RESPA: Regulation & Integration Process Guide

Transcription

1 - 1 - Reverse Mortgage Wholesale & Correspondent Lending RESPA: Regulation & Integration Process Guide The Real Estate Settlement and Procedures Act (RESPA) is a consumer protection statute designed to help homebuyers be better shoppers in the real estate market and is enforced by The Department of Housing and Urban Development (HUD). Effective January 1, 2010, HUD will require loan originators to provide borrowers with a standardized Good Faith Estimate that accurately discloses settlement charges and key loan terms. In addition, closing agents will be required to provide borrowers with a new HUD-1 settlement statement. These initiatives are intended to streamline the timely delivery of disclosures, prohibit kickbacks that increase homebuyer costs and add transparency to the home buying process. Moving forward, mortgage lenders and originating brokers will be bound to the settlement charges and terms presented on the Good Faith Estimate at time of application. As a result, it is imperative that you, our business partner, understand the new regulations, processes and software updates to be successful. Your company may be liable for cost overages deviating from those originally disclosed. The information detailed in this guide will highlight topics including: Document changes and additions Good Faith Estimate Cover Letter Settlement Service Providers List Standardized Good Faith Estimate Lender produced HUD-1 Settlement Statement ReverseWare system updates GFE menu Forms menu Changes to process and protocol Fulfillments role in RESPA related borrower re-disclosure Tolerances and changed circumstances Best practices for originators Frequently asked questions

2 - 2 - Document Additions: Good Faith Estimate Cover Letter The new standardized Good Faith Estimate (see pages 3 through 5) will be accompanied by a cover letter. The cover letter will print each time a Good Faith Estimate is generated within ReverseWare and must be included with your submission fulfillment. The GFE Cover Letter is intended to address all possible reasons for receiving a Good Faith Estimate including: Changed circumstances as a result of acts of God, war, disaster, or other emergency The information provided to generate the initial GFE has changed or has been found to be inaccurate i.e., loan amount, value of the property, or other New information has been received that affects settlement costs (such as the need for flood insurance) The sales price changed Loan Commitment expired Document Additions: Settlement Service Provider List Borrowers are allowed to shop for certain third party settlement services. Because of this, RESPA has added an additional step to ensure borrowers are made aware of their option to shop for settlement services. This additional step requires that all borrowers be presented with a Settlement Service Provider List simultaneously with the disclosure of the initial GFE AND each time a re-disclosure adds a required or additional settlement service. Note: The Settlement Service Provider List will not be included in application packages generated within ReverseWare. It is your responsibility to create, maintain and present your client with your Settlement Service Provider List. All submissions to fulfillment must include a copy of the Settlement Service Provider List. Below are some sample items that you could include on your Settlement Service Provider List: A brief statement notifying the borrower that they are NOT required to use the providers presented on the list A timeframe for which the borrower must make their selection known A statement explaining what will happen if no selection is made known (i.e. you will select the service providers on their behalf if you do not hear from them within the timeframe provided OR they tell you they do not wish to shop for services) Designate a section for Title and Settlement Services. Take into consideration your business model and the number of states you operate in when deciding to provide national or local service providers Consider adding a section for counseling agencies or add a note that refers them to the list of counselors you provided at application Note: A borrower s choice to select from the service provider list or shop for their own services will impact the GFE and fee tolerances. For additional information, please refer to Fee Tolerance Rules located on page 7 of this guide. Key Points: Settlement Service Providers List Borrowers are allowed to shop for certain third party settlement services The Settlement Service Providers List ensures your client is made aware of their option to shop services Must be provided with initial GFE and each time a re-disclosure adds a required or additional settlement service Borrowers are not required to use the providers presented on your list It is your responsibility to create, maintain and present the list to your clients List must be included with ALL submissions to fulfillment

3 - 3 - Document Changes: Standardized Good Faith Estimate (GFE) Effective January 1, 2010, lenders and mortgage brokers will be required to present borrowers with a Good Faith Estimate in HUD s new standardized format. The following pages describe this document and will prepare you for your next client meeting. Per RESPA, the Good Faith Estimate must be presented to your client within 3 days of application. (Exhibit A page 1 of the Good Faith Estimate) GFE highlights 1 This section contains critical originator and borrower information. Business partners will be responsible for presenting clients with the GFE. Therefore, your name and contact information will appear on the Good Faith Estimate. 2 Important dates highlights good through dates relative to interest rates, lock periods and settlement charges. For adjustable rate products, the interest rate available through date will reflect the Monday following the last print date. Fixed rate products will reflect the GFE print date. Settlement charges presented will be available through the current date plus 10 business days. The after you lock your interest rate, you must go to settlement within... field will populate 10-days for fixed rate products and is N/A for adjustable rate products. The You must lock the interest rate at least... field will populate N/A for all products. 3 Summary of your loan includes loan specific information. Data in this section will vary dependent on the product originated within ReverseWare. 4 Escrow account information will be completed only if your borrower elects to have funds set-aside for taxes and/or insurance. 5 Summary of your settlement charges combines figures presented on page 2 of the GFE. See Exhibit-B.

4 Document Changes: Standardized Good Faith Estimate (GFE) continued (Exhibit B page. 2 of the Good Faith Estimate) GFE highlights continued 1 Your Adjusted Origination Charges. Our origination charge (Box-1) is the sum of Box-A and Box-2. Total from Box-1 includes the origination fee, processing fees, document prep fees, courier/express mail fees, Texas attorney s fees (if applicable), and correspondent fees. Your credit or charge (points) (Box-2) will populate the highest correspondent fee for that day based on the product you selected. The calculation for this field includes loan discounts, service release premiums and your correspondent fee. All correspondent fees in this field will be reflected as absolute values, even if there is negative compensation associated to the product you are delivering. Your adjusted origination charges (Box-A) is the sum of the origination fee, processing fees, document prep fees, courier/express mail fees, and Texas attorney s fees (if applicable). 2 Your Charges for ALL Other Settlement Charges. Boxes 3-11 are total charges for all other settlement services and are expressed as a sum in Box-B. The form takes the totals from Your Adjusted Origination Charges (Box-A) and adds them to the totals from Your Charges for All Other Settlement Services (Box-B). This combined number equals the total estimated settlement charges your borrower can expect to pay for their reverse mortgage.

5 Document Changes: Standardized Good Faith Estimate (GFE) continued (Exhibit C page. 3 of Good Faith Estimate) GFE highlights continued 1 Fee Tolerances This section gives a brief description of the charges that cannot increase at settlement, those that cannot increase more than 10%, and charges that can change at settlement. For additional information, please refer to Fee Tolerance Rules located on page 7 of this guide. 2 Tradeoff Table This table is allows the borrower to make a comparison of similar loan offerings. The first column will be auto-populated by ReverseWare 3 Shopping Chart The shopping chart can be used by your client to compare loan offers from different originators. ReverseWare will populate loan specific data to the first column. Note: The new standardized Good Faith Estimate does not include a signature line. Adding a signature line to this document is prohibited by HUD.

6 - 6 - Document Changes: Lender Prepared HUD-1 Settlement Statement Significant changes were made to the HUD-1A with the intention of making it easier to read for your borrowers. This new format allows borrowers to compare settlement charges from the last disclosed Good Faith Estimate to those appearing on the final lender prepared HUD-1A. Note: The exhibits illustrated below reference fee tolerances. For additional information about fee tolerances please refer to Fee Tolerance Rules located on page 7 of this guide. (Exhibit D page 1 of the HUD-1 Settlement Statement) Name and Address of Lender>.> If closing documents are drawn in our name, then Bank of America s name and address will appear in this field. If closing documents are drawn in your name, then your company name and address will appear in this field. Place of Settlement>>>>.>>>>> The place of settlement field is reserved for the address where the closing is taking place. We have updated our Doc Request Worksheets to allow space for you to provide the address for the place of settlement. (Exhibit E page 3 of the HUD-1A Settlement Statement) Settlement Charges>>>>.>>>>.. Settlement charges will populate to the HUD-1A. Each charge will also identify the box number the fee correlates to on the Good Faith Estimate. Charges That Cannot Increase.. Charges listed in this category cannot change without a valid Changed Circumstance. Cannot Increase More Than 10%.. Total charges listed in this category cannot increase by more than 10% from what was originally disclosed. Charges That Can Change.. Charges listed in this category can increase without limitation.

7 - 7 - Fee Tolerance Rules Cannot Increase 0% Tolerance Can Increase 10% Aggregate Tolerance Can Increase No Tolerance Rule Applied GFE disclosed fees in this category may not increase unless there is a valid changed circumstance. 0% Tolerance Fees Include: Origination Fee Processing Fee (non-allowable charge on HECM products) Document Preparation Fee Texas Attorney Review Fee (if applicable) Transfer Taxes (city/county/stamps) Loan Discount (not currently used) Fees that break the 0% tolerance rule must be cured. ReverseWare will indicate 0% tolerance breaks by highlighting the fee in red on the GFE page (see Exhibit-F below). Exhibit-F GFE disclosed fees in this category cannot increase more than 10% and applies to all fees in this class 10% Tolerance Fees Include: Recording Fees Settlement services where your organization selects the provider. For example: - Credit Report - Appraisal Company - Flood Determination Service Settlement services where the borrower selects a provider that appears on your Settlement Service Provider List Fees exceeding the 10% tolerance rule must be cured. ReverseWare will indicate 10% tolerance breaks by highlighting out of tolerance fees in yellow on the GFE page (see Exhibit-G below). Exhibit-G Tolerance rules do not apply to fees in this category. Fees in this category may increase and be charged to the borrower. No Tolerance Rule Fees Include: Hazard Insurance Flood Insurance Fees for services where the borrower selects a provider that does not appear on your Settlement Service Provider List If an event occurs after the GFE is issued, which results in an increase to any fee within this category, a new GFE may be reissued if the event was a valid changed circumstance. GFE re-disclosure due to a valid changed circumstance must be completed within 3 business days from when you received information about the triggering event. Failure to comply within 3 business days will nullify your changed circumstance. The increased amount cannot be charged to your borrower and your organization will absorb any overages beyond the initial disclosed amount. Tolerance breaks can be cured by: 1. Selecting a valid changed circumstance if one exists and re-disclosing the GFE to your borrower within 3 business days. 2. Lowering the fee back under the tolerance.

8 - 8 - Valid Changed Circumstances Should a valid changed circumstance arise, a fee may be increased. HUD defines a valid changed circumstance as: 1. An act of God, war, disaster or other emergency; 2. Information particular to the borrower or transaction that was relied on in providing the GFE and that changes or is found to be inaccurate after the GFE has be provided, which information may include information about the credit quality of the borrower, the amount of the loan, the estimated value of the property, or any other information that was used in providing the GFE; 3. New information particular to the borrower or transaction that was not relied on in providing the GFE; or 4. Other circumstances particular to your borrower or transaction, including boundary disputes, the need for flood insurance or environmental problems The following are selectable valid changed circumstances within ReverseWare : Appraisal Value or Sales Price Loan Amount Decrease Locking Event / Price Change Product Change Margin change which negatively impacts the loan Change in borrowers age which negatively impacts the loan GFE not disclosed to borrower Other Changed Circumstance Sample Scenarios VALID CHANGED CIRCUMSTANCE? FEES THAT COULD CHANGE/RESULT Originator forgot to input credit report fee to GFE page and has already issued the GFE... Processor discovers hazard insurance premium is due... Appraised value comes in higher than anticipated and as a result increases the maximum claim amount... Pricing has improved since initial disclosure so the originator decides to lock the loan... Processor under-discloses city taxes... No Yes Yes Yes No Fee cannot be charged to borrower. Originator absorbs cost. Processor adds hazard premium to GFE page, selects Other Changed Circumstance and re-discloses GFE within 3 business days. Potential fee increases include origination fee, MIP, title insurance, state/city/county fees based on previous max claim. Originator adjusts impacted fees, associates a valid changed circumstance with each increase and re-discloses GFE within 3 business days. Originators compensation increases. Originator selects Locking Event / Price Change and re-discloses within 3 business days. 0% tolerance fee; No valid changed circumstance applied. Originating organization absorbs cost overage. Note: Fees that increase after the GFE has been disclosed to the borrower will require a valid changed circumstance. After applying the valid changed circumstance to the increased fee, ReverseWare will populate a reminder message to re-disclose within 3 days of the change. The message will appear at the top of the GFE page in red text. A valid changed circumstance selection cannot be used to correct prior errors in fee disclosure.

9 - 9 - Re-disclosure: Combined Responsibility Re-disclosures relevant to RESPA will be a joint effort between your organization and the fulfillment site where you deliver your loans. Continuing to be transparent with each other and keeping in regular communication will be critical to our success. The chart below will help visualize our shared responsibility with RESPA related re-disclosures: ORIGINATOR... FULFILLMENT... Is responsible for all RESPA related re-disclosures prior to a commitment being issued Should work very closely with settlement company to ensure all transaction fees are accurately accounted for Must thoroughly complete the GFE page within ReverseWare Will print full application package Must supplement the Settlement Service Provider List to the application package and include it with the submission to fulfillment Should review signed application for accuracy Is responsible for curing any tolerance breaks prior to commitment Is responsible for re-disclosing GFE s prior to commitment where a valid changed circumstance was applied Will ensure re-disclosures are completed within 3 business days Will include documentation of re-disclosure with submission to fulfillment Is responsible for all RESPA related re-disclosures after a commitment is issued Will condition for an updated Settlement Service Provider list from the originator should the transaction require an additional settlement service (i.e. roof certification). Additionally, any valid changed circumstance that would necessitate an increase of fees or added services after commitment will require your establishment to provide a quote to fulfillment for proper re-disclosure Must verify that files submitted with changed circumstances are valid Is responsible for ensuring all re-disclosures were included with the originators submission Is responsible for notifying the originator if re-disclosure is required due to a changed circumstance while in process Will provide copies of re-disclosed items to the originator for auditing purposes Will send all re-disclosed items to borrower via mail Will monitor the number of times a GFE was issued at the loan level by verifying the Notes screen within ReverseWare

10 ReverseWare : System Updates The process for boarding a loan to ReverseWare has not changed. Significant changes, however, have been made to the look and functionality of GFE page within ReverseWare. Additionally, you will notice several new system warnings to help ensure your transactions are RESPA compliant and do not deviate from the prescribed fee tolerances. (Exhibit-H GFE page within ReverseWare ) GFE Disclosed After printing a GFE from the system, items that were input to the FIN column will be hardcoded to a new column titled GFE Disclosed. Broker Paid Outside of Closing (BrPOC) Fees that your organization will pay for on behalf of the borrower must be input to a new column titled BrPOC (Broker Paid Outside of Closing). The BrPOC column will also be used to cure tolerances breaks for fee overages with no valid changed circumstance. Not On Vendor List (Exhibit-I Add a HUD Line page) When a borrower selects a settlement service provider who is not on the list that you provided, check the box for that service/fee in this column. Selecting the Not on Vendor List checkbox will turn the 10% tolerance rule off for that particular fee. Adding a HUD Line The functionality for adding a HUD line to the GFE has slightly changed. You can no longer manually type in a specific HUD line. Instead, you will associate the fee to a particular HUD Series by selecting an 800, 900, 1101, 1205, or 1300 series.

11 ReverseWare : Tolerance and Fee Change Warnings Exhibit-J illustrates a loan where a GFE has already been issued. As a user, you can quickly determine this by looking to the GFE Disclosed column. Notice that several fees appear and are hardcoded to this column. Hard-coding the last disclosed fee amount is convenient for future reference. (Exhibit-J - GFE page within ReverseWare ) GFE page Exhibit-J illustrates both a 0% and 10% tolerance break. Fees that deviate from their tolerance rule will be highlighted. Fees that break the 0% tolerance rule will be highlighted red. Fees that break the 10% tolerance rule will be highlighted yellow. 0% Tolerance Break 10% Tolerance Break This fee is out of tolerance because the user tried to add it after issuing the initial GFE. Also, this particular fee falls within the 0% tolerance category (reference page 7). This fee is out of tolerance because the user tried to increase the appraisal fee from $400 to $600 which created a 10% aggregate tolerance break. In this example, the GFE disclosed amount for the appraisal, credit report and flood zone determination fees totaled $ Therefore, the maximum increase amount for the total of all three fees cannot exceed 10% of $ or $ Curing this tolerance break would require the overage of $ to be moved to the BrPOC column and would be absorbed by your establishment. Remember, fee additions after a issuing the GFE can only occur if there is a valid changed circumstance. If no valid changed circumstance occurred, the fee would have to be moved to the BrPOC column and would be absorbed by your establishment. (Exhibit-K Changed Circumstance Pop-Up on GFE) Selecting a Changed Circumstance Anytime a fee is increased after a GFE has been issued, the valid changed circumstance pop-up message will appear (see Exhibit-K). If no valid changed circumstance exists, leave the drop down menu blank and select OK. If a valid changed circumstance exists, select the appropriate scenario from the drop down menu and select OK.

12 ReverseWare : Warnings, Notes and Forms (Exhibit-L - Reason for Re-disclosure Pop-Up) (Exhibit-M Warning Pop-up) (Exhibit-N Notes page within ReverseWare ) (Exhibit-O Forms Menu) GFE re-disclosure will require you to provide a reason. After a GFE has been issued, a warning pop-up will appear when attempting to change the property type, appraised value, loan program, margin and borrower s date of birth. Each time a GFE is issued a note will populate to the Notes page of ReverseWare Do not print the Full Application Package or standalone Good Faith Estimate until the fees on the GFE page are accurate and you are ready to take the initial application with your client. ReverseWare will capture this as a GFE disclosure. Complete the following steps to increase or add fees to a transaction where the GFE has been printed but not yet presented to your borrower: 1. Return to the GFE page 2. Increase/add the appropriate fees 3. Increased fees will turn yellow or red depending on their tolerance type 4. Select Save 5. A pop-up warning will appear asking why the fees have increased 6. Select the valid changed circumstance GFE not disclosed to borrower 7. Go to Forms 8. Print a new GFE 9. Pop-up warning will appear asking to provide the reason for re-disclosing the GFE 10. Select GFE not disclosed to borrower 11. Add additional comments 12. Select ok 13. Return to the GFE page and the increased fees will no longer be out of tolerance

13 Frequently Asked Questions When will Bank of America implement the new RESPA requirements? December 12, Applications taken on or after December 12, 2009 will be held to the new RESPA requirements outlined in this document. Applications taken prior to December 12, 2009 will use the old GFE form and require the settlement company to prepare the HUD-1 settlement statement. Where may I get additional RESPA related training? Please join us for one of our regularly scheduled Loan Application and Origination courses. This session will highlight the many RESPA-related software updates within ReverseWare. Class schedules are released every Friday. If you are not on our mailing list, you can obtain a schedule by ing reversewholesale@bankofamerica.com. When does a loan originator have to issue a GFE? A loan originator must issue a GFE no later than three 3-business days after the loan originator receives an application or information sufficient to complete an application. Application is defined as the submission of a borrower s financial information in anticipation of a credit decision relating to a federally related mortgage loan which shall include the following: (1) borrower s name, (2) borrower s monthly income; (3) borrower s social security number to obtain a credit report; (4) property address; (5) estimate of value of the property; (6) loan amount and (7) any other information deemed necessary by the loan originator. When must a loan originator provide the borrower with a written list of Settlement Service Providers? All borrowers must be presented with a Settlement Service Provider List simultaneously with the disclosure of the initial Good Faith Estimate AND each time a re-disclosure adds a required or additional settlement service. If the borrower chooses a settlement service provider that is not on my Settlement Service Provider List, will tolerance rules apply? No, if the borrower chooses a settlement service provider that is not on your Settlement Service Provider List, the amount paid for that service is not subject to a tolerance. Are there any required fields within ReverseWare which must be completed in order to print a Full Application Package or a standalone Good Faith Estimate? Yes. Originators and processors should always make it a best practice to complete as many blank data fields within ReverseWare prior to submission. However, all loans must include First Name, Last Name, Social Security Number, Monthly Income, and Property 'Dwelling Type' entered to generate a Full Application Package or a standalone Good Faith Estimate. Bank of America, N.A. Member FDIC Equal Housing Lender 2009 Bank of America Corporation. Program, rates, terms and conditions are not available in all states and subject to change without notice. Credit is subject to age and property qualifications. THIS INFORMATION IS INTENDED FOR MORTGAGE AND REAL ESTATE PROFESSIONAL USE ONLY AND SHOULD NOT BE DISTRIBUTED OR SHOWN TO CONSUMERS OR THIRD PARTIES.