Dennis Deischer

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RESPA GFE and HUD-1

• Presented By
• Dennis Deischer

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New GFE and HUD-1

• Number of changes
• Three page forms
• Effective January 1, 2010
• If GFE used before, must comply with all rules
• If GFE used before, must use new HUD-1
• If HUD-1 used before, must comply with all rules
• If HUD-1 used before, must follow new GFE

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GFE Required

• Within 3 business days of receipt of
  application
• Six pieces of information minimum for application
• Name
• SSN
• Income
• Property address
• Estimated value
• Loan amount
• Lender/broker prohibited from requiring more info
  to verify application before GFE, but may after
  GFE

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• Transaction Identification Section
• Originator name and contact Information
• Borrower name and subject property
• GFE date, key in defining the period that the
  GF forms are available
• Purpose Section
• Explains the purpose of the GFE
• Identifies sources of additional information
• Advises how to proceed
• Shopping for Your Loan Section Advises that
  only the consumer can
• shop for the best loan for him or her

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• Important Dates Section
• Specify the date and, at option, the time
  through which the interest rate and certain
  rate-dependent charges are available
• Interest rate-dependent charges
• Credit or charge for the interest rate chosen
• Adjusted origination charges
• Per diem interest
• Specify the date through which all other
  charges are available
• Minimum 10 business day period
• Specify rate lock timeframes
• Provide the rate lock period that will apply
  once the rate is locked
• If applicable, note the minimum time for lock
  before settlement
• Enter Not applicable or NA as appropriate
  for Lines 1 4

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• Summary of Your Loan Terms Section
• Addresses nine elements of the loan
• For the interest rate, enter the note rate and
  not the APR

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• Escrow Account Information Section Addresses
  whether loan includes escrow
• Summary of Your Settlement Charges Section
• Block A Adjusted origination charges from
  Block A on pg. 2
• Block B Total of all other settlement charges
  from Block B on page 2
• Block AB Sum of the two amounts

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• Your Adjusted Origination Charges Section
• Relationship between the interest rate and the
  settlement costs
• Includes Yield Spread Premium paid to broker
• Combines all the various loan origination
  charges into a single charge
• Block 1 Must include all origination charges of
  lender/broker including YSP
• (No POC with amounts allowed on GFE)
• All fees associated with getting the loan, such
  as application, processing, underwriting,
  administration, document preparation, wire,
  lender inspection, mortgage broker, loan
  handling, and other miscellaneous fees
• If no broker lender may (not required) include
  credit or charge (points) for rate chosen in
  Block 1, with 0.00 in amount column of Block 2
• OR
• If there is a broker, any credit/charge must be
  disclosed in Block 2

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• Your Adjusted Origination Charges Section
• Block 2
• To reflect credit for rate chosen, check 2nd
  box and insert amount and
• interest rate in applicable blanks Enter dollar
  amount as negative
• To reflect a charge (points), check 3rd box and
  insert amount and
• interest rate in blanks Enter charge as a
  positive
• 2nd and 3rd boxes are like radio buttons
  cannot check both
• Block A Total of Blocks 1 and 2

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• Your Adjusted Origination Charges Section
  Examples
• 100,000 loan, no points, lender fees of 1.5,
  broker compensation is YSP of 2
• Block 1 Our origination charge - 3,500
  (1,500 fee plus 2,000 YSP)
• Block 2 Your credit or charge (points) for the
  specific interest rate chosen
• Complete 2nd check box, enter 2,000 credit and
  rate in blanks In
• Block 2, YSP is entered as a negative
• Block A Your Adjusted Origination Charges -
  1,500 (3,500 from Block 1,
• less 2,000 from Block 2)

• 100,000 loan, 2 points to buy down rate, lender
  fees of 1.5, broker fee of 1
• Block 1 Our origination charge - 2,500
  (1,500 lender fees 1,000 broker)
• Block 2 Your credit or charge (points) for
  the specific interest rate chosen
• Complete 3rd check box 2,000 and rate. Block
  2 amount of 2,000
• Block A Your Adjusted Origination Charges
  - 4,500 (2,500 from Block 1
• plus 2,000 from Block 2)

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• Your Charges for All Other Settlement Services
  Section
• Block 3 Required services that we select
• For services required and provider selected by
  originator (excluding titles services), list each
  service and estimate charge and enter total in
  Block 3, e.g. providers of credit reports,
  appraisals, flood certifications, real property
  tax related services, and mortgage insurance
• Block 4 Title services and lenders title
  insurance
• Enter total estimated charge for all title
  searches, examinations and endorsements, as well
  as delivery, notary and settlement fees
• Block 5 Owners title insurance
• For purchase transactions, enter total estimated
  charge for all title premiums
• and endorsements in Block 5
• For non-purchase transactions, enter NA or Not
  Applicable

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• Block 6 Required services that you can shop
  for
• For each service list each service and
  estimated charge and total, e.g., survey, pest
  inspection, etc.
• Provide separate list of service providers at
  time of GFE
• Block 7 Government recording charges
• Enter total estimated recording charges in Block
  7. No transfer taxes
• Block 8 Transfer taxes
• Enter estimated sum of all state and local fees
  on mortgages and home sales based on loan amount
  or sales price and property address
• Block 9 Initial deposit for your escrow
  account
• Enter total required escrow at closing in
  Block 9
• Indicate if for all property taxes, all
  insurance and any other items
• If deposits are required for some, but not
  all, insurance, Check the other box and
  identify the applicable taxes and/or insurance

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• Block 10 Daily interest charges
• In blanks, enter amount of interest for each
  day, number of estimated days and the
  anticipated settlement date
• Enter total daily or per diem interest in Block
  10
• Block 11 Homeowners insurance
• List required hazard or similar insurance,
  (i.e. flood) and estimated premiums
• Enter total in Block 11
• Block B Your Charges for All Other
  Settlement Services
• Enter total from Blocks 3 through 11
• Block A B Total Estimated Settlement
  Charges
• Enter sum of Block A (Your Adjusted
  Origination Charges) and Block B

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• Understanding Which Charges Can Change at
  Settlement Section
• Section explains applicable limits/tolerances
  on changes in estimated fees
• No need to enter information in this section

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• Using the Tradeoff Table Section
• Intent Demonstrate relationship between rate
  and settlement costs
• Originator must enter information about loan
  covered by the GFE in left column
• Completion of remainder of the table is
  optional
• Center column alternate loan with lower
  settlement charges and higher rate
• Right column is alternate loan with higher
  settlement charges and lower rate
• If you elect to add information on alternate
  loans
• Information must be for loans you actually
  would offer
• Alternate loans must be identical to loan
  covered by GFE, except for rate and settlement
  costs

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• Using the Shopping Chart Section
• For completion by consumer as a loan comparison
  tool
• There is nothing for lender/broker to enter
• If Your Loan is Sold in the Future Section
• Notes that a future loan sale will not change the
  loan or the charges paid at settlement

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GFE Duration - 3500.7(f)

• Duration
• GFE of most charges must be good for at least 10
  business days, unless new GFE provided prior to
  settlement
• Exceptions
• Interest Rate
• Credit/Charge for Lock-In Rate
• Adjusted Origination Charges
• Per Diem Interest
• Retain documentation of reasons for providing new
  GFE no less than 3 years after settlement

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Changes/Redisclosure - 3500.7(f)

• Revised GFE to be provided within 3 business days
  of receiving information establishing changed
  circumstance
• Affecting settlement costs
• Affecting the loan
• Based on borrower-requested changes
• Originator not bound by GFE if borrower does not
  express intent to continue within 10 business
  days
• If interest rate has not been locked by the
  borrower, or a locked interest rate has expired,
  appropriate charges may change, e.g.
• Borrower later locks, new GFE showing revised
  interest rate-dependent charges and terms must be
  provided
• All other charges and terms must remain the same
  as on the original GFE

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RESPA - HUD-1/1A Settlement Statement

• At Closing and Upon Request Day Before
• Process Changes Necessary
• Significant communication and coordination with
  outside closing agents
• Use of new GFE requires use of HUD-1
• Closing agents need GFE when issued
• Significant communication and coordination with
  service providers
• Timing of fee notification to closing agent
• Advance notice of changes in fees prior to GFE

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Overview

• Basic format remains still provides itemization
  of fees
• Changes
• Cross reference on various lines to appropriate
  GFE Block
• Different approach to itemizing certain charges
• Added new page
• Compares GFE and HUD-1 charges
• Summarizes loan

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Both HUD-1 and -1A have transaction
identification section at top of forms
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• HUD-1 includes summary of borrowers and
  sellers transaction
• on first page
• HUD-1A includes only a summary of borrowers
  transaction
• seller-less transaction

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• Both 2nd page of HUD-1 and 1st page of HUD-1A
  still provide listings of charges
• 700 Total Real Estate Broker Fee Not
  included in HUD-1A
• 800 Items Payable in Connection with Loan
• Lines 801 to 803 follow three part approach of
  GFE to disclose lenders origination charges
• Lines 801 and 802, applicable amount is
  disclosed left of borrowers column
• Line 803, amount must be listed in borrowers
  column, as negative number
• (if credit), positive (if charge), or zero
• Lines 804 to 808
• Disclose the applicable amount in borrower
  column, or to left of
• column, based on whether charge is paid at or
  outside closing
• For POC charges, must show party paying charge
  (P.O.C. (Borrower))

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• 900 Items Required by Lender to Be Paid in
  Advance
• Applicable amounts paid at settlement reflected
  in borrowers column
• Do not include any amounts for deposit into
  escrow or impound account
• 1000 Reserves Deposited with Lender
• This series for disclosure of amounts for
  deposit into escrow account
• Total deposit is entered on the 1001
• Amounts In 1002 to 1007 are an itemization of
  total deposit in line 1001
• Note line 1007 is for aggregate accounting
  adjustment, which is a negative number or zero

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• 1100 Title Charges
• Title service charge and lenders title
  insurance premium disclosed at 1101
• If settlement or closing fee is included on
  line 1101, then disclose to left of borrowers
  column on line 1102
• Owners title charge disclosed in borrowers
  column on line 1103
• Charge for lenders title insurance disclosed
  to left of borrowers column on Line 1104
  (already included in 1101)
• Lenders and owners title policy limits, and
  agents and underwriters portions of insurance
  premium disclosed to left on 1105-1108
• 1200 Government Recording and Transfer Charges
• Total recording charges are disclosed in
  borrowers column on 1201
• Itemization of charges are disclosed to left of
  borrowers column at 1202
• Total transfer taxes are disclosed in
  borrowers column 1203
• Itemization of transfer taxes disclosed to left
  1204 to 1205

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• 1300 Additional Settlement Charges
• Total of required services that borrower can
  shop for included in borrowers column at 1301
• Individual services itemized on lines that
  follow amounts to left
• 1300 series also used to reflect miscellaneous
  itemized settlement charges not included in any
  specific category, such as charge for a warranty
  plan
• These amounts entered in borrowers/sellers
  columns
• 1400 Total Settlement Charges Total amount
  of charges in columns
• 700 1300
• Seller paid fees
• There is a special rule to disclose amounts
  paid by seller to provide for the comparison of
  GFE to HUD-1
• Even if seller pays a charge, charge must be
  recorded in borrowers column on appropriate
  line on page 1, credit to borrower entered in
  200 series and corresponding charge to seller
  must be entered in 500 series

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• New Page 3 of HUD-1 contains crosswalk
  providing comparison to GFE in
  three parts based on the tolerances
• Charges That Cannot Increase
• Charges That in Total Cannot Increase More Than
  10
• Government recording charges
• Required services when the originator selects
  the provider
• Required services, required title insurance and
  owners title insurance, when borrower
  selects the provider identified by the originator
• Charges That Can Change

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• New page of HUD-1 contains a summary of the
  loan terms
• Although similar to summary in the GFE,
  this summary includes further
• detail because the terms of the loan are
  known.
• If applicable must provide
• Specific date on which the rate can first
  change
• Period between subsequent rate changes
• Maximum rate movement on a change date
• Amount of monthly escrow or impound account
  payment
• Specific date on which a balloon payment is due

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Case Study Example See Attachments C D
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What Are Your Questions?
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RESPAThe New GFE and HUD-1
THE END!!!

• Thank you
• Denny