Starting January 1, 2010 HUD implemented a new RESPA rule to standardize the GFE and HUD-1 issued to borrowers for the purpose of a home loan.  Now unless you have been researching this information, are in the process of securing a home loan or work in the industry, that last sentence was most likely read like a law student’s text book and made absolutely no sense.  So, let’s break this down.

HUD stands for the department of Housing and Urban Development, and is the government agency that oversees the Federal Housing Administration (FHA).  The FHA is the specific department that insures home loans made by private lenders.  HUD passed some new regulations regarding how borrowers are informed of the details of mortgage loans back in November of 2008 and some of these changes are now being fully implemented.  (Some things take time.)  These rules are part of RESPA.  RESPA stands for Real Estate Settlement Procedures Act, and is a federal law that helps protect consumers from unfair practices during the home-buying and loan process. (We are not the only ones looking out for you.)

As part of this new regulation some significant changes have been implemented to two documents that are used within the mortgage process – specifically the Good Faith Estimate (GFE) and the Settlement Statement (HUD-1).  The GFE is a form that is issued at the start of the loan process.  It discloses to the borrower their estimated costs for fees related to obtaining the mortgage for their home that will be paid prior to or at the time of closing.  The HUD-1 is a final listing of the closing costs for the mortgage transaction.  It lists the sales price, loan amount, individual charges and total settlement costs related to the transaction for both the buyer and seller (or for just the single party in the case of a refinance).

There were two goals with this change: 

1. To standardize these two forms across all lenders to provide borrowers with an easier way of comparing loan offers.
2. To help borrowers determine that the loan they are getting at close is the same loan they were offered in the GFE. 

Every lender will now use the exact same form, with the exact same terminology and show, at close where and why any changes were made between the start of the loan process and the end.  This is a very good thing! 

A borrower can now compare a loan program from any number of lenders and intelligently compare fees, interest rates and programs in order to make an informed decision on what loan will be best for them.  At Awareness Home Funding, our goal has always been to educate our clients and to treat them fairly.  Now you have a way to prove to yourself that what we have been saying all along is true!  Check us out and compare our fees to anyone else.  We think you’ll be glad you did.

Monday, December 28, 2009

RESPA Changes
Real Estate Settlement and Procedures Act

Kessler’s Take:
The Department of Housing and Urban Development (HUD) announced their upcoming changes effective January 1, 2010.  In an attempt to make things easier and more transparent to consumers changes have been made to how a mortgage application is to be disclosed.  Here are the coming changes:

1) Mortgage brokers will need to calculate their commissions from their lenders (known as yield-spread premiums) as part of the loan origination fee.
2) Lenders will have to complete a new good faith estimate form, which will be three pages long as opposed to the current two-page form.
3) Origination fees and transfer taxes on the HUD-1 at closing must be exactly as stated on the lender’s good faith estimate at application.
4) Some costs from entities unaffiliated with the lender (ie. certain title company and inspection fees) can change between the good faith estimate and the HUD-1, but the change cannot be greater than 10%. Note that deals may still close if the discrepancy is greater than 10%, but all discrepancies will have to be reconciled and corrected within 30 days.

Here is the long and short of the matter.  HUD hopes that the good faith estimates being issued are more accurate and brokers and lenders are held more accountable for their actions.  Currently if a broker/lender issues a good faith estimate with numbers considerably low and the borrower gets surprised at closing, there are no consequences.  Under the HUD changes if the numbers disclosed are over 10% of the estimation the broker/lender is responsable for the difference.  While I support the updated procedure 100 percent the new forms that come with the changes have to be explained properly because if they are not they become more cumbersome than the ones currently being used.

Kessler’s Forecast:
Until lenders, loan officers, bank attorneys and all parties involved in the mortgage application fully understand what is going on borrowers can see delays in the processing and closing times associated with their transactions.  The other issue is brokers and lenders will over inflate their good faith estimates to insure they are not responsible for any difference in cost.  While that does not sound like such a bad thing it does affect an applicants ability to be approved.  An applicant must have the money needed to close plus a couple of months reserves.  If the closing numbers are inflated and an applicant is on the border of having enough funds they could be declined.  As with any changes it will take some time for the kinks to be worked out, but in the end it should help matters not hurt.

Housing Confidence

Kessler’s Take:
I believe is the last hurdle to housing stabilization is housing confidence.  The biggest question on most homeowner’s or potential buyers mind is what is the property worth.  While over the past couple fo years the thought of declining values was very realistic, the tide seems to be turning.  More and more people believe the worst is behind us and stabilization is around the corner.  Most housing economists look for a 6 month housing supply to acknowledge a market is stable.  After last weeks announcement by the National Association of Realtors there is now a 6.5 month supply down from a 7 month supply at the end of October.  While buyers continue to time the market right the days of waiting a couple of months for higher decreases are over.  Buyers now realize today is the day.
According to a third-quarter survey of homeowners by the mortgage market website Zillow, 41 percent of respondents said they expected the value of their home to increase over the next six months, while 43 percent felt the value of their home would stay the same, and only 17 percent thought it would decline.

Kessler’s Forecast:
March is the month!  I believe that we will be at a 6 month supply in March, with the perfect storm around us potential buyers will get off the fence and buy.  The overall thought about housing will be positive.  Homeowner’s will not think the value of their homes will drop rather stay stable with possible small gains.  The government has been the one pushing the housing market and will continue to do so until it is stable.

Rates

Kessler’s Take:
The 30 year fixed moved up to 5.05% nationally from 4.94% according to Freddie Mac’s Weekly Survey .  Last week I forecasted it would be up to 4.95%.  The upward movement is going to happen although I believe this is a little blip, rates should come down below 5% in the next 15 days and then start moving back up.

Kessler’s Forecast:
1 week (12/31/2009) – 5.15%
 1 month (1/28/2010) – 5.20%;
3 months (3/25/2010) – 5.65%;
 6 months (7/1/2010) – 6.25%;
12 months (12/30/2010) – 6.50%

Reports

Previous Week:

Tuesday, December 22

November Existing Home Sales
National Association of Realtors

Wednesday, December 23

November New Home Sales
U.S. Census Bureau

Upcoming Week:

Tuesday, December 29

S&P Case-Shiller HPI
Standard & Poor’s

Talk now more than ever for fraud are common guides and a main part of the conversation. Borrowers on terms more guides than ever formed: a fixed rate and floating rate, weapons, etc. But what strikes me is the lack of knowledge borrowers / buyers have regarding the good faith estimate and the fees associated with money loans are .

The Real Estate Settlement Procedures Act, or for short ReSPA was written by the U.S. Department of Housinginformation are filled and Urban Development (HUD) and to protect borrowers from hidden fees, bait and switch tactics, and the exceptional items which are charged to borrowers who knew nothing cheap, until the final table. To address this problem requires ReSPA the need for a debtor to a mediator guides / lender with a good faith Estimate (GFE) to the borrower not more than 3 days after the submission of loan application. This GFE is detailed to the borrower and explain theBorrower must sign and receive a copy.

The GFE includes things like the creation of commissions, underwriting fees, processing fees, deposits, estimated proration under estimated liabilities, etc. The GFE is a purchase price and interest rate. After the borrower receives an offer on a property and its agents accept / locks in a rate lender if the borrower's GFE with an updated version that reflects the purchase price and interest shall be made available. "The accuracy of these charges is a critical factorimportant, "says Jennifer Moran Foland, a real estate agent with RE / MAX Excellence, because it tells the buyer how much money they need to close the transaction and receive their new home. I can not say how many times my clients have after Review your estimated HUD-1 surprise from the company title coming to the closing table with more money than they had expected. "

For borrowers, the HUD-1 statement should reflect the numbers that were provided to the GFE available. TheLender fees should be identical, called the charges on the GFE, and the proration of taxes, sewer, Hoa, tax title should be in the vicinity. "It's important to be aware of this to buyers." Says Jennifer. "But I have a chance – take a copy of the GFE with my clients in advance so I know what my customers to get to the closing table and ensuring that there are no last minute surprises should."

As a final note ReSPA went on some recent reforms and newRegulations have been issued by the Department and will from 1 January 2010.

The Department of Housing and Urban Development (HUD) has released an updated version of a booklet that’s intended to help consumers comparison-shop for a mortgage.

Much of the 49-page publication, “Shopping for Your Home Loan: HUD’s Settlement Cost Booklet,” is devoted to the new standardized Good Faith Estimate and HUD-1 settlement statement forms that lenders must begin using on Jan. 1.

The forms and other changes to implementation of the Real Estate Settlement Procedures Act (RESPA) are intended to help consumers comparison shop. HUD believes the new RESPA rules, which encourage lenders to package settlement services like title insurance with loans, will save consumers an average of nearly $700 in costs and fees per mortgage.

The new RESPA rules place restrictions on changes to estimated loan origination and settlement service charges as disclosed on the GFE. The RESPA rule changes also require that mortgage brokers disclose “yield spread premiums” — rebates paid by lenders when borrowers take out loans at higher interest rates than they could qualify for — and credit them against a borrower’s closing costs.

HUD has posted a RESPA “FAQ” — answers to “frequently asked questions” — and other information on a dedicated RESPA page to help lenders, settlement services providers and consumers understand the new rules.

Source: Inman News


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RESPA is changing the guidelines for fees and this will help borrower’s lower their cost in closing loans. RESPA(Real Estate Settlement Protection Act) is governed by HUD. The “initial” charges on the GFE (Good Faith Estimate) will now be binding and these charges will be what you see on the final HUD1 at settelment. Great News for Consumers and Mortgage Applicants.  A report I found interesting informative and true about RESPA.

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One cannot know enough these days about mortgage lending, protect yourself and be at ease about what you know. Prepare yourself and ask questions and get answers…it is about your life.