ePackaging and Other Applications of Technology to the Mortgage Process

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ePackaging and Other Applications of Technology
to the Mortgage Process

• Richard Andreano, Jr.
• Thursday, December 1
• 1045 pm to 1200 pm

WBSK Weiner Brodsky Sidman Kider PC 1300 19th
Street, NW Washington, DC 20036 Your Company
Logo Here
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RESPA

• ScopeFederally related mortgage loans
• InternetNo special status
• Two key elements
• Disclosures
• Prohibited Payments
• Section 8
• Referral fee prohibition
• Fee split prohibition
• Exception for payments that reflect the
  reasonable value of services, goods and
  facilities provided

Weiner Brodsky Sidman Kider PC
3
RESPA

• HUDs takes a broad view of the fee splitting
  prohibition
• Based on its belief that the prohibition is
  intended to prohibit unearned fees, HUD concludes
  that the following practices violate the fee
  splitting prohibition
• Splitting a settlement service fee with a third
  party when the third party does not provide
  supporting services
• Marking-up a third partys settlement service fee
  without providing supporting services
• Overcharging for your own services

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4
RESPA

• HUDs position on overcharges has been rejected
  by United States Circuit Courts of Appeals
• Mixed results with HUDs position on mark-ups
• 2nd and 3rd Circuits agree with HUDs position
• 4th, 7th and 8th Circuits reject HUDs position
• 11th Circuit indicated that a single party may
  violate the fee splitting prohibition by marking
  up a settlement service fee
• 7th Circuit found that an impermissible fee split
  could exist when the lender and closing agent
  both charged a release fee

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5
RESPA

• HUDs 2002 RESPA Reform Proposal
• Included an optional Guaranteed Mortgage Package
  Agreement (GMPA)
• Would include most services
• One, fixed price
• Referral fee and fee splitting exemption for
  packaging arrangements
• Use in lieu of Good Faith Estimate
• No itemization of charges
• Open for acceptance by consumer for at least 30
  days
• No fee could be imposed to issue a GMPA
• Minimal fee could be imposed upon acceptance of
  GMPA

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RESPA

• Proposal withdrawn March 2004
• June 2005 HUD announces RESPA Reform Part Deux
• Series of roundtables held over the summer to
  obtain input from the industry, consumers and
  other interested parties
• Four goals cited by HUD
• Simplicity
• Clarity
• Transparency
• Greater certainty of costs

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RESPA

• HUD identified the following packaging issues on
  which it sought input
• What may be the impact on consumers of a mortgage
  package that includes an interest rate guarantee
  and a fixed price for settlement costs?
• How can subpackaging be designed to maximize
  competition without creating undue complexity for
  consumers?
• Should HOEPA loans be eligible for packaging?
• Should there be an opportunity to cure and/or
  remedies for packaging errors or violations?

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RESPA

• HUD published an internal version of the
  Guaranteed Mortgage Package Agreement under
  consideration at that time that HUD withdrew the
  proposal in March 2004
• The single Guaranteed Mortgage Package Agreement
  was replaced with a Mortgage Package Offer and an
  optional Settlement Service Package
• The Settlement Service Package could be used with
  a mortgage package offer or Good Faith Estimate
• Attachment to outline has detailed information

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RESPA

• General theme from the roundtables
• In terms of RESPA reform, packaging does not have
  the support that it did back in 2002
• There is a general consensus that HUD should
  focus on improving the Good Faith Estimate
• Timetable for new proposal
• Not today
• Not tomorrow
• Beyond that, HUD will not give a specific
  timeframe

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RESPA

• Packaging without RESPA reform
• Disclosure requirements
• Good Faith Estimate
• Settlement Statement
• Referral fee and fee splitting prohibitions
• Arrangements between packagers and participants
  in package arrangements
• Mark-up issue regarding total price for the
  package
• Fixed price arrangements
• Differ from package arrangements

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STATE LAW

• Fees
• Allowable fees
• Mark-ups
• Disclosures
• Borrower right to select the provider
• Unauthorized practice of law
• Insurance restrictions
• Affiliate restrictions
• Express restrictions
• Predatory lending law issue

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