HUD Communications on RESPA

We have continued to monitor HUD communications in regard to GFE and want to provide you the resources that we have obtained to continue to assist you. The Department of Housing and Urban Development (HUD) on April 2, 2010 issued a revised FAQs regarding the new RESPA Rule . Download the full document for RESPA FAQ’s (download FAQ ) . In addition, you can watch the webcast from March 18, 2010 clarifying the new RESPA rule. (Watch Presentation Video) , or obtain the presentation (download the presentation material).

The most updated FAQs were revised to provide further clarification on the following:

• GFE – General, Question #33, page 11. HUD directly addresses in the FAQs the question of whether a loan originator can provide a GFE without a property address on preapprovals. HUD advises that a loan originator can determine that a property address is not one of the required pieces of information that the loan originator needs in order to issue a GFE. It is important to note that a loan originator must consistently apply its policy on the information it deems necessary to issue a GFE, and the RESPA rule requires a loan originator to issue a GFE whenever it receives information sufficient to complete an application for a GFE. As a result, if a loan originator received an application for a preapproval and that application included all of the pieces of information that the loan originator requires to issue a GFE, the loan originator must issue a GFE and all of rules that govern the GFE process would apply. In addition, if a GFE is issued without a property address, the future receipt of the property address is not a changed circumstance that would allow the loan originator to issue a revised GFE.

  A preapproval is never to be used as a substitute for a GFE. If an applicant has chosen a property to purchase and the loan originator is willing to qualify the applicant for a specific loan amount, the a loan originator should issue the applicant a GFE that facilitates shopping for a loan, not just a preapproval used to shop for a property. For example, a lender may never issue only a preapproval to an applicant seeking to refinance.

• GFE-Important dates, Question #5, page 23. Previously in the FAQs, HUD indicated that if a lender does not offer a rate lock, the lines 1 in the “Important dates” should state “Not Available” or “NA”. HUD now advises that Line 1 must be completed the same way whether or not the lender offers a rate lock. Line 1 must state the date, and if applicable, time until which the interest rate for the GEE will be available.

• GFE-Block 1, Questions #7, and #8– HUD clarifies that any charge by a loan originator for the commitment period is included in Block 1 of the GFE, “Our origination charge”. “Our origination charge” includes processing, application, administration fees, underwriting, document preparation, wire, lender inspection, mortgage broker, loan handling and other miscellaneous originations services provided by or on behalf of the loan originator.

  HUD advises in question #8 if all or a portion of the charge in Block 1 is calculated as a percentage of the loan amount, and the loan amount changes, the loan originator can issue a revised GFE if it is permissible under 24 CFR §3500.7(f). In particular, if the loan amount changes and all or a portion of Block 1 is calculated as a percentage of the loan amount, then that portion in Block 1 may be recalculated.

• Right to cure and tolerance violations, Questions #9 and #12, pages 42 and 43 - HUD clarifies how a potential violation that is corrected by the lender should be listed on the HUD-1. HUD advises that the settlement agent must prepare a revised HUD-1 that states the actual charges paid by the borrower and seller. If the lender pays for a portion of a charge to cure a potential tolerance violation, the amounts for the charge shown on page 2 of the HUD-1 must be corrected to show the actual amount charged to the borrower. The settlement agent must include on a blank line in the applicable series a notation that the lender has made a P.O.C. payment of a specified amount to correct a potential tolerance violation. After the revised HUD-1 has been prepared by the settlement agent, the settlement agent must provide the revised HUD-1 to the borrower, the lender, and the seller as appropriate.

  In question #12, HUD clarifies how a credit to cure a tolerance should be listed on page 1 of the HUD-1. HUD advises that the cure for a potential tolerance violation may be listed as a credit to the borrower on page 1 of the HUD- 1 with a description of the service(s) the credit is applied to. If the tolerance cure is applied to the overall tolerance category “Charges that in Total Cannot Increase More Than 10%”, the tolerance cure credit may be listed as a “lump sum” amount on a blank line in Lines 204 -209 with a description of the tolerance category cure. For example, line 204 should read: Cure for “10% Tolerance Category”