Thursday, December 17, 2009

YOUR Benefits of The Revised RESPA As Of January 1, 2010

Lenders will shortly have considerably stricter disclosure requirements to meet when providing buyers with a Good Faith Estimate (GFE). Also affected with the new laws are very specific RESPA - HUD-1 Settlement Statement disclosures.

Many closings will not happen on time after 1/1/10 as a result of these new federal regulations. What you need to know is how to prevent YOUR closing from being delayed.

Although the goal of the new regulations is to provide simplicity, clarity, and certainty of mortgage costs for the public, the public may be quite unhappy to lean they may not take title of their home and their moving company will not be able to start moving furniture into the property because the regulations were not followed perfectly by their lender.

Here are how the changes will affect you:
1. The loan information disclosed to you should make it easier for you, the borrower, to understand the costs and terms of your financing and closing costs.
2. The new regulations are designed to help consumers shop for the lowest cost financing.
3. A standardized Good Faith Estimate will be required nationally.
4. The (GFE) will clearly disclose your loan terms and closing costs.
5. The upfront disclosures in the GFE will have very tight limits for the amount of estimated charges that can change between the time you receive your estimate and the actual figures charged at the closing. (The goal is to potentially save the borrowers hundreds of dollars in lender junk fees and typical real estate transaction hidden costs.
6. The new GFE forms will consolidate closing costs into major categories and display total settlement costs prominently on the first page so will easily be able to compare and determine which lender is offering the most favorable terms.
7.The Department of Housing and Urban Development (HUD) will limit closing costs and fees that can and cannot change at settlement and the amount that they can change. Many fees will have tolerances up to a 10% increase while other buyer expenses will have a zero tolerance from the lender’s GFE that was provided to you within three days of loan application.
8.The lender will not be able to charge you any fees (other than for a credit report) until after you receive their GFE.
9. The new GFE must state dates and terms of your loan including loan amount, term of your loan, interest rate, interest rate lock date, requirements for impounds (monthly taxes and hazard insurance), pre-payment penalties, balloon payments, loan adjustments and all charges associated with the loan including loan origination, appraisal and credit report. The terms and prices quoted (except for the interest rate and charges related to the interest rate) must be available for at least 10 days following issuance of the GFE.

If certain information or circumstances change after the GFE is issued, a new GFE will likely be required. If you want to prevent a delay in your scheduled closing date (and move in date), you will want to understand the three inherent consumer problems with this new regulation.
There are three tolerance categories:
• Zero Tolerance: There may be no variance in fees quoted. This applies to lender charges for taking, underwriting, and processing the application, including points, origination fees, and yield spread premium. (if this rule is broken, your lender has the option of eating the overage or not closing)
• 10% Tolerance fees:- settlement services where the lender selects the provider,- settlement services where the borrower selects the provider from the lender’s list,
- title services and title insurance if the lender selects the provider
- and recording fees.
• Unlimited Tolerance: Variance in these items is allowed without limitation, including services where the borrower can choose providers, like escrow and title insurance, impounds for taxes, per-diem interest, and the cost of homeowners insurance.

The final page of the GFE also contains worksheet-like charges to compare different loans and terms that the borrower can use to shop for the best loan pricing between mortgage lenders.
The most significant changes to the new HUD-1 Settlement Statement were made with the intention of having consumers easily compare their settlement charges on the GFE with those on the Federal HUD-1 closing form.Changes within the new HUD -1 disclosures that will benefit you are:• All fees customarily paid by the buyer that are to be paid by the seller must now be disclosed in the borrower’s column on the HUD-1 closing settlement statement and offset with a credit from the seller to the buyer on page 1 of the HUD-1 statement.
The premium for the owner’s/buyer’s title policy (even though customarily paid by the seller) must also be disclosed in the buyer’s column as a charge and offset with a credit on page 1, since it now appears on the buyer’s GFE.

What does this mean for your closing?
If there is a difference between the costs quoted on the GFE and the final numbers on the HUD-1, RESPA’s Final Rule provides a unique solution. Your lender has the opportunity of reimbursing the borrower any amounts by which tolerances were exceeded, either at the closing or within 30 days of settlement. OR – the lender can elect to revise their Good Faith Estimate when the tolerance have been exceeded – which may cause a delay in your closing and possession if not done with enough lead time for the regulations. (Your moving company will not be very happy about any delays either. )

DELAY PREVENTION IDEA:Be sure to select a very knowledgeable and reputable lender and real estate broker who will be sure to verify more than three business days before your closing date that the figures are within the new tolerances. Ideally, your lender and your real estate broker will need to be communicating closely about a week before your scheduled closing to insure your GFE figures are within mandatory tolerances. If not, a revised GFE will need to be prepared for you – hopefully without too big of a surprise on the revised figures. You might also want to be asking your lender about ten days before the closing if this new regulation will prevent you from closing on your property on the intended closing date. An informed consumer can make the best decisions for their specific situation.

No comments: