RESPA REFORM
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.
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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
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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
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Good Faith Estimate
New Definition - Application
Stearns Lending considers an application complete for
RESPA, GFE purposes when the originator
(mortgage broker or lender) has the following:
– Borrower’s name
– Borrower’s monthly income
– Borrower’s social security number
– Property Address
– Estimated value of the property
– Loan Amount
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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.
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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.
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Certification of Intent to Proceed
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.
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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.
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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.
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GFE – Getting it Right
Dates,Fees,Details
What you need to know
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 broker’s
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.
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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.
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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.
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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. Do not count Saturday and Sunday if you
are not open for business on those days. If the rate is locked, the lock expiration date is
shown here. Enter that date here.
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.
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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.
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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.
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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.
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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.
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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.
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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.
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GFE Page 2,Your Adjusted Origination Charges
Enter the total of the following fees in block 1:
YSP, or Lender to Broker Compensation
Origination Fee
Administration Fee
Underwriting Fee
Messenger Fee
SSN/Tax Return Verification Fee
Employment Verification Fee
MERS Registration Fee
Commitment Fee
Broker Fee
Processing Fee
Application Fee
Courier Fee
Wire Fee
Lock Fee
Extended Lock Fee
Doc Prep Fee
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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.
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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.
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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.
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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)
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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)
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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%
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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%
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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 can’t 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.
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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%
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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.
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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%
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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.
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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.
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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, lender’s title insurance fee, delivery fee, settlement or escrow fee, sub
escrow fee, notary fee, messenger fee, email fee, and attorney’s 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 borrower’s neighborhood so these fees are as accurate as
possible.
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GFE – Getting it Right, Page 2
Your charges for All Other Settlement Services
In a purchase transaction the fee for owner’s title
insurance and any endorsements, independent of
who is paying for them, is entered here.
In a refinance, enter NA.
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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.
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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.
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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 taxes
Hazard Insurance
Flood Insurance
Mortgage Insurance
Any other impounds.
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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.
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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.
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GFE Page 3
The third page of the GFE has
minimal data entry by the
originator and it’s primary
purpose is to be a tool for
the borrower when shopping
and comparing loan offers
from different lenders.
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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.
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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.
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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.
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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 borrower’s 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.
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Settlement Service Providers
Form Sample
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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.
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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.
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Changed Circumstances
When do I reissue a new GFE? When
can a fee quoted on the initial GFE
change?
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
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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.
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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
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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 borrower’s choice.
Examples include:
• Changed loan program, i.e. from ARM to fixed
• Rate lock
• Borrower chooses another property
• Borrower requests different loan amount
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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.
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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.
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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.
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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.
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Broker Fee Sheet
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HUD-1 Getting it Right
Dates,Fees,Details
What you need to know
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.
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HUD-1 Example
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HUD-1 Example
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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.
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HUD-1 Real Estate Broker Fees
Commissions earned by Real Estate Agents are now
shown in dollars instead of a percentage.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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.
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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 broker’s office.
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.
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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.
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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
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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
broker’s origination fees enabling the charges to return to tolerance. It is the broker’s
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.
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Compliance Specialist
We are creating a new position in each Wholesale Branch, a Compliance
Specialist who’s 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.
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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.
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 RESPA44@Stearns.com
San Jose, CA RESPA63@Stearns.com
Santa Ana, CA RESPA51@Stearns.com
Santa Rosa, CA RESPA62@Stearns.com
Roselle, IL RESPA49@Stearns.com
Las Vegas, NV RESPA41@Stearns.com
Cranford, NJ RESPA48@Stearns.com
Tigard, OR RESPA40@Stearns.com
Sandy, UT RESPA42@Stearns.com
We are here to help you!
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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.
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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.
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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.
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