RESPA REFORM Slide 2 2 What is RESPA Reform? RESPA Reform was
enacted by the U.S. Department of Housing and Urban Development
(HUD). The final rule was published on 11/17/08 with the goal of
providing consumers greater protection surrounding the terms, fees
and settlement charges of their mortgage loan. The new RESPA rules
apply to loan applications taken as of 1/1/10. Slide 3 3 Principles
of RESPA Reform Primary Goals include: Helping the customer shop
for the best loan Shopping Leads to Greater Competition and Lower
Prices Key final terms of the loan disclosed to the borrowers at
closing Preserve a competitive market for all settlement service
providers Slide 4 4 Important Changes New Good Faith Estimate
Disclosure Timing of upfront fee collection Changed Circumstances
Concept New Tolerance and redisclosure requirements Greater
emphasis on communication between the broker and the lender at time
of application through closing New HUD-1 Settlement Disclosure
Slide 5 Good Faith Estimate Slide 6 6 New Definition - Application
Stearns Lending considers an application complete for RESPA, GFE
purposes when the originator (mortgage broker or lender) has the
following: Borrowers name Borrowers monthly income Borrowers social
security number Property Address Estimated value of the property
Loan Amount Slide 7 7 At Application The GFE must be given to the
borrower within 3 business days of receipt of these 6 pieces of
information. The broker is responsible for preparation of the Good
Faith Estimate and any redisclosure until the complete loan file is
submitted to Stearns Lending for underwriting and approval. If a
transaction involves more than one mortgage loan, a separate GFE
for each loan is given to the applicant. Slide 8 8 Intent to
Proceed RESPA states the borrower must express their intent to
proceed prior to: Collection of any upfront fees other than a
credit report fee, and Verification of any information provided by
the applicant The new Good Faith does not have signature lines. The
borrower does not sign the GFE, they can initial receipt of the GFE
by their name on the first page but this is not required. There can
be no other attachments to the GFE, no other document in the file
is to be named GFE. Slide 9 Certification of Intent to Proceed
Slide 10 10 Good Faith Estimate (GFE) The new GFE is designed to
create more transparency regarding key loan terms, fees and charges
to encourage the borrower to shop and compare terms offered by
different lenders. The originator is responsible for providing
accurate figures of the true costs of the loan at application,
avoiding surprises at settlement. The new GFE includes all charges
typically paid by a borrower regardless of who is paying the
charges (borrower, seller, lender) on an individual transaction.
For applications taken beginning 1/1/10 or only the standardized
GFE form defined by RESPA may be used. If a loan has an application
date prior to 1/1/10, we can use the previous GFE and the
settlement agent will use the old HUD-1. Slide 11 11 Good Faith
Estimate (GFE) Loan Originators, (mortgage brokers and lenders) are
bound to the settlement charges and terms listed on the GFE
initially provided to the borrower, subject to certain tolerances.
Slide 12 12 PreApprovals If there is no subject property, the
transaction is not considered an application for RESPA purposes. A
GFE cannot be issued. Verification and/or processing of the loan
request cannot begin until the borrower selects a property,
receives the GFE and expresses intent to continue with the loan.
Slide 13 GFE Getting it Right Dates,Fees,Details What you need to
know Slide 14 14 GFE Page 1 The first page of the GFE acts as an
overview of the loan transaction. A snapshot of the terms of the
loan for which the borrower applied. Included on the first page:
loan originator contact information, important dates, summary of
loan terms total of estimated settlement charges. This page is
designed to make shopping for a loan easier for the consumer. Our
job as a lender is to review the brokers GFE for accuracy and
completion. In Wholesale at submission our TIL package will no
longer include the GFE. After submission if we are preparing the
GFE due to changed circumstances, our system will complete the form
based on our data entry. Slide 15 15 GFE Getting it Right, Page 1
Contact Information In the first section you must fill in the name,
business address, phone number and email address of the loan
originator completing the GFE. Broker contact information is shown
until the time the processed loan file is submitted for approval,
then Stearns contact information will be entered In the second
column the borrowers names, property address and the date the GFE
is prepared is entered. Slide 16 16 GFE Getting it Right, Page 1
Important Dates The important dates section notifies applicants of
the timeframe the terms quoted at application are available to
them. When a loan is locked the GFE is reissued because this
section updates to give the borrowers accurate information. Slide
17 17 GFE - Getting it Right, Page 1-Important Dates Line 1. Enter
the date through which the quoted interest rate will be available.
You may enter a date and time, or if the rate is floating enter
N/A. If the loan is locked the lock expiration date is shown here.
Line 2. RESPA requires all other settlement charges quoted at time
of application to be binding for a minimum of 10 business days. For
wholesale and retail do not count Saturday and Sunday. Enter that
date here. If a revised GFE is issued, the date in this box is 10
days after the date on the reissued GFE. Line 3. Enter the term of
the rate lock here. If the loan is floating enter N/A. This field
will be updated at the time the loan is locked and a new GFE
reissued. Line 4. This field represents the number of days prior to
settlement that the rate must be locked. The minimum number of days
for Stearns Lending is 14. If the loan program requires a greater
number of days, enter that here. We chose 14 days because that is
the shortest rate lock period we currently offer. This does not
mean the borrower needs to wait 14 days to settle, they can lock
and go to closing as soon as possible. Slide 18 18 GFE Page,
Summary of your loan This section of the GFE highlights critical
terms of the loan to the consumer. Line 1. The loan amount applied
for Line 2. The term of the loan in years Line 3. The interest rate
shown on the note at closing. If the loan is a 3-2-1 buydown the
interest rate on the note not the buydown rate is quoted. For an
ARM loan, the initial interest rate is quoted. Line 4. The initial
monthly payment amount of principal, interest and mortgage
insurance. If the loan program has other than monthly payments,
total the amount of payments made in a year and divide by 12. That
number goes here. Slide 19 19 GFE Page 1Summary of your loan This
section of the GFE highlights critical terms of the loan to the
consumer. Line 5. If the interest rate can rise, check Yes and
enter the maximum interest rate over the life of the loan and the
number of months before the first interest rate change. If a fixed
rate loan check No. Line 6. If a loan has negative amortization,
check the box Yes and enter in the maximum amount the principal can
rise. We do not offer negatively amortizing loans at this time.
Check the box No. Line 7. If a fixed rate loan check No. If an ARM,
enter the month of the first increase and the maximum associated
payment amount. The maximum payment over the life of the loan is
also shown. Line 8. Check Yes or No to show whether there is a
prepayment penalty. If yes, state the maximum amount of the
prepayment penalty, assume payoff on day 1. Interest paid through
the end of the month on an FHA loan at the time of payoff is not
considered a prepayment penalty. Line 9. Check Yes if the loan has
a balloon payment and enter the amount and number of years until
the balloon is due, otherwise check No. Slide 20 20 GFE Getting it
Right, Page 1 Escrow Account Information It is important for a
consumer to know if their loan payment includes impounds for taxes
and insurance. This box tells the consumer to ask their loan
officer for information regarding impounds. The payment quoted in
this section is only principal, interest and mortgage insurance.
Check the box No or Yes depending on the situation. If the loan
includes an impound account, information regarding impounds is on
page 2 of the GFE. Slide 21 21 GFE Getting it Right, Page 1 Summary
of Settlement Charges The total charges shown in boxes A and B are
detailed on page 2 of the GFE. This section gives the borrower the
total amount of estimated settlement charges from both origination
and other settlement charges. Slide 22 22 GFE Page 2 Page 2
displays loan fees as subtotals by service provided to the
consumer, another tool for shopping for the best loan. The fees
quoted at time of application on page 2 are compared to the charges
at closing on the HUD-1 to insure none have increased at closing
more than is allowed by the regulation. The lender is bound to the
fees quoted at application. In a wholesale transaction, the lender
is not able to unbind the agreement between the broker and the
applicant. Slide 23 23 GFE Page 2,Your Adjusted Origination Charges
Block 1. Our origination charge The dollar amount shown in this
block represents all compensation paid to the broker and lender.
This total is not dependent on who is paying the compensation. For
example lender paid compensation to the broker as well as seller
paid fees benefiting the broker or lender are included in the
total. Slide 24 24 GFE Page 2,Your Adjusted Origination Charges
Enter the total of the following fees in block 1: YSP, or Lender to
Broker CompensationBroker Fee Origination FeeProcessing Fee
Administration FeeApplication Fee Underwriting FeeCourier Fee
Messenger FeeWire Fee SSN/Tax Return Verification FeeLock Fee
Employment Verification FeeExtended Lock Fee MERS Registration
FeeDoc Prep Fee Commitment Fee Slide 25 25 GFE Page 2,Your Adjusted
Origination Charges Block 2: Your credit or charge (points), for
the specific interest rate chosen Block 2 represents the fees paid
or credit given to the borrower for the interest rate. This box
reflects the net impact of any discount, YSP or other loan level
price adjustment. Important to note: boxes 2 and 3 cannot be
checked at the same time. The fee or credit shown is the net impact
of all charges related to the interest rate chosen. Slide 26 26 GFE
Page 2,Your Adjusted Origination Charges Check one of three boxes
Box 1 wholesale, do not check. Box 2 if there is a credit for the
interest rate, check the box, enter the dollar amount of the credit
and the interest rate, carry the dollar amount of the credit as a
negative number into the column. Box 3 - if there is a charge for
the interest rate, (discount points and loan level price
adjustments) check the box, enter the dollar amount of the charge
and the interest rate, carry the dollar amount as a positive number
into the column. Again, the net charge or credit is reflected do
not choose both a credit and a charge. The amount from block 1 is
added to the amount in block 2 and the total shown in box A. Slide
27 27 GFE Page 2, Your Adjusted Origination Charges Impact of a
Lock: Once the loan is locked, the interest rate dependent charges
only are updated. These are the net charges/credits shown in block
2. Origination Fees as disclosed in block 1 are not allowed to
increase. These fees represent the charges involved in processing a
loan and do not include rate dependent fees. It is important to
take care when quoting the origination charges at application as
these fees cannot change unless an appropriate changed circumstance
exists and is documented and approved by Stearns Lending. We will
address changed circumstances later in the presentation. Exception:
if the loan origination fee is a percentage of the loan amount then
only that portion of the Our Origination Fee in box one can change
when the loan amount changes. For example, on a $100,000.00 loan
with 1% origination fee and $500.00 processing, box 1 = $1500.00.
The loan amount changes to $120,000, then box 1 updates to
$1700.00. Slide 28 28 GFE Page 2,Your Adjusted Origination Charges
Example 1: Loan Amount: $200,000 Interest Rate: 5.00% Broker Price:
101.00 (1% YSP) Broker Fees: origination $4,000.00, processing
$500.00 Stearns Fees: $750.00 administration Credit for Interest
rate to borrower: 1.00% (1% YSP) Slide 29 29 GFE Page 2,Your
Adjusted Origination Charges Example 2: Loan Amount: $200,000
Interest Rate: 4.50% Broker Price: 98.00 (2 discount points) Broker
Fees: origination $2,000.00, processing $500.00 Stearns Fees:
$750.00 administration Charge for Interest rate to borrower: 2.00%
(2 discount points) Slide 30 30 GFE Page 2,Your Adjusted
Origination Charges Example 3: Loan Amount: $200,000 Interest Rate:
4.75% Broker Price: 100 par no discount or YSP Broker Fees:
origination $2,500.00, processing $500.00 Stearns Fees: $750.00
administration Charge for Interest rate to borrower: 0.00% Slide 31
31 GFE Page 2,Your Adjusted Origination Charges Impact of Float to
Rate Lock on Example 1 Loan Amount: $200,000 Interest Rate: was
5.00% with 1 YSP now to get 5% the borrower must pay 1 discount
Broker Price: 101.00 became 99.00 a swing of 2 points Broker Fees:
origination $4,000.00, processing $500.00 Stearns Fees: $750.00
administration Credit for Interest rate towards closing costs for
borrower: 1.00% (1% YSP) became charge for interest rate of 1.00%
Slide 32 32 GFE Page 2,Your Adjusted Origination Charges What
happens now? The cost of the loan increased $4,000.00 (2 points)
based on market changes. RESPA tells us the origination charge is
not based on the interest rate but represents compensation to the
broker and lender for originating and processing the loan. Before
the rate lock, the broker was receiving $2,000 compensation from
the lender, now to continue to earn the $5250 origination fee
originally quoted, this compensation needs to be paid by the
borrower. What do I do? Contact the broker If the broker is holding
his origination charge constant then the burden of payment has
shifted from Stearns to the borrower. This will create additional
prepaid finance charges to the borrower and may trigger a new Truth
in Lending disclosure due to APR increases above tolerance. If the
broker wants to reduce his origination fees then include that
reduction in the redisclosure. A point to remember once a fee is
reduced, it cant be raised again unless there is a qualifying
changed circumstance. You may need to remind your broker of this if
he chooses to lower his origination charge in this example. Slide
33 33 GFE Page 2,Your Adjusted Origination Charges Impact of Float
to Rate Lock, improving market Example 3 Loan Amount: $200,000
Interest Rate: 4.75 was the par rate, now when paying 4.75% the
borrower earns 1% YSP as a credit for that interest rate Broker
Price: 100 par no discount or YSP, now 101 Broker Fees: origination
$2,500.00, processing $500.00 Stearns Fees: $750.00 administration
Charge for Interest rate to borrower: 0.00%, becomes credit of 1%
Slide 34 34 GFE Page 2,Your Adjusted Origination Charges What
happens now? The cost of the loan decreased $2,000.00 based on
market changes. RESPA tells us the origination charge is not based
on the interest rate but represents compensation to the broker and
lender for originating and processing the loan. Therefore broker
and lender origination charges do not change. Since the market
improved and costs for the interest rate selected decreased, the
borrower receives a credit towards their closing costs. The
borrower continues to pay their portion of broker and lender
compensation. Slide 35 35 GFE Page 2,Your Adjusted Origination
Charges Example 4: Loan Amount: $200,000 Interest Rate: 6.00%
Broker Price: 102.5 Broker Fees: origination $2,000.00, processing
$500.00 Stearns Fees: $750.00 administration Credit for Interest
rate to borrower: 2.50% Slide 36 36 GFE Page 2,Your Adjusted
Origination Charges What happens now? The Adjusted Origination
Charges in box A are allowed to be a negative number. In this case
the credit for the interest rate was larger than the origination
charges. This credit will be carried down to offset the other
settlement services in box B on the bottom of page 2. Slide 37 37
GFE Page 2, Your charges for All Other Settlement Services This
section lists each third party settlement provider selected by the
originator other than title. The description of the service, not
the provider name, and the charge for each must be included. The
total of all these fees is entered in the right hand column.
Examples include: credit report, appraisal, appraisal review, flood
certification, property tax services, FHA upfront MIP and VA
funding fee. These fees are limited to a 10% increase at close
unless there is a changed circumstance. Brokers and Loan Officers
need to create working relationships with their vendors to get
accurate estimates at the time of application. Slide 38 38 GFE
Getting it Right, Page 2 Your charges for All Other Settlement
Services All fees related to closing go in box 4 and is shown as a
total. The fees are not itemized individually. Included in this box
are fees such as title search, examination and endorsements,
lenders title insurance fee, delivery fee, settlement or escrow
fee, sub escrow fee, notary fee, messenger fee, email fee, and
attorneys fees for documents needed at close (not loan documents).
Any fee relating to the settlement, escrow or title services except
for owners title insurance goes here. Again, it is important for
the Broker and Loan Officer to create close working relationships
with the title companies in the borrowers neighborhood so these
fees are as accurate as possible. Slide 39 39 GFE Getting it Right,
Page 2 Your charges for All Other Settlement Services In a purchase
transaction the fee for owners title insurance and any
endorsements, independent of who is paying for them, is entered
here. In a refinance, enter NA. Slide 40 40 GFE Getting it Right,
Page 2 Your charges for All Other Settlement Services Any required
third party services that the borrower can shop for is listed here.
Describe the service, (for example, pest inspection, survey) and
list each estimated charge. The total goes in the right hand
column. For services disclosed in boxes 4, 5 and 6, if borrowers
are permitted to shop for a third party settlement services they
must be given a separate written list of settlement service
providers at the time of the GFE. This list contains the names of
providers the estimates were based on. This list is prepared on a
separate piece of paper provided along with the GFE. The broker is
responsible for preparation of this list and submission at the time
of application. Slide 41 41 GFE Getting it Right, Page 2 Your
charges for All Other Settlement Services Box 7 enter any state and
local recording fees for the loan and any required title documents.
Communication with the settlement agent prior to preparation of the
GFE is important so the estimate is accurate. Box 8 Transfer Taxes
represents the sum of all state and local government fees that will
be charged at settlement based on the loan application. This fee
must be exact and there is zero tolerance for charging more than is
initially quoted per RESPA. Communication with the settlement agent
is important for accuracy. Slide 42 42 GFE Getting it Right, Page 2
Your charges for All Other Settlement Services Box 9 represents the
estimate of the deposit that will be required for the borrowers
initial impound account at closing. The estimate includes deposits
for Property taxesHazard Insurance Flood InsuranceMortgage
Insurance Any other impounds. Slide 43 43 GFE Getting it Right,
Page 2 Your charges for All Other Settlement Services The estimated
per diem interest collected at closing is shown in box 10. In box
11, list the type of Hazard Insurance and the estimated amount,
carry the total to the right hand column. Insurance includes,
hazard, fire, flood, earthquake etc. Slide 44 44 Tolerance 10%
Tolerance: The total of charges in blocks 3,4,5,6 and 7 can
increase up to 10% if the service provider is identified by the
loan originator. There is no tolerance limitation if the borrower
selects their own service provider in blocks 4,5 and 6. Transfer
Taxes, block 8, has zero tolerance, the fee cannot increase at
settlement. Slide 45 45 GFE Page 3 The third page of the GFE has
minimal data entry by the originator and its primary purpose is to
be a tool for the borrower when shopping and comparing loan offers
from different lenders. Slide 46 46 GFE Getting it Right, Page 3
This part of the GFE is informational for the consumer. It tells
the consumer which fees can and cannot change and the associated
tolerance. If at closing there is a change greater than the
tolerances allowed, the lender is responsible for the correction
and that correction is shown on the HUD-1. Communication with
brokers and settlement agents prior to documents being released is
the key to success. Slide 47 47 GFE Getting it Right, Page 3 The
consumer can use the tradeoff table to compare loan offers from the
same lender. We will be programming the first column. Slide 48 48
GFE Getting it Right, Page 3 The shopping chart is a useful tool
for the consumer to use to compare offers from all lenders during
the 10 business day period described earlier. When a borrower
chooses the loan program and lender they will be required to
document their intent to proceed with the loan before any
additional fees or information, (verification of the application)
can be collected. Slide 49 49 GFE Getting it Right Settlement
Servicers Providers List Anytime the borrower is allowed to shop
for or choose a service provider, the Settlement Service Providers
List must be given along with the GFE showing providers that are
available to provide the services described. Key Points: The
Settlement Service Providers List is given to the applicant with
each Good Faith Estimate The list must include at least one
provider for each required service along with contact information
The providers given must offer their services in the borrowers
neighborhood. The applicant is not required to select from the list
provided. The borrower must notify the loan originator of his
choice of service providers for each service within 10 business
days of the application date. If the borrower chooses a provider on
the Settlement Service Providers List the fee at closing is limited
to a 10% increase. If the borrower chooses their own provider then
the fee is not limited. Slide 50 50 Settlement Service Providers
Form Sample Slide 51 51 HUD Booklet Hud also published a new
booklet to be sent to applicants with the Good Faith Estimate. The
revised booklet provides the borrower expanded information about
shopping for a mortgage and understanding the home purchase
process. The format and contents of the new Good Faith Estimate are
included in the description of the process and are required to be
used with any mortgage loan application taken on or after January
1, 2010. The HUD Booklet can be found at www.hud.gov/respa. Slide
52 52 TILA and RESPA TILA differences TILA requires itemization of
individual fees Seller paid fees are not included in the APR The
YSP is not included as a prepaid finance charge for APR purposes No
duplication of fees by broker and lender Individual Fees still used
in High Cost calculations The Initial Disclosure package does not
include the GFE. It is delivered separately by the broker. Timing
wait periods RESPA fees are binding for 10 days. Borrower intent to
proceed prior to verification of information or collection of fee
other than credit report fee. MDIA 3 day mailing period for TIL
documents prior to ordering appraisal, 7 days for settlement. Slide
53 Changed Circumstances When do I reissue a new GFE? When can a
fee quoted on the initial GFE change? Slide 54 54 Changed
Circumstances Changed circumstances include: Acts of God, Disaster,
Emergency a federal disaster declared by the president (fire,
flood, tornado, earthquake, hurricane) Inaccurate information used
in good faith to provide the GFE Loan amount, credit quality,
property value, income New information obtained that was not relied
on in providing the GFE Property type (SFR Units), Occupancy
Change, FICO, underwriting conditions require additional services
Locking the Loan Loan locks after GFE issued, Lock period expires
Other info particular to the borrower or transaction, boundary
disputes, flood insurance, environmental problems, unique property
characteristics not know to originator Slide 55 55 Changed
Circumstances Changed circumstances do not include: Lender non
acceptance of mortgage broker issued GFE GFE issued with no
property information and the property information is provided later
in the process, (Preapproval) GFE issued by the mortgage broker for
one lender, which is later submitted to a different lender Market
fluctuations on a locked loan Changes that should have been known
at the time the GFE was provided, for example requirement of two
appraisals for loan program/amount requested. Slide 56 56 Changed
Circumstances Changed circumstances may include the following. Each
will be considered on a case by case basis to determine the impact
of the change to the costs incurred for settlement. Each decision
will be documented on the Respa Changed Circumstance Detail form
Borrower does not proceed to closing quickly GSE, FHA, Mortgage
insurance program changes Regulatory changes Property address
deemed to be incorrect Parties added or removed from title Property
use changes Signing documents using a POA Vendor for a settlement
service goes out of business AVM problem, Appraisal Review Investor
Rejection of appraisal requiring new appraisal Borrower changes
from standard to extended coverage owners title policy Slide 57 57
Changed Circumstances Borrower Requested Changes Borrower requested
changes Changes to the loan application originated by the borrower
can be cause to create a new revised GFE, changing only those
sections of the GFE related to the borrowers choice. Examples
include: Changed loan program, i.e. from ARM to fixed Rate lock
Borrower chooses another property Borrower requests different loan
amount Slide 58 58 Changed Circumstances Rate Lock When the
borrower locks their interest rate, only the interest rate related
charges may change, for example: Charge or credit for interest rate
chosen (box 2 on page 2 of the GFE) Per Diem Interest Charges
related to the loan terms All other charges must remain the same.
For additional information about changed circumstances and their
fee impact please refer to the changed circumstance chart. Slide 59
59 Changed Circumstances - Timing A new GFE must be provided to the
borrower disclosing the costs affected by the changed circumstance
within 3 days of discovery of the changed circumstance. The broker
must reissue the GFE within 3 days of discovery if the loan has not
yet been submitted to Stearns. If submitted, the broker must notify
the account manager and/or compliance specialist immediately upon
identification of the changed circumstance so a new GFE/TIL (if
needed) can be prepared by Stearns. The underwriter may be the
first person notified as well. Slide 60 60 Changed Circumstances
Documentation In order to prepare a revised accurate GFE, the
originator must complete the RESPA Changed Circumstance Detail
Form. This form includes: The date of the change The date of the
redisclosure Details regarding the change Fee changes associated
with the change The changed circumstance documentation is reviewed
by the Compliance Specialist who will approve or decline the
request. If approved the Compliance Specialist will prepare the
revised GFE and TIL disclosures, if needed. If the loan is already
approved, the underwriter will review and approve or decline the
request before forwarding to the set up person for redisclosure.
The form will be kept in the loan file along with the appropriate
GFE. You will have a choice on DocuPrep to indicate if you are
requesting only a GFE or a GFE/TIL package. Slide 61 61 Request for
Revised GFE If the loan has been submitted for underwriting, and a
changed circumstance occurs, the broker will complete the Request
for Revised GFE form detailing the reason for the change. This form
will be reviewed by the Underwriter and/or the Compliance
Specialist prior to a new GFE being prepared by Stearns. Slide 62
62 Broker Fee Sheet Slide 63 HUD-1 Getting it Right
Dates,Fees,Details What you need to know Slide 64 64 HUD-1
Settlement Statement The new HUD-1 has been revised with line items
that correspond to the new GFE. Fees are not listed individually
but represent those in the boxes on the GFE. The purpose is to
allow borrowers to easily compare their final loan terms and
closing costs with those listed on their GFE. A third page added to
the HUD-1 lists the fees quoted on the GFE and shows a side by side
comparison of those fees at closing. Three tolerance categories are
disclosed zero tolerance, 10% tolerance and no tolerance
limitations. Fees exceeding tolerance must be cured and the credit
shown on the first page of the HUD-1. RESPA allows for a 30 day
cure period. The last page has a summary of loan terms. The new
HUD-1 is used in partnership with applicants receiving the new GFE.
If an application is taken prior to 1/1/10, the previous version of
the HUD is used, otherwise the new version is used. We are still
requiring the borrowers and sellers execute a signature page
attached to the HUD-1. Slide 65 65 HUD-1 Example Slide 66 66 HUD-1
Example Slide 67 67 HUD-1 Page - 1 Any cure to bring a fee into
tolerance will be shown in the 200 section as a lender credit on
page 1 of the HUD-1. Fees exceeding tolerance are not reduced on
page 2, but shown as their actual charge. Slide 68 68 HUD-1 Real
Estate Broker Fees Commissions earned by Real Estate Agents are now
shown in dollars instead of a percentage. Slide 69 69 HUD-1 Items
Payable in Connection with Loan Previously each fee was itemized
separately on individual HUD lines, now the HUD-1 is designed to
display fees in line with the new GFE subtotaled by category. Note
the references to the GFE so the borrower can easily refer to their
copy of the GFE. The adjusted origination charge is shown in the
fee column as paid by borrower, following from Box A of the GFE
page 2. Slide 70 70 HUD-1 Paid in advance to Lender and Reserves to
Lender These sections of the HUD-1 carry through from the GFE boxes
noted. The impound section (1002 1007) are listed on the inside
column with only the aggregate shown in the outside column. Slide
71 71 HUD-1 Title Charges Title services is the total of any charge
for a service involved in obtaining title insurance. Important
note, the title insurance premium split between the title agent and
the underwriter is disclosed on lines 1107 and 1108. Slide 72 72
HUD-1 Recording and Transfer Charges Government Recording charges
are detailed on the inside column and then the aggregate shown in
the outside columns. Line 1203 Transfer Taxes has zero tolerance.
If different than the amount shown on the GFE, contact the broker
to explain credit needed from broker. Slide 73 73 HUD-1 Additional
Settlement Charges This section details the services the borrower
shops for. The details again on the inside column with the
aggregate charges in the outside columns. Since the borrower chose
these service providers, the fees are not limited or considered in
the tolerance provisions of RESPA. Slide 74 74 HUD-1 Page 3 ZERO
TOLERANCE Charges That Cannot Increase This section compares the
information shown on the GFE to the final settlement charges. These
fees cannot increase at closing. Any fee which has increased at
closing must be resolved by a credit on page one of the HUD-1. This
chart is not corrected, only the credit is shown to bring the fee
back into tolerance. The funder is required to review this page of
the HUD prior to releasing funds. Any credit needed is to be taken
from broker fees and a correct HUD issued prior to release. If the
final HUD is sent after closing, the post funding audit department
will process the credit in partnership with the settlement agent
within 30 days of close. Slide 75 75 HUD-1 Page 3 10% TOLERANCE
Charges with an allowable increase of 10% These fees and charges
are allowed to increase 10% in total. The tolerance is not measured
on an individual basis but an aggregate basis. If the total has
increased at closing greater than 10%, that difference must be
resolved by a credit on page one of the HUD-1. This chart is not
corrected, only the credit is shown to bring the total back into
the 10% tolerance. The funder is required to review this page of
the HUD prior to releasing funds. Any credit needed is to be taken
from broker fees and a correct HUD issued prior to release. If the
final HUD is sent after closing, the post funding audit department
will process the credit in partnership with the settlement agent
within 30 days of close. Note: if the total amount of fees exceed
the initial quote by 14%, the 4% over the tolerance is the amount
credited. Slide 76 76 HUD-1 Page 3 Charges that can change These
charges are for those services chosen by the borrower or represent
fees associated with the closing date, for example, prepaid
interest and the initial deposit for the impound account. Slide 77
77 HUD-1 Page 3 Loan Terms Summary The loan terms information is
completed by the settlement agent from information included in the
closing document package. Borrowers may use this section to compare
terms quoted on their GFE to the final documents. The funder and
post funding auditors are responsible for reviewing this
information for accuracy and coordinating with the settlement agent
as described above for correction. Slide 78 HUD-1 Every HUD-1 must
be reviewed within 30 days of closing. Any fees found out of
tolerance must be refunded to the customer and an updated HUD-1
prepared by the settlement agent. The Stearns post closing auditor
will audit the final HUD-1 against the HUD-1 provided to the funder
and the GFE. The auditor is responsible for ordering a check and
working with the settlement agent to reissue a new HUD-1within 30
days of close. The auditor will also notify the broker of the need
for reimbursement if the error made is determined to have
originated from the brokers office. Slide 79 79 Lock Expiration and
RESPA Lock Expiration If the lock expires, the lock cannot be
extended or renegotiated until all prior to doc conditions are
approved. To extend the lock keeping the same interest rate offered
to the borrower, the broker may be required to take the increased
cost out of his compensation. Or, a changed circumstance will exist
due to the lock expiration and the broker submits the request for
new GFE due to lock expiration, a new GFE/TIL is prepared and the
appropriate waiting time begins again. Slide 80 80 Submission
Stages and RESPA Modifications/Changed Circumstances If during the
underwriting process a changed circumstance is identified which was
not initially disclosed in the loan submission, it may be necessary
to prepare a new Good Faith Estimate along with a TIL document
reflecting the change in terms associated with the new information.
Once the loan file is submitted to Stearns for underwriting, we
will prepare the updated GFE and document the changed circumstance
form. The Compliance Specialist, Account Manger or Underwriter will
contact the broker for preparation of the Changed Circumstance Form
and confirmation of fees that are changing. Stearns will make every
attempt to contact the broker within the 3 day window, if unable to
reach the broker or we do not receive the information, Stearns will
proceed with preparation of the GFE based on the best available
information to us. At this point in the loan process, only Stearns
will issue an amended GFE, the broker cannot issue the updated GFE.
Changed circumstances may also be identified after approval but
during review of prior to document conditions. Again, the
Compliance Specialist, Underwriter, Account Manger and Document
Preparation Specialist will work together to prepare the revised
GFE/TIL if needed and document the file of the changed circumstance
while working with the broker as above. Slide 81 81 Submission
Stages and RESPA Borrower Requested Changes When a borrower
requests a change, for example, from an ARM to a fixed rate loan,
the GFE and TIL documents need to be redrawn. The following are
submitted by the broker to the Compliance Specialist so the loan
can be modified and the appropriate disclosures prepared:
Submission Form Stearns Broker RESPA Fee Sheet Acceptable Changed
Circumstance Form Documentation to support the request Amended GFE
within 3 days of borrower request An acceptable Broker Prepared GFE
within 3 days of borrower request Amended TIL documents, (if not
being prepared by Stearns) An acceptable Broker Prepared Settlement
Service Providers Worksheet Broker Certification of Borrower Intent
to Proceed Slide 82 82 Submission Stages and RESPA Closing
Documents The document request form, and any supporting documents,
is completed and sent to Stearns by the broker. Document Prep will
use the estimated HUD from settlement to prepare the documents The
funder or document preparation specialist will compare the latest
version of the GFE to the HUD-1 page 3 and determine if any fees
and charges exceed tolerances at the time documents are prepared.
The document preparation specialist or funder will work with the
broker to adjust the brokers origination fees enabling the charges
to return to tolerance. It is the brokers responsibility to quote
fees correctly at application to minimize changes and credits at
closing. Funding The funder will review and compare the HUD-1
prepared by the settlement agent to the HUD-1 and GFE prepared with
loan documents. Any discrepancies must be resolved prior to
distribution of funds. The funder will work with both the broker
and the settlement agent to resolve any issues. Slide 83 83
Compliance Specialist We are creating a new position in each
Wholesale Branch, a Compliance Specialist whos primary focus is
RESPA compliance. The Compliance Specialist is the primary resource
for RESPA related questions from the broker community and the staff
in the branch. The Compliance Specialist will review the GFE,
Settlement Service Provider List and RESPA Fee Sheet auditing for
acceptability on each submission. The specialist is responsible for
contacting the broker to resolve any questions or issues regarding
the GFE, TIL and the RESPA Fee Sheet. The Compliance Specialist
will contact the broker and work out a solution if fees/charges
appear to be under disclosed or if Stearns fees are missing from
the GFE. A changed circumstance and the related fee documentation
will be reviewed by the Compliance Specialist. Slide 84 Compliance
Specialist If you are locking after taking an application, the
Compliance Specialist will review your registration package and
your GFE for accuracy and timing requirements prior to preparation
of the TIL disclosure package. Then your rate lock will be issued.
If you are floating your interest rate and the GFE shows a locked
interest rate, we will call you for clarification. Stearns will
require you to lock your loan at market rates for the interest rate
quoted to proceed with us. If you show a rate lock on the GFE, then
the lender is bound to the GFE as well. If we cannot support the
interest rate and terms quoted as locked on your GFE, we will
return the registration package to you. If your lock expires,
please contact the lock desk right away so we can work together to
determine the best solution for all. Slide 85 85 Compliance
Specialist - Resources For information regarding completion of the
Good Faith Estimate, please refer to the previous slides in this
presentation. Thank you. If you have additional questions, please
email your branch RESPA help desk Modesto, CA
[email protected]@Stearns.com San Jose, CA
[email protected]@Stearns.com Santa Ana, CA
[email protected]@Stearns.com Santa Rosa, CA
[email protected]@Stearns.com Roselle, IL
[email protected]@Stearns.com Las Vegas, NV
[email protected]@Stearns.com Cranford, NJ
[email protected]@Stearns.com Tigard, OR
[email protected]@Stearns.com Sandy, UT
[email protected]@Stearns.com We are here to help you!
Slide 86 86 Additional Resources Estimating your Appraisal Fee On
our wholesale website, there is a link to the appraisal request
system. Please enter the property information requested and a quote
will be returned to you. Typically a quote can be given the same
day. If for unique properties, additional information may be
required prior to a quote being given, you will be asked for any
additional information at the time of the fee estimate request.
Slide 87 87 Additional Resources Broker RESPA Fee Sheet The fee
sheet is created so that individual fees listed subtotal into the
various fee categories shown on the GFE. This should make your
audit of the initial GFE as well as preparation of any
redisclosures easier and more accurate. A copy of this form
individualized by branch is posted on our website,
www.stearnswholesale.com. Slide 88 88 Additional Resources Changed
Circumstance Chart Stearns has created a chart which lists possible
situations where a GFE may need to be reissued. The chart lists the
type of situation as well as the fee categories that may be
affected. This chart is posted on our wholesale website
www.stearnswholesale.com.
