The following is adapted from National Association of REALTORS® Government Affairs Division Answers provided by national RESPA expert, Phillip L. Schulman, Esq., partner in the law firm of K&L Gates, Washington, D.C.
How does the RESPA rule distinguishes between "lender," mortgage broker," and "loan originator"?
When the RESPA rule refers to "loan originator," this is defined to include either a lender or a mortgage broker. Certain obligations apply only to the lender or only to the mortgage broker, HUD uses the terms "lender" or "mortgage broker."
If a mortgage broker is involved, who is responsible for a tolerance violation - the lender or the mortgage broker?
The m lender is responsible for any excesses in the tolerance restrictions. However, the lender may seek reimbursement from the mortgage broker if the lender is required to reimburse any excess over the tolerance restrictions. If a lender does this, the RESPA rule does not govern the activity.
Must a loan originator recommend settlement providers to a borrower even if it does not want to do so?
Essentially, HUD expects the lender to identify at least one settlement service provider on the list of services the borrower is permitted to shop for.
Arguably, each provider listed will be the provider the lender relies on to obtain prices to populate the GFE. When a loan originator permits a borrower to shop for third-party settlement services, the loan originator must provide the borrower with a written list of settlement service providers at the time of the GFE on a separate sheet of paper. Thus, this list could include title and settlement providers, survey companies, home inspectors, homeowners insurance companies - any provider of settlement services for which the consumer may shop and select the provider.
What if the contract calls for a home warranty paid for by seller? Whose side does it go on?
If the warranty is typically a borrower fee that is paid for by the seller, on behalf of the borrower, this fee would be disclosed in Block 6 of the GFE. On the HUD-1, the fee would be included in the lump sum disclosed on Line 1301 in the borrower's column, with the home warranty fee disclosed outside of the columns. A charge would then be disclosed in the 500 series for the seller, with a corresponding credit disclosed in the 200 series for the borrower. If, however, the home warranty fee is strictly a seller-paid fee, the charge would not be disclosed on the GFE. On the HUD-1, the home warranty charge would appear in a separate line item in the 1300 series inside the seller's column.
If a buyer pays a portion of the real estate commission, how do you disclose this on the GFE?
HUD has not envisioned this scenario, and, in fact, would likely treat the real estate commission as a seller fee. As a seller fee, the commission would not be required to be included on the GFE. If the buyer later agrees to pay a portion of the real estate commission, this amount would be reflected in the borrower's column of the HUD-1. As the fee would not be disclosed on the GFE, tolerances are not an issue.
How can a lender's underwriting standard that prohibits cash back to the buyer at closing be reconciled with a tolerance that is exceeded at closing?
This is not an issue addressed by the final RESPA rule. To the extent a lender or investor's underwriting guidelines do not allow cash back to the buyer at closing, note that RESPA allows a lender up to 30 days after closing to cure any tolerance violations. As long as the same underwriting guidelines do not prohibit cash back to the buyer after closing, making the reimbursement to the buyer within 30 days after closing may be a way around this limitation. Otherwise, lenders may have to revise their underwriting guidelines to account for the lender's cure of tolerance violations at closing.
How does a change in the closing date affect the completion of the HUD-1?
If there is a change in the closing date, typically this only affects the amount of pre-paid items that are disclosed on both the GFE and the HUD-1, like escrow and daily interest charges. These items, however, are subject to the no tolerance restriction, which means they may change by any amount at closing. Thus, to the extent the closing is rescheduled, these pre-paid items may change on the HUD-1 without restriction.
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