The U.S. Department of Housing and Urban Development (HUD) announced on Friday that it will implement a 120 day delay in enforcing new, sweeping regulatory changes to the Real Estate Settlement Procedures Act (RESPA) set to go into effect January 1, 2010. The new regulations will still go into effect on January 1, 2010, but the board overseeing enforcement of these new rules will “exercise restraint in enforcing” them.
The major components of the new RESPA reform are the new and substantially revised HUD-1 Settlement Statement and Good Faith Estimate (GFE) of closing costs issued by lenders, settlement agents, and closing attorneys. HUD will require that lenders and mortgage brokers provide consumers with a newly revised Good Faith Estimate (GFE) that clearly discloses key loan terms and closing costs. Closing agents will also be required to provide borrowers a new HUD-1 Settlement Statement that clearly compares consumers’ final and estimated costs.
The new RESPA rule became effective on January 16, 2009, but provided a one-year transition period for the mortgage industry to incorporate these changes. HUD will continue to work with the mortgage industry during this period, including providing a comprehensive set of frequently asked questions (FAQs) on its website.
This is very good news for lenders and closing attorneys so they can take advantage of some well needed additional time to digest the new forms and procedures. I recently attended a seminar on the new RESPA changes, and they are quite a substantial change to the current GFE and HUD-1. Lenders must provide borrowers with a firm “origination charge” which must include all the various loan origination fees now separately itemized on the HUD-1 Settlement Statement, including points, appraisal, credit, and application fees, administrative, lender inspection, wire, and document preparation fees. This origination fee cannot increase. Lenders also have to provide borrowers with a “firm” quote for typical closings costs, including attorneys’ fees, title insurance and recording fees, and select up to 1 preferred provider for such services. The firm quote cannot increase by more than 10% at closing. If the lender allows, borrowers can use their own providers who will not be subject at all to the firm quote requirement. The new changes will require quite a bit of coordination between lenders and closing attorneys.
Most lenders who I have spoken to are not ready for these changes. The likely impact is that for the first 4 months of 2010, borrowers could see either the current or the revised GFE and HUD-1 form, depending on whether the lender/closing attorney has implemented the changes.
I plan to do a comprehensive post on the new changes soon.
Comments(4)