After December 31, 2009 you will see a new Settlement Statement at the closing table. The US Department of Housing and Development (HUD) has for sometime been working to revise the Real Estate Settlement Procedures Act (RESPA). The new revisions were just recently finalized. Part of the revision requires that mortgage originators (lenders) provide potential borrowers with a new form Good Faith Estimate (GFE) and that final settlement figures be provided on a new form Settlement Statement (Form HUD-1).
Loan charges and settlement fees will be clearer on revised version of the GFE form that is now required to be provided to borrowers within three days of their mortgage application. Charges on the form will fall into three categories:
Fees that cannot increase from the initial estimates to final closing.
Fee estimates that may increase by as much as 10 percent in total from the initial estimates.
Fees that can increase without limit, mainly because the lender has no control over them or because they are difficult to predict weeks in advance.
Charges in the zero-increase category include lender and broker mortgage origination, processing and underwriting fees and costs. Also in this category are lender or broker loan discount charges or “points” based on the interest rate quoted to the borrower.
Charges in the 10 percent category include services required by the lender but where the lender chooses the service provider, such as appraisals, lender’s title insurance and settlement services where the borrower chooses a provider on a list approved by the lender, owner’s title insurance when the borrower chooses a insurer on the lender’s approved list, and state and local recording fees.
Though any one of these items can increase more than 10 percent from the initial estimate to closing, the combined total of all the fees in this category cannot increase by more than 10 percent.
Charges that can increase without limit include lender-required services when the borrower chooses a title insurance agent, escrow or other settlement company that is not on the lender’s list, the cost of homeowners insurance, per diem interest charges on the loan, and the amount of the initial deposit by the borrower into a pre-paid escrow account.
If any of the fees in the zero-increase change or in the 10% category change by more than 10% the lender is obligated to re-disclose those changes to the borrower and the closing cannot occur before 3 days of that re-disclosure.
The intent of the new good-faith estimate is to encourage borrowers to shop for a lender to work with. The form includes space for comparing up to four competing lender estimates on interest rates, rate locks, prepayment penalties or mortgage insurance, and other terms.
The cost estimates from each competitor are required to remain available for 10 business days. Interest rates can change unless locked by the lender and borrower.
The new standard settlement statement, the HUD-1 is unlike the settlement statements in use today, the revised HUD-1 refers directly to the final GFE to allow borrowers to compare what they were quoted by the lender with their figures at closing. The final page of the new HUD-1 itemizes the three categories of fees from the GFE and compares them line-by-line with the actual fees at closing. The new HUD-1 also requires disclosure of the fee splits of title insurance premiums between the title insurance underwriter and the title insurance agent, who is often the settlement agent.
The Real Estate Settlement Procedures Act (RESPA) is a consumer protection statute, first passed in 1974. The Act covers loans secured with a mortgage placed on a one-to-four family residential property. This includes most every congenital residential real estate mortgage. The purposes of the act is to help consumers become better shoppers for settlement services and to eliminate kickbacks and referral fees that unnecessarily increase the costs of certain settlement services.
If you have questions about the new GFE, HUD-1 or revised RESA requirements please contact me.
Legislators today voted to extend the $8,000.00 first time home buyer credit. Many say that the credit is responsible for the spike in the local real estate market while others criticize it as not being enough of an effort to stimulate the economy.
The President is expected to sign the extension making the credit available to first time home buyers through June 2010. The program has also been expanded to benefit certain home owners who will be buying again within the credit period. Income caps have also been increased along with the purchase price cap. You can read more about the specifics of the extension here.
The United States Senate leadership amended a proposition to substitute an expiring $8,000 first-time home buyer tax credit, extending the credit to higher-income borrowers and to others who already own real estate, according to Bloomberg.
The program would extend the revised credit to April 30, 2010. It will also make the credit available to homeowners and buyers earning up to $125,000, or $225,000 for couples, this is an increase from $75,000 for individuals and $150,000 for couples available current available.
I have been speaking recently with many of my real estate business partners about their valid frustration over the Home Valuation Code of Conduct (HVCC) and how it unnecessarily jeopardizes transactions for homeowners and potential buyers.
The Federal Law imposed to protect consumers, as many others like it, is quickly becoming more of a burden then a benefit for the very consumer it is designed to protect.
There is an effort in the industry to encourage lawmakers to reconsider the HVCC. You can learn ore about the effort here and sign a petition that will be presented to lawmakers.
For those who may not be familiar with the code The Home Valuation Code of Conduct stipulates how appraisers, loan officers, lenders and real estate agents can handle the real estate appraisals in part it states that:
A loan officer can NOT order the appraisal, and can not be involved with the selection of the appraiser;
The lender must order the appraisal and must order it through a third party vendor (appraisal management company) that cannot be influenced by the lender, loan officer, appraiser or any other party to the transaction.
If a second appraisal is needed it must be obtained from a second, unrelated, appraisal company.
The mandate of the institution of a third part vendor has caused a pricing shift. The cost of appraisals has not yet increased dramatically which means there is less of a profit now to be shared between the third party vendor (appraisal management company) and the actual appraisal company. The result is that appraisers with little or no experience are being used to reduce cost to the appraisal companies. Appraiser work loads are being increased and appraisers are working in unfamiliar markets/geographic areas.
Read more about the Home Valuation Code of Conduct here.
For the first time in more than 30 years, the U.S. Department of Housing and Urban Development has issued long-anticipated mortgage reforms that will help consumers to shop for the lowest cost mortgage and avoid costly and potentially harmful loan offers. HUD will require, for the first time ever, that lenders and mortgage brokers provide consumers with a standard Good Faith Estimate (GFE) that clearly discloses key loan terms and closing costs. HUD estimates its new regulation will save consumers nearly $700 at the closing table.
Middlesex County, North District and South District, Registries of Deeds are accepting the electronic filing of documents. That means settlement and escrow agents may file real estate documents with the Registry of Deeds remotely by scanning the documents and submitting them through a third party vendor.
Our office is fully equipped to take advantage of this service and we have recorded several documents and transactions electronically with both district registries. If you have a real estate transaction in either county we can assist you with the convenience of electronic filing.
