RESPA Training Good Faith Estimate (GFE) & Settlement Statement HUD-1

REAL ESTATE SETTLEMENT PROCEDURES ACT RESPA NEW RULE TIMELINE NOVEMBER 2008 PROMULGATED JANUARY 16, 2009 - EFFECTIVE JANUARY 1, 2010 - IMPLEMENTED 2

The minimum requirements to issue a GFE are? Borrower s name Borrower s social security number Borrower s monthly income Property address Property value Loan Amount 3

Delivery of the GFE The initial GFE distributed by any loan originator in a transaction becomes the binding GFE Rushmore Home Loans will be accountable for Loan Originator GFE GFE must be generated by the broker within 3 days of the acquiring the six minimum requirements and the Lender must ensure it was provided by the broker within 3 days of application Rushmore Home Loans is responsible for compliance of the GFE through HUD-1 4

Service Providers If no service providers are listed, then it is assumed the customer could not shop and fees will be bound by the applicable tolerances Rushmore Home Loans is responsible for fee requirements listed by the broker Although the listing of a service provider is considered a referral, without a thing of value and an agreement or understanding, there is no violation of RESPA Section 8 Additional disclosure may be added to the list stating that the originator is not endorsing the service providers 5

Enter the name and address of the entity providing the GFE Important dates Summary of loan information Characteristics of loan Escrow account information Summary of settlement charges 6

Important Dates The interest rate and other settlement charges dates are independent of each other Important Dates At lock, an updated GFE must be issued with Important Dates sections updated. Line 4 may contain N/A at this point. FLOAT LOCK 7

Important Timelines Availability of Terms 10 Business Days Binding GFE Rushmore Home Loans is bound to charges and terms if the applicant accepts terms within the availability period, unless there is changed circumstance 8

ARM Loans Negative Amortization ARM Loans 9

Enter only the principal, interest and MI amount. Same figure as from 4 th line of the Summary of Loan. 10

GFE page 2 11

Disclosing Fees Disclosing Fees Block 1 contains all Rushmore Home Loans & broker origination points, processing fees and administrative fees. Examples: Processing, mortgage broker fee, application, administrative, underwriting, doc prep, wire, loan handling and other miscellaneous fees. Note: Origination charges should not be itemized on the GFE or the HUD-1 Exception: If a state or governmental program requires the specific itemization of origination fees, a lender may itemize on the HUD-1 in the blank 800 lines (VA requires the itemization of 800 series fees) 12

Disclosing Fees Box 1 Box 2 Box 3 Block 2 Box 1 - is only checked by the lender if no additional charges or credits apply Box 2 - contains lender credits to the borrower to cover origination and/or fees (Lender Paid Compensation would be in this box) Box 3 - any loan discount points NOTE: Only 1 box can be checked per loan. 13

Disclosing Fees Block 3 includes all third party settlement services selected by the lender for which the borrower cannot shop. Examples: Appraisal, credit report, tax service, flood certification, and up-front mortgage insurance premiums 14

Disclosing Fees Block 4 - Title Services and Lender s title insurance Examples: Title searches Title examinations Endorsements All charges associated with the title services and settlement (closing) agent services 15

Disclosing Fees Block 5 - Owner s title insurance Must be shown on all purchase transactions Must have NA/Not Applicable on non-purchase transactions (Can t be Blank) Block 6 - Required services the borrower can shop for Examples: Pest inspections, survey, Home Warranty Block 7 Government recording charges Required on all loans Block 8 Transfer taxes 0 Tolerance Required on all purchase transactions (per state) If paid by seller disclosed on the seller side of the HUD-1 16

Disclosing Fees Block 9 Initial Deposit for your escrow account Boxes must be checked Block 10 Daily Interest Charge Must have the number of days, interest charges, settlement date; dated after the date of the GFE and the total. Block 11 Homeowner s Insurance Hazard Flood Hurricane Earthquake Required to be disclosed on purchase loans HOA insurance required on condos (need to be disclosed) 17

Tolerances Blocks 3 thru 11 10% tolerance in aggregate (along with other services below where provider was chosen from the list) Must list at least one service provider Subject to 10% aggregate tolerance if listed service provider is chosen Not subject to tolerance if listed service provider is not chosen 10% aggregate tolerance Must list at least one service provider if allowed to shop Subject to 10% aggregate tolerance if listed service provider is chosen Not subject to tolerance if listed service provider is not chosen Zero tolerance Must be disclosed but not subject to tolerance (not required on nonpurchase transactions) 18

Instructions Provides a recap of the tolerances Note: Even fees paid on behalf of the borrower by other parties are subject to the tolerances Allows for a comparison of different loans only required to complete the left hand column. 19

Instructions - Continued Shopping chart that can be completed by the borrower to compare multiple loan Scenarios not required to completed by issuer 20

Changed Circumstance What is it? Acts of God, war, disaster or other emergency Changed situation or inaccurate information provided by the borrower after issuance of the GFE 21

Changed Circumstance What can change? Only those fees impacted by the changed circumstance When going from a float to a lock, if pricing changes due to a changed circumstance, or a borrower requested change, only the interest rate dependent charges and terms may change. This includes only those charges or credits in Block 2 which will, in turn, impact the Adjusted Origination Charges. Block 1 fees CANNOT change, even with a changed circumstance Exception: If the loan amount changes and a portion of the Origination Charge is a percentage of the loan amount or the overall loan program changes Important Dates Section must be updated to reflect any new information 22

If a changed circumstance occurs, when must a new GFE be issued? The revised GFE must be issued within 3 Business Days of discovering the change or being notified by the borrower/broker of the changed circumstance Any revised GFE must be documented on a separate form as to the following: Date of Change Date of Re-Disclosure Detail of Change Indicate fees changed is association with the changed circumstance This documentation must be retained in the loan file and maintained for at least 3 years 23

At what point can a loan originator charge the applicant fees, other than a credit report fee? After the applicant receives the initial GFE, indicates an intention to proceed with the loan covered by the GFE notification of intention must be in writing and the applicant has received the lenders Truth-in-Lending statement. 24

New HUD-1, Page 1 25

New HUD-1, Page 2 Insert the name of the payee Line 801 = Line 1 of Block A from the GFE Line 802 = Line 2 of Block A from the GFE Line 803 = the difference of Line 1 and Line 2 Lines 804 thru 807 = items listed in Line 3 of the GFE Insert the name of the payee Line 1001 = Line 9 of the GFE Line 1101 = Line 4 of the GFE Line 1103 = Line 5 of the GFE Insert the amount of title ins. Insert the name of the payee Line 1201 = Line 7 of the GFE Line 1203 = Line 8 of the GFE Line 1301 = Line 6 of the GFE 26

New HUD-1, Page 3 Comparison of fees on GFE to HUD-1 Zero Tolerance Comparison of fees on GFE to HUD-1 10% Tolerance this is an aggregate of the total amount of fees Comparison of fees on GFE to HUD-1 that can change and there is no tolerance level A restatement of the Loan Terms, which should match the first page of the GFE 27

The HUD-1 All charges are subject to tolerance thresholds, regardless of whether there is a credit for that fee at closing by the seller, realtor or loan originator. Tolerance thresholds are for increases only; decreases beyond the threshold are allowed. RESPA cures have to be cured by the Lender. 28

Comparison Chart HUD- 1, page 3 Comparison of Good Faith Estimate (GFE) and HUD-1 Charges Charges That Cannot Increase HUD-1 Line Number Our origination charge Your credit or charge (points) for the specific interest rate chosen Your adjusted origination charges Transfer taxes Good Faith Estimate HUD-1 # 801 5,942.50 5.942.50 # 802-1,261.88-1,261.88 # 803 4,680.62 4,680.62 # 1203 6,057.00 6,057.00 Charges That in Total Cannot Increase More Than 10% Government recording charges Appraisal Fee Credit Report Fee Tax Service Fee Flood Certification Fee Owners Title Insurance Title Services and Lenders Title Insurance Good Faith Estimate HUD-1 # 1201 715.00 715.00 # 804 450.00 600.00 # 805 23.00 104.00 # 806 68.00 68.00 # 807 10.00 10.00 # 1103 1678.00 1,875.00 # 1101 Total 2839.43 5783.43 3,150.00 6,522.00 Increase between GFE and HUD-1 Charges $ 738.57 12.77% 29

Determining the Amount to be Refunded when Charges that Cannot Increase by more than 10% - Exceed the 10% Aggregate Good Faith Estimate 715.00 450.00 23.00 68.00 10.00 1678.00 2839.43 5783.43 HUD-1 715.00 600.00 104.00 68.00 10.00 1,875.00 3,150.00 6,522.00 $ 738.57 12.77% $5,783.43 X 1.10 = $6,361.77 maximum fees allowed $6,522.00 6,361.77 = $160.23 amount to be refunded 30

Documenting the 10% Tolerance Violation on the HUD-1 200. Amounts Paid By Or In Behalf of Borrower 201. Deposit or earnest money 202. Principal amount of new loan (s) 203. Existing loan(s) taken subject to 204. Lender credit to cure 10% tolerance 205 206 207 208 209 10,000.00 336,500.00 160.23 The amount of the 10% Tolerance Violation is entered on the first available line in Section 200 on page 1 of the HUD-1. Note: A HUD-1/A can be used on refinance transactions, however there is no place to indicate any RESPA violation cures 31

Tolerance Cure on the HUD-1 Attributable to a Specific Line Item Example: Transfer Tax was under disclosed by $200.00 32

Appendix 33

Completing the New Good Faith Estimate 34