting, and doc
prep even if they are paid to a 3rd party.

•If a portion of the Brokers compensation includes the YSP, the
amount of the YSP must be added to the origination charge.
                     GFE Page 2

• A Broker Fee Breakdown sheet must be submitted to
  Clearinghouse CDFI with the initial loan submission.

• Line 1, our origination charge CANNOT change, even with a
  changed circumstance. Exception: If the loan amount changes
  and a portion of the Origination Charge is a percentage of the
  loan amount or the overall loan program changes. (Must be a
  legal documented changed circumstance!)

• Line 1 is subject to a 0% tolerance. This means that this fee
  cannot change at closing.
                           GFE Page 2




•   Block 2, box 1 should never be checked by a broker. This box is for lenders only.
•   Block 2, box 2 is to show a credit for the rate chosen, or the amount of the YSP.
    If there is a credit/ YSP it will be shown as a negative #, which deducts that
    amount from the origination charge.
•   Block 2, box 3 will be checked if the borrower is paying points for the rate that
    they have chosen. Box 2 and Box 3 cannot both be checked. This number will
    be shown as a positive number and will be added to the origination charge.
•   This line is also subject to a 0% tolerance and cannot change at closing. GFE will
    be re-disclosed at the time of rate lock by CDFI staff.
                       GFE Page 2




• Example for initial GFE- Loan amount $300,000
   – Block 1 = CDFI fee of $750, Broker Origination of 1.5%, Broker Processing
     Fee $500, YSP of 1% = $8,750
   – Block 2, Box 2 is checked and the credit of 1% or $3000 is shown in the
     second column as -$3000.
   – Your adjusted Origination Charge is $5,750 and this is the amount the
     borrower will pay.
                     GFE Page 2


• Block 3 includes each service required by the broker and
  Clearinghouse CDFI for which we will select the provider. These
  Providers will be listed on the service provider list.
• This should include lender AND broker credit reporting
  companies, flood certification fees, Mortgage insurance, FHA
  MIP, etc. See Clearinghouse CDFI fee list for applicable
  information. Additional lines may be added.
• If there are charges for a VOE or HOA cert, that would be listed
  in this section.
• The items in this section are subject to the 10% bucket tolerance.
                        GFE Page 2

• Block 4: Enter the total for ALL title services, premiums and
  endorsements (not owners title), regardless of who selects or
  pays for the title provider.
• Title services include:
    – The charge for conducting the settlement.
    – Processing and administrative services such as document delivery,
      preparation and copying , wiring, and notary.
• The amount in Block 4 is subject to the 10% bucket tolerance IF
  the borrower chooses a title provider identified by the broker or
  lender.
                 GFE Page 2

• Enter the total for owners title premiums and
  endorsements, regardless of who selects or pays for
  the title provider.
• For a refinance transaction, this box can be marked
  NA.
• The amount in Block 5 is subject to the 10% bucket
  tolerance, if the consumer chooses a title provider
  identified by the lender or broker.
                     GFE Page 2


• Block 6 includes each service required by the originator for
  which the originator will permit the consumer to shop for the
  provider. The providers in this section must be on the service
  provider list.
• This block includes charges such as home inspection, termite,
  attorney, housing counseling fees, etc. Broker must have their
  own list of service providers to provide with the initial GFE.
• The items in this section are subject to the 10% bucket tolerance
  IF the borrower chooses the provider from your list.
                    GFE Page 2


• Block 7: Enter the total estimated recording charges. This will
  include the recording charges for the DOT, Grant Deed,
  Subordinate Financing docs, etc. Recommend using a recording
  fee calculator service.
  http://www.firstam.com/product.cfm?id=1318
• Recording fees are subject to the 10% bucket tolerance.
• Block 8: Enter the total estimated transfer taxes. This block is
  subject to a 0% tolerance.
• TIP: If you overestimate, you are still in tolerance!!!
                    GFE Page 2




• Blocks 9, 10, and 11 are not subject to any tolerance so you can
  estimate here.
• Page 3 of GFE is just information for the consumer and explains
  the tolerances and gives them the ability to shop for a loan.
                   GFE Tolerances
• If within the 10 business day period, or such longer period that
  the loan originator may specify, the consumer expresses an
  intent to proceed with the loan covered by the GFE, the GFE is
  binding subject to both tolerances on charge increases and
  exceptions.
• There are 3 tolerance categories:
    – 0% tolerance- no charge increase permitted
    – 10% bucket tolerance- charges in total may not increase by more than 10%.
    – No tolerance- no limit on increases in tolerances.
• Tolerances were given in the GFE explanation section of this
  presentation.
     GFE Tolerance Exceptions
  Communication, communication, communication!!!!!

• There are 3 exceptions that permit a loan originator to revise a
  GFE without regard to tolerances:
   – Changed Circumstances (to be explained in the next section)
   – Borrower- requested changes
   – Newly constructed homes.


• BROKER COMMUNICATION WITH
  CLEARINGHOUSE IS KEY!!!

• Once a loan has been submitted to Clearinghouse CDFI, the
  Broker must not issue another GFE.
     GFE Tolerance Exceptions
• If a changed circumstance or borrower requested change happens, the
  LO must inform Clearinghouse within 2 business days by submitting
  the Changed Circumstance Detail form. If the changed circumstance is
  not given to us within 2 business days the broker will be responsible for
  curing any tolerance violations at closing.
• The changed circumstance detail form must be accompanied by proof
  of the reason for changed circumstance.
• Clearinghouse will provide a copy of any re-disclosed GFE to the
  borrower and broker so you can document your file.
• The new construction home exception is available when settlement is
  expected to occur more than 60 days after the GFE is provided.
• The LO may provide along with the GFE a separate, clear and
  conspicuous disclosure stating that at any time up until 60 calendar
  days before closing the originator may issue a revised GFE. (this only
  applies if the occupancy permit HAS NOT been issued.)
     Changed Circumstances
• An act of God, war, disaster or other
  emergency.
• Changed situation or inaccurate information
  provided BY the borrower after issuance of
  the GFE.
• Only the fees affected by the changed
  circumstance can be changed.
• REMINDER: Block 1 fees CANNOT change –
  even with changed circumstance. (unless the loan
  amount changes and or/ the loan program changes.)
 Not Considered Changed Circumstances

• A mortgage broker issues a GFE that the lender does
  not accept, the lender cannot re-issue a GFE to be in
  compliance.
• A GFE is issued without identifying a property
  address and the property address is later identified.
• A broker issues a GFE based on one lender’s loan
  products and origination fee, but places the loan with
  another lender.
• The broker doesn’t notify the lender of a changed
  circumstance within 3 business days (2 for CDFI).
 Acceptable Changed Circumstances

• A mortgage insurance program changes and the
  originator did not have notice of the change prior to
  issuing the GFE.

• The property address is not the correct legal address.

• Requirement of an AVM after appraisal review, fees
  for VOE or HOA certs. may be added.

• The Borrower’s credit score changes.
                      HUD-1




• All charges that are subject to tolerance thresholds
  will be compared on the HUD-1.
                            HUD-1
• If fees are found to be out of tolerance, whoever was
  responsible for disclosing that fee will have to cure the tolerance
  violation prior to closing by reimbursing the borrower.
• Example: If the Broker disclosed the initial GFE that the transfer
  taxes were $400, and they ended up being $450 at closing, the
  Broker would be responsible for making up the $50 deficit.
• Fees included in the origination charge cannot be broken down
  in section 800 unless it is a program like CalHFA that has fee
  limits. FHA’s 1% origination fee limit is going away January 1.
• The MIP cannot increase from the GFE.
• The Origination fee to be on the IRS 1098 is listed below line
  1400.
       GFE/ HUD Violations
• A violation of the GFE/ HUD requirements
  will constitute a violation of RESPA Section 5.
• RESPA violations can trigger state law
  violations.
• Curing of tolerance violations can happen
  within 30 days of closing, however
  Clearinghouse CDFI will require them to be
  cleared prior to closing.
                       Examples
•   Loan amount: $200,000
•   Interest Rate: 5%
•   YSP: 1% =($2000)
•   Broker Compensation: $4,000+$200 Processing Fee
•   Lender Admin Fee: $300
    Does this constitute a changed circumstance?
            If so, What fees can change?

• Broker sends the Initial GFE to the borrower thinking they are
  going to send the file to Flagstar Bank, discloses Flagstar’s fees,
  and they end up sending it to Clearinghouse CDFI.
•   Answer: No, the GFE cannot be changed and this would not constitute a changed
    circumstance.
• Broker estimates the recording fees and later on they find out
  that there is an additional document that will be recorded.
•   Answer: Yes, this would constitute a changed circumstance. Evidence of notification of the
    new document will have to be retained in loan file.
• Broker sends a GFE on a pre-approval, and the borrower ends
  up finding a property in a different city, and the transfer taxes
  are now out of tolerance.
•   Answer: No, the Broker is presumed to have a property address when they send the initial
    GFE and finding the property address does not constitute a changed circumstance.
        Questions??

          Melissa Brown
Director of Single Family Lending
         (949) 525-4960
melissab@clearinghousecdfi.com
  www.clearinghousecdfi.com