HUD Amends GFE Procedures
On November 17 and November 19, 2009, HUD issued additional implementation guidance on the RESPA rule, effective January 1, 2010. The new guidance, in the form of “frequently asked questions (FAQs)” posted to the HUD website, addresses the design of the Good Faith Estimate (GFE). To view the “New RESPA Rule FAQs”, please go to http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm.
What is the Background on this Amendment?
On March 14, 2008, HUD published a proposed rule designed to improve certain disclosures required to be provided under RESPA. The RESPA disclosure requirements apply in almost all transactions involving mortgages that secure loans on one to four family residential properties. The revisions to the regulations adopted by HUD in this final rule are intended to make the process of obtaining mortgage financing clearer and, ultimately, less costly for consumers.
What does this Amendment Mean?
This amendment requires more timely and effective disclosures related to mortgage settlement costs for federally related mortgage loans to consumers. More specifically, this means no more guessing on closing costs. All costs reported on the GFE are requested to be within ten percent of the actual closing costs.
What will this Amendment Do and Who does it Help?
The amendment to the HUD’s regulations protects the consumers from unnecessarily high settlement costs by taking steps to:
Improve and standardize the Good Faith Estimate (GFE) form to make it easier to use for shopping among settlement service providers.
Provide more accurate estimates of costs of settlement services shown on the GFE.
Ensure that page 1 of the GFE provides a clear summary of the loan terms and total settlement charges so that borrowers will be able to use the GFE to identify a particular loan product and comparison shop among loan originators.
For example, the title charges that are itemized on the GFE are: Title services and lender’s title insurance; Settlement or closing fee; Owner’s title insurance; Lender’s title insurance; Lender’s title policy limit $; Owner’s title policy limit $; Agent’s portion of the total title insurance premium; Underwriter’s portion of the total title insurance premium.
Improve disclosure of yield spread premiums (YSPs) to help borrowers understand how YSPs can affect borrowers’ settlement charges.
Borrowers must be provided the GFE three days prior to receiving or processing any payments against the loan application.
Ensure that settlement borrowers are aware of final costs as they relate to their particular mortgage loan and settlement transaction.
Prohibits anyone from giving or accepting a fee, kickback, or anything of value in exchange for referrals of settlement service business involving a federally related mortgage loan.
Prohibits a seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale.
Sets limits on the amounts that a lender may require a borrower to put into an escrow account for purposes of paying taxes, hazard insurance, and other charges related to the property.
These regulations go into effect on January 1, 2010.
