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
- Definition of Application: 6 minimum pieces of information make up a mortgage ‘application:’
- Property Address
- Loan Amount
- Estimated Value
- Borrower Name
- Social Security Number
- 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 The GFE must be provided within 3 business days after an application is received (unless it is denied or withdrawn).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.
- 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.
- This line is for the date when all other settlement charges are good through. This needs to be at a minimum 10 days.
- Number of days the lock is good for.
- 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.
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.
- Lender fees (underwriting)
- Application Fee
- Processing fee
- Loan Origination Fee (broker fee)
- 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.