Its official Hud rolled out the proposed revisions to Respa FINALLY -- MArch 14th 2008. To view the Federal Register you can see it here --------> Federal Register
What Hud Says
HUD says simplifying and standardizing the GFE would make it easier for home buyers to shop around by comparing the fees charged by loan originators, whether they are yield spread premiums paid to mortgage brokers or other fees charged by banks.
The proposed rule would also allow settlement service providers to seek volume-based discounts for settlement services, which HUD believes would lead to lower third-party settlement service prices. Settlement service providers would also be allowed to use "average cost pricing" for third-party services they purchase, simplifying the process.
3 Decades since update
It's been three decades since the Real Estate Settlement Procedures Act (RESPA) has been updated. Hud says its due to the complexity of today's closing process is widely believed to have allowed unscrupulous mortgage brokers and others who originated home loans to dupe homebuyers into complex loans with adjustable rates and unexpected balloon payments.
Under the proposed changes all loan originators would have to provide prospective homebuyers with a four-page good-faith estimate about the total costs involved in taking out a mortgage. This would serve as a check sheet to weigh against a final closing document. Which is fine by me, more educated a customer is about the refinance process the better. We lenders shouldn't try to hide or deceive a borrower anyways...now heres where the tricky part comes into play and can AFFECT alot of mortgage brokers which alot of brokers are already outraged by this...
MAJOR CHANGE that can affect the industry
The new GFE proposed by HUD would require brokers to disclose as their "service charge" the full amount received for originating a loan, and that borrowers receive credit for that portion of the amount paid by wholesale lenders for loans with higher interest rates (the yield spread premium) against their closing costs.
The proposed GFE form also specifies which charges can and cannot change at closing. Originators would be barred from changing their service fees -- or charges or credits for the interest rate chosen -- after interest rates are locked.
The GFE form would also cap increases on title insurance and other required settlement services at 10 percent when they are selected by or identified by loan originators
The New GFE
Click here to see the form ----> http://www.hud.gov/content/releases/pr08-033.pdf
On the front page of this proposed good-faith estimate, already tested by HUD on a sample of consumers, the precise interest rate is spelled out clearly. Also specified are whether that rate can adjust, whether the loan balance can adjust, whether there are prepayment penalties that discourage refinancing to a more favorable loan before a certain period, whether there are balloon payments and whether there is an escrow account that collects and pays property taxes and home insurance.
My 2 cents
So I hear that the The National Association of Mortgage Brokers today issued a statement saying "a huge victory for consumers"requiring "everyone who brokers a loan to disclose their compensation in a uniform way" allowing consumers the ability to comparison shop.
I find this weird because even though I am a direct lender so doesn't affect me much but I have a lot of broker friends who are fed up by this association in backing up this change. I mean last time they did this proposal was back in 2002 and didn't even make it to the Federal Register, too many voices and opposition stopped the change. Now we have the VP of NAMB endorsing this? Does any one else find this weird?
I am very curious to see if this time around they are going through this. They talked about as early as May 2008 this might be released officially.
So the most obvious change will affect brokers but it will affect all lenders as well even banks.
Heres what HUD said about dishing out for the new HUD changes and compliance.
In raw dollar terms, mortgage brokers are expected to take the majority of the $5.88 billion annual revenue hit HUD says loan originators could be facing under the new rules. Mortgage brokers stand to lose up to $3.53 billion in annual revenue, while lenders such as banks, thrifts and mortgage banks could see revenue fall by $2.35 billion, HUD estimates. But the 60-40 split in revenue losses between mortgage brokers and other lenders is in line with their share of mortgage originations, HUD said.
Whew ...that's alot of interesting new information, very interesting to see how this turns out now its official
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