Tomorrow I will be doing a presentation on the RESPA changes at a local real estate company.  I would love to hear your feedback on it.  Thanks all!!

RESPA Changes at a Glance

The GFE

• Definition of Application:  6 minimum pieces of information make up a mortgage ‘application:’
  1. Property Address
  2. Loan Amount
  3. Estimated Value
  4. Borrower Name
  5. Social Security Number
  6. Income
  7. JUST ADDED: Anything else deemed necessary by the originator.  (WHAT?!?) Very Vague

Timing. The GFE must be provided within 3 business days after an application is received (unless it is denied or withdrawn).  When a GFE is issued, it is assumed that all components of an ‘application’ have been received.

Collecting Fees.  Prior to issuing a GFE, the only fee that can be collected is a credit report fee.

Top of the Estimate.  Should have all the information of the originator and all the info on the borrower, with property address.

Important Dates.  Numbered 1-4.

1. The interest rate that this GFE is good for.  This line, we are being told, is to be either the end of a lock period, or to be left N/A.  As we all know, rates are changing on us about every 5 hours.
2. This line is for the date when all other settlement charges are good through.  This needs to be at a minimum 10 days.
3. Number of days the lock is good for.
4. How long before settlement do they have to lock.

Summary of Loan.  Pretty straight forward here.  It outlines the terms of the loan.  Loan amount, the loan term (30 years, 15 years), the interest rate, and the monthly payment (including interest, principal, and mortgage insurance).  This does not include taxes/insurance if it is in the monthly payment.

A + B.  This is where it totals up all the costs from page 2, and shows the amount of closing costs.

PAGE TWO

Your Adjusted Origination Charges.

The origination charge is going to be one of the hardest things for our clients to understand.  This box is the entire cost of originating the loan. 

This includes:

1. Lender fees (underwriting)
2. Application Fee
3. Processing fee
4. Loan Origination Fee (broker fee)
5. Any rebate from the lender to the broker.

This number is going to look inflated, because of that rebate aspect to the charge.  But, that rebate will be credited back to the borrower in section 2.  Box A is the cost to the borrower, after the credit for lender rebate has been taken out.

Charges for All Other Settlement Services.

This box you will find the appraisal fee, the credit report fee, and mortgage insurance.  These charges have a 10% variance.  We are being told to pad these fees in case a 442 needs to be done, or some other un-foreseen cost.  You may see this number come out higher, just in case.

What does this mean for your clients??

The new GFE does not have the full PITI payment (??)

The new GFE does not have the cost to close (??)

The new GFE does not reflect the earnest deposit or seller credit (confusing??)

They should give the title/escrow fees or contact info immediately to the lender once in contract so we can stay within the 10% tolerances. (This is KEY.  As soon as you get this info, pass it on to the Escrow will need more time to prepare HUD to compare fees from GFE to the HUD statement. (More time needed per transaction possibly).

Each lender may have a different ‘estimate’ to give their clients that may make it easier to understand.

There are so many factors on EVERY loan that it can be dangerous to quote.  Keep in mind that rates can change hourly on busy days, so this is just a snap shot in time.  I want to try and show you how things are moving through each day.  Here are the factors I will be quoting:

Purchase, 20% down, owner occupied, single family residence, full documentation, 740 Fico score, $325,000 purchase price, and a loan amount of $260,000, taxes and insurance as part of monthly payment, 21 day lock.  (If any one of these factors are different, it COULD change the below rates.  This is just a barometer of the current rates).

30 Year Fixed with 1% in origination fee : 4.750% (APR 4.935%) ~ Priced 0% in origination fee: 5.000% (APR 5.099%).

5/1 ARM—3.625% (!!!) with 1% in origination, APR 3.789%

And for people putting down 5%?  They still look good for you!
5% down, 30 year fixed—5.000% ( APR 5.078%)!!! That is with .500% in origination.  Don't believe it when people say that you have to put down 10, 15, or even 20%! 

For loans that are at $417,001+, interest rates/guidelines are tighter.  Here is one of the best priced 30 year fixed rates out there:

Purchase, 20% down, owner occupied, SFR, full documentation, 740 FICO+, loan amount of $500,000.

30 year fixed with 1% in origination fee: 5.500% (APR 5.685%)

5/1 ARM- (different lender than 30 year fixed) with 1% origination fee, 4.650% (APR 4.781%)

ALL mortgage professionals are REQUIRED by LAW to report APR.  The real way to compare lenders is to look at RATE and ORIGINATION fee, from the two lenders, on the same day, at the same HOUR .  Keep that ALL in mind.

Keep in mind that I will compete for YOUR business, and I would love to compete!

Speaking of competing….

I thought I would try something new, and give you a comparison of what my biggest competition is offering today.  The main thing when shopping for an interest rate is to look at the rate offered, and then how much in origination the lender is charging.  I think that the lenders are actually under-disclosing APR (they can never get it right).  But, I am still beating them all!

Purchase, 20% down, owner occupied, single family residence, full documentation, 740 Fico score, $325,000 purchase price, and a loan amount of $260,000, taxes and insurance as part of monthly payment, 30 day lock.  (If any one of these factors are different, it COULD change the below rates.  This is just a barometer of the current rates). Rates as of 12/15/09, 11 AM.

There are so many factors on EVERY loan that it can be dangerous to quote.  Keep in mind that rates can change hourly on busy days, so this is just a snap shot in time.  I want to try and show you how things are moving through each day.  Here are the factors I will be quoting:

Purchase, 20% down, owner occupied, single family residence, full documentation, 740 Fico score, $325,000 purchase price, and a loan amount of $260,000, taxes and insurance as part of monthly payment, 21 day lock.  (If any one of these factors are different, it COULD change the below rates.  This is just a barometer of the current rates).

30 Year Fixed with 1% in origination fee : 4.750% (APR 4.935%) ~ Priced 0% in origination fee: 5.000% (APR 5.099%).

5/1 ARM—3.750% (!!!) with 1% in origination, APR 3.921%

And for people putting down 5%?  They still look good for you!
5% down, 30 year fixed—5.000% ( APR 5.189%)!!! That is with 1% in origination.  Don't believe it when people say that you have to put down 10, 15, or even 20%! 

For loans that are at $417,001+, interest rates/guidelines are tighter.  Here is one of the best priced 30 year fixed rates out there:

Purchase, 20% down, owner occupied, SFR, full documentation, 740 FICO+, loan amount of $500,000.

30 year fixed with 1% in origination fee: 5.500% (APR 5.685%)

5/1 ARM- (different lender than 30 year fixed) with 1% origination fee, 4.650% (APR 4.781%)

ALL mortgage professionals are REQUIRED by LAW to report APR.  The real way to compare lenders is to look at RATE and ORIGINATION fee, from the two lenders, on the same day, at the same HOUR .  Keep that ALL in mind.

Keep in mind that I will compete for YOUR business, and I would love to compete!

Speaking of competing….

I thought I would try something new, and give you a comparison of what my biggest competition is offering today.  The main thing when shopping for an interest rate is to look at the rate offered, and then how much in origination the lender is charging.  I think that the lenders are actually under-disclosing APR (they can never get it right).  But, I am still beating them all!

Purchase, 20% down, owner occupied, single family residence, full documentation, 740 Fico score, $325,000 purchase price, and a loan amount of $260,000, taxes and insurance as part of monthly payment, 30 day lock.  (If any one of these factors are different, it COULD change the below rates.  This is just a barometer of the current rates). Rates as of 12/15/09, 11 AM.

I consider myself to be fiscally Conservative, and socially very Liberal.  With all of the changes coming down the line, I am blown away by the industry's response to these changes.  I also know that a lot of the industry is very Conservative.  In my mind, those two things do not match together. 

How can one be conservative, and NOT want people to have more money into a home?  Isn't being conservative all about saving money, lowering spending, and not over extending oneself??  That is what a higher down payment means, in my mind.  That a person has not gone out to eat for a few months, brewed coffee at home, and saved the extra little bit to purchase a home. 

So, if you are fiscally Conservative, you should be SCREAMING for them to increase the minimum down payment....right??

There are so many factors on EVERY loan that it can be dangerous to quote.  Keep in mind that rates can change hourly on busy days, so this is just a snap shot in time.  I want to try and show you how things are moving through each day.  Here are the factors I will be quoting:

Purchase, 20% down, owner occupied, single family residence, full documentation, 740 Fico score, $325,000 purchase price, and a loan amount of $260,000, taxes and insurance as part of monthly payment, 21 day lock.  (If any one of these factors are different, it COULD change the below rates.  This is just a barometer of the current rates).

30 Year Fixed with 1% in origination fee : 4.750% (APR 4.935%) ~ Priced 0% in origination fee: 5.000% (APR 5.099%).

5/1 ARM—3.750% (!!!) with 1% in origination, APR 3.921%

And for people putting down 5%?  They still look good for you!
5% down, 30 year fixed—5.000% ( APR 5.189%)!!! That is with 1% in origination.  Don't believe it when people say that you have to put down 10, 15, or even 20%! 

For loans that are at $417,001+, interest rates/guidelines are tighter.  Here is one of the best priced 30 year fixed rates out there:

Purchase, 20% down, owner occupied, SFR, full documentation, 740 FICO+, loan amount of $500,000.

30 year fixed with 1% in origination fee: 5.500% (APR 5.685%)

5/1 ARM- (different lender than 30 year fixed) with 1% origination fee, 4.650% (APR 4.781%)

ALL mortgage professionals are REQUIRED by LAW to report APR.  The real way to compare lenders is to look at RATE and ORIGINATION fee, from the two lenders, on the same day, at the same HOUR .  Keep that ALL in mind.

Keep in mind that I will compete for YOUR business, and I would love to compete!

Speaking of competing….

I thought I would try something new, and give you a comparison of what my biggest competition is offering today.  The main thing when shopping for an interest rate is to look at the rate offered, and then how much in origination the lender is charging.  I think that the lenders are actually under-disclosing APR (they can never get it right).  But, I am still beating them all!

Purchase, 20% down, owner occupied, single family residence, full documentation, 740 Fico score, $325,000 purchase price, and a loan amount of $260,000, taxes and insurance as part of monthly payment, 30 day lock.  (If any one of these factors are different, it COULD change the below rates.  This is just a barometer of the current rates). Rates as of 12/15/09, 11 AM.

I have been following this story on Diana Olick's blog from CNBC.  My question to all of my realtor buds on here is if they have seen this in any short sales they have worked on?  The second lien holder asking for $$ from the transaction, but making it NOT on the HUD-1?  Anyone see this in their work?

http://www.cnbc.com/id/34877347/

I just recieved this list of FAQ's on the new RESPA changes.  It is a lot of information, but I think they are doing a great job in simplifying it (as much as possible) for people.  Lots of changes coming down the line!  Be ready, knowledge is power!

December 15, 2009

RESPA Webinar FAQ’s

Q: When delivering a GFE to a borrower, how do we count the 3 days (business or calendar)?

A: Per RESPA you count business days. A business day for your business is the days that your business is open to conduct most of the business functions.

Q: Can we disclose a higher YSP and receive a lower YSP after locking?

A: Per RESPA you must quote the Rate/YSP exactly as the Lender quotes to you. What you quote in Lender credit can not decrease (Question has been submitted to HUD for clarification).

Q: Can you offer an alternative Fee Sheet in lieu of a GFE to a borrower who is shopping you?

A: Yes, you may offer a Fee breakdown to a borrower in lieu of a GFE. If the borrower has made application (provided you with the 6 items) you must issue a GFE w/in 3 days. If the borrower is just asking prequalifying questions you can issue the fee breakdown.

Q: If we pull a credit report during an interview, would that pull date constitute a GFE to the client?

A: Not unless you have the 6 items RESPA considers an application.

Q: Is the 10% tolerance up and down or just up?

A: The fees may not increase more than 10%. Fees may decrease but broker/lender must re-disclose.

Q: On a TBD, do I need to provide a GFE even though I don’t have a property address?

A: No. We recommend you do not provide a GFE but rather a Fee Sheet until application has been made. USA will not accept a TBD file if there was a GFE issued to the borrower.

Q: What if inaccurate information was supplied by the borrower before the GFE?

A: You may adjust your GFE line items that were affected by the inaccurate information.

Q: What happens if the lock expires and rates have gone up? Is that a change circumstance?

A: yes. Items that are associated with the rate can be changed.

Q: We deal with foreclosures and short sales. How should we disclose escrow fees when we don’t have an option?

A: Just like all purchase loans, the seller selects the escrow company. You will need to request the name of the escrow company the seller (bank) will utilize.

Q: What if I take an application in December but it does not close until January. Do I need to use the new GFE?

A: You may use the old GFE….? You may use the old GFE if you disclose in December. If the loan has to be re-disclosed in January we will do so on the new GFE. If the loan doesn’t close by January 31^st we will re-disclose it on the new GFE.

Page 2

Q: Can you please review the 3 day disclosure period again?

A: RESPA now considers the Application date when the Broker has the 6 required items. The lender now must disclose within 3 days of the brokers Application date its not, the date the broker submits the loan to the lender.

Q: If I take a TBD application in December and the property is identified in January, do I need to use the new GFE?

A: Yes, you must use the new GFE in this scenario.

Q: If you must re-disclose after 12/31/09, do you have to use the new GFE?

A: No. You may use the old GFE as long as you close by 1/31/10. As a company we are re-disclosing on the new form.

Q: Many of the loans I have are outside the city limits so providers may charge extra. How do I disclose those on my provider list?

A: Since you will have a property address, you should be able to give actual costs.

Q: What happens if you have to extend a lock reducing the YSP?

A: If you extend a lock it is a change in circumstance. The lender credit can’t decrease and the block 1 charges have a zero tolerance. (I have a question into HUD on this)

Q: What if you lock the loan and you are now getting more YSP?

A: You must re-disclose the increase but it will be a broker credit on the final HUD-1. Block 1 fees can not increase.

Q: Where is the final total the borrower will have to bring to the closing table on the new GFE?

A: The new GFE only discloses loan costs so it will never match the final HUD for borrower funds to closing.

Q: What if the YSP is lower than disclosed? Does the borrower end up with the extra?

A: yes, the credit can not be decreased. (submitted a question to HUD on this)

Q: What if you have a borrower just trying to get a pre-qual to find out how much they can afford? Can I give them a list of potential fees until they identify a property address?

A: Yes, that is the best way to proceed with TBD pre-qual loans.

Q: What if both parties request a home inspection and the report states repairs that need to be made? Can I re-disclose and not have to abide by the 10% tolerance?

A: If the inspection is not a condition of the loan it does not go on the GFE. IF you disclose it you are held to the 10% tolerance and MUST give a provider list to the borrower.

The original link.

Hello all of my favorite real estate minded folks!

I wanted to pass along some info on the new RESPA rules coming down the line on January 1st. It is called RESPA reform. We had HVCC, we had HERA, and now we have RESPA reform.

What is it?

The objective of this new reform is to help clients reduce the surprises at the closing table. There are variances that are set up to make sure that the fees do not increase beyond a certain level from the time the new GFE is received, to closing.

How does this affect my clients?

The new GFE is set up so that once the number is put into the origination box, it can not change (there is a box that says 'this estimate is good from X to X). This also has whatever rebate the lender will be paying the broker, but shows that the broker will be crediting that rebate back to the borrower, so the settlement costs are lowered by that rebate amount. It might get very confusing for clients, and it is our job to set up those expectations in the beginning.

Clients also will not really be able to call around and get these estimates, they are only supposed to be issued once the originator (me) gets six items: 1) Name 2) Address of property 3) Social security number 4) Income 5) Loan amount and 6) Estimated value of property. That is right, we can not issue the new good faith until there is a property, so those shopping for a home can no longer get a 'to be determined' estimate. All of us lenders are looking for ways around this, to show the costs of the loan, without issuing a true GFE.

Like I said, this might get very confusing for your clients, it is up to us to make sure our clients are expecting these new things when talking to lenders. Keep in mind, as well, that retail banks are not subject to disclose all of these fees (darn banking lobby won on this one), so keep in mind that us brokers are the only ones that are really disclosing EVERYTHING.

There will be lots more questions, I am sure, as this rolls out. I am more than happy to help you or your clients with any questions they may have. Feel free to give me a ring.

All in all, this is going to help our clients from getting surprised at closing. So, it is a good thing :).

--
Jake Planton

Proud loan officer with Rose City Mortgage

(C) 503-475-3788
JakePlanton.com