I hope everyone is enjoying the holidays, and I trust you are all ready for the new changes that the government will implement in 19 days... in case you have not heard, read on... you may want some asprin, adult beverages, and a chair... its gonna be a little hairy:
MDIA 2009- Mortgage Disclosure Improvement Act of 2009
In June of 09 this law went into effect. It says that a buyer/borrower must have a GFE/TIL in their possession for at least SEVEN business days before they can close. After the seventh day, they can close unless the closing package shows an APR which is .125% higher than the GFE/TIL which was disclosed after application. If there is a change, then the bank must reissue a new GFE/TIL and wait three more business days before they can try to close again.
The buyer cannot opt out of this, and these are business days- not calendar days... What changes can cause this variation of APR? Attorney Fees, Title Insurance, Lender Fees..
RESPA Reform of 2008- NEW HUD-1 and GFE
On Jan 1, 2010 the new respa reform rules go into effect. The thrust of the new rules are as follows:
1. Changes to the Good Faith Estimate (GFE), modifying its structure and expanding it to a 3 page document.
2. There are new limitations on variances of some charges between the GFE and the settlement statement.
Three levels of tolerance for changes between what is disclosed to the borrower on the GFE and what is charged on the HUD-1:
a. zero tolerance for some lender charges- this means there can be no change at all
b. 10% tolerance for some settlement agent/ title insurance charges and taxes
c. no limit of changes for some services that are shopped for: surveys, pest inspections, etc
3. The HUD-1 form has been modified and expanded to 3 pages. Settlement providers can use an average pricing model to establish their fees.
a. Settlement Agents and Lenders must disclose fees upfront and stick to them
b. What you charge on the hud must be well documented as an average charge
c. You can no longer move charges around on the second page of the hud. The seller paid closing costs will be a credit and debit in the 200 section of the hud and the 500 section
4. A change in required use guidelines- It will be illegal to force use of settlement agents, however a class of sellers and agents can offer incentives to use settlement agents as long as certain requirements are met... including that it must be an actual incentive that is not made up somewhere else in the hud-1, and it must be optional... (this is the AFBA exception)...
Builders are forbidden from offering incentives or forcing use of closing agent... (this will bring a big fat suit on Jan 2)
This is just a scratch in the surface of what is happening... I encourage you to check out the HUD website and read the HUD FAQs... they are the commentary on the new rules. They are written in simple english and are informative... www.hud.gov