RESPA Reform

1
RESPA Reform Economic Updates

• Overview of changes and impacts to Corporate
  Relocation

2
Whats New

• 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.

3
Whats New

• 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.

4
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.

5
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.

Units Contiguous States and District of Columbia Contiguous States and District of Columbia Alaska and Hawaii Alaska and Hawaii
Units Minimum Maximum Minimum Maximum
One 417,000 729,750 625,500 938,250
Two 533,850 934,200 800,775 1,201,150
Three 645,300 1,129,250 967,950 1,451,925
Four 801,950 1,403,400 1,202,925 1,804,375
For single family loans the maximum allowable
loan amount is determined as the greater of
417,000 or 125 of area median home prices, not
to exceed 729,750.
6
Government Loans

• 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 amount.

Units Floor Ceiling
One 271,050 729,750
Two 347,000 934,200
Three 419,000 1,129,250
Four 521,250 1,403,400
For single family loans the maximum allowable
loan amount is determined as the greater of
271,050 or 125 of area median home prices, not
to exceed 729,750.
7
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.

8
RESPA Reform facts

• Applies to all lenders and mortgage brokers
• Mandatory by January 1, 2010

9
New RESPA Reform requirements

• New Good Faith Estimate (GFE)
• New Settlement Statement (HUD-1)
• Closing timeline impact

10
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.

11
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
  owners title insurance)

12
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)

13
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.

14
Impacts to Direct Bill

• Direct Bill Agreement / Reimbursement policy
• Relocation Policy Updates

15
Economic News

• 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
  reported- 2/5/2010
• 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

16
Economic News

• 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

17
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,
  Moodys 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
• six months.
• 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.

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Questions?