REAL ESTATE SETTLEMENT PROCEDURES ACT DEFINITIONS Application - - PowerPoint PPT Presentation

REAL ESTATE SETTLEMENT PROCEDURES ACT

¡ Application ¡ Changed Circumstances ¡ Federally Related Mortgage Loan ¡ Required Use ¡ Settlement Service

DEFINITIONS

RESPA applies to all Federally Related Mortgage Loans (FLMLs) except: ¡ A loan on property of 25 acres or more ¡ Business purpose loans (use Reg Z definition) ¡ Temporary financing ¡ A loan to purchase vacant land (exception) ¡ Assumptions, generally ¡ Loan conversion with no new note ¡ Secondary market transactions

COVERAGE

SPECIAL INFORMATION BOOKLET

¡ Provide booklet no later than three business days after application. ¡ Not required if the loan is denied within the three day period. ¡ Provide to only one applicant.

SETTLEMENT COST BOOKLET

The booklet only needs to be provided when the purpose of the loan is to purchase a 1-4 family

• dwelling. The booklet does not need to be provided for

the following types of loans:

¡ Home Equity Lines of Credit (even if the loan purpose is to purchase) ¡ Refinancings ¡ Subordinate liens

EXCEPTIONS

The booklet can be reproduced in any fashion, except:

¡ The booklet may not be made a part of a larger document ¡ All fonts used must be legible ¡ The text may not be changed except:

§ Names, addresses and telephone numbers of the lender or others and similar information may appear on the cover, but no discussion of the matters covered in the booklet shall appear on the cover. § The text may be translated into languages other than English.

REP REPRODUC ODUCTION AND C ION AND CHANG ANGES ES

GOOD FAITH ESTIMATE

¡ Provide within 3 days

• f application

¡ Multiple delivery methods are available ¡ Not required if, before the end of the 3- business-day period:

§ The lender denies the application § The applicant withdraws the application

¡ Not required for HELOCs

GOOD FAITH ESTIMATE

¡ The lender is not permitted to charge, as a condition for providing a GFE, any fee for an appraisal, inspection, or other similar settlement service. ¡ The lender may, at its option, charge a fee limited to the cost

• f a credit report.

¡ The lender may not charge additional fees until after the applicant has received the GFE and indicated an intention to proceed with the loan. ¡ If the GFE is mailed to the applicant, the applicant is considered to have received the GFE 3 calendar days after it is mailed, not including Sundays and the legal public holidays.

PE PERMI MITTE TTED CHAR D CHARGE GES

¡ The lender is not permitted to require, as a condition for providing a GFE, that an applicant submit supplemental documentation to verify the information provided on the application. ¡ A borrower may voluntarily sign consents to verify employment, income, deposits, etc. prior to issuance

• f the GFE to facilitate the loan process.

REQUES REQUESTING ING ADDIT ADDITIONAL INF IONAL INFORMA ORMATION ION

¡ Terms must be available for 10 days ¡ Exceptions

§ The interest rate § Charges and terms dependent upon the interest rate § Adjusted origination charges § Per diem interest

AV AVAILABILITY OF GFE TERMS

¡ The standard GFE form must be used. ¡ Only alterations listed in the GFE instructions and the FAQs are permitted.

CO CONTE NTENT AND F NT AND FORM

¡ 0%

§ The origination charge § While the borrower's interest rate is locked, the credit or charge for the interest rate chosen § While the borrower's interest rate is locked, the adjusted origination charge § Transfer taxes (only required in some locations)

¡ 10%

§ Lender-required settlement services, where the lender selects the third party settlement service provider § Lender-required services, title services and required title insurance, and owner's title insurance, when the borrower uses a settlement service provider identified by the lender § Government recording charges

TOLERANCES

The loan originator is bound, within the tolerances allowed, to the settlement charges and terms listed on the GFE provided to the borrower, unless:

¡ A revised GFE is provided prior to settlement under certain allowable conditions ¡ The GFE expires

BI BINDING GF G GFE

¡ Documentation ¡ May Be Required for:

§ Changed Circumstances § Borrower Requested Changes § Interest Rate Changes § New Construction

REVISED GFE

¡ For charges that exceed tolerances ¡ Reimburse to the borrower the amount by which the tolerance was exceeded ¡ Provide reimbursement within 30 calendar days after settlement

CURING VIOLATIONS

HUD-1 SETTLEMENT STATEMENT

¡ HUD–1 required when there is a borrower and a seller. ¡ HUD–1 or the HUD-1A may be used when there is no seller. ¡ Not required for HELOCs

HUD-1

All charges on the HUD-1 must be disclosed in accordance with the instructions in Appendix A. In general: ¡ Actual amount paid must be listed ¡ Third party charges must be itemized ¡ All origination services must be included in the loan

• riginator's own charge

¡ Administrative and processing services related to title services must be included in the title underwriter's or title agent's own charge. ¡ The amount stated on the HUD–1 for any itemized service cannot exceed the amount actually received by the settlement service provider unless the charge is an average charge.

CHAR CHARGE GES

¡ Sometimes used when the exact cost of a settlement service is unknown until month-end invoicing. ¡ If a lender uses an average charge to calculate the cost of a settlement service, they must follow certain rules:

§ Calculation § Applicability § Prohibitions § Documentation

US USE OF A E OF AVERA VERAGE CHAR GE CHARGE GE

Inadvertent or technical errors can be corrected with a revised HUD-1 provided within 30 days of settlement.

CORRECTIONS

The settlement statement must be available for inspection by the borrower at least one day prior to settlement.

ONE D ONE DAY AD ADVANC ANCE INS E INSPEC ECTION ION

Five Years

RECORDKEEPING

KICKBACKS AND UNEARNED FEES

¡ The acceptance or payment of referral fees and unearned fees is prohibited. ¡ Payment of fees must be for services actually performed.

RULES

¡ There must be a payment or giving of a thing of value. ¡ It must be pursuant to an agreement to refer business. ¡ A referral must

• ccur.

HOW TO VIOLATE SECTION 8

¡ Attorney’s fees. ¡ Title company fees. ¡ Fees for originating the loan. ¡ Payment of a bona fide salary to any person for services actually performed. ¡ Payment for goods or facilities actually furnished or services actually performed. ¡ Payments pursuant to a cooperative brokerage arrangement. ¡ Normal promotional and educational activities. ¡ An employer's payment to its own employees for any referral activities.

PERMITTED PAYMENTS

AFFILIATED BUSINESS ARRANGEMENTS

A situation where a person or firm is in a position to refer purchasers of settlement services to a settlement service provider that is

• wned in whole or in part by the referring party.

DEFINIT DEFINITION ION

¡ When there is an ABA:

§ The person making the referral must give an ABA Disclosure Statement to each person to whom a referral is made. § With certain exceptions, the person to whom the referral is made is not required to use the referred settlement service. § The only thing of value received from the arrangement is a return on an ownership interest or franchise relationship.

¡ The ABA Disclosure must:

§ Conform to the sample disclosure in the regulation. § Be provided on a separate piece of paper no later than the time of each referral or, if the lender requires use of a particular provider, at the time of loan application or with the GFE.

DISCLOSURE

ESCROW ACCOUNTS

¡ Permitted Escrow Accounts ¡ Escrow Account Analysis ¡ Aggregate Accounting ¡ Escrow information

• n the HUD-1

CONCEPTS

¡ Must be presented to the borrower at settlement or within 45 days following settlement. ¡ The initial statement must list the results of the aggregate analysis and contain the following information:

§ The amount of the borrower's monthly mortgage payment. § The portion of the monthly payment going into the escrow account. § Itemization of the estimated taxes, insurance premiums, and other charges. § Anticipated disbursement dates of those charges. § The amount that the servicer selects as a cushion. § A trial running balance for the account.

INIT INITIAL ES IAL ESCROW A ACCOUNT OUNT DIS DISCLOS OSURE URE ST STATE TEMENT NT

¡ An escrow account must be reanalyzed at least once every 12 months. ¡ The information resulting from the annual escrow account analysis must be disclosed to the member/borrower within thirty calendar days of the close of the escrow account computation year. ¡ The servicer is permitted to reanalyze the escrow account prior to the normal end of the escrow account computation year to allow it to change the effective date of the member/ borrower’s annual escrow computation year.

ANNU ANNUAL AL ESCR ESCROW A W ACCOUNT ANAL CCOUNT ANALYSIS SIS

¡ Account History ¡ Account Projection ¡ The current monthly mortgage payment w/escrow amounts ¡ The past year's monthly mortgage payment w/ escrow amounts ¡ The total paid into escrow during the previous year ¡ The total amount paid out of the escrow during the previous year ¡ The balance in the escrow account at the end of the period ¡ An explanation of how any surplus is being handled ¡ An explanation of how any shortage or deficiency is to be paid ¡ If applicable, the reason(s) why the estimated low monthly balance was not reached

ANNU ANNUAL AL ESCR ESCROW A W ACCOUNT ST CCOUNT STATEMENT TEMENT CO CONTE NTENT NTS

¡ Surpluses ¡ Shortages ¡ Deficiencies

RULES FOR SURPLUSES, SHORTAGES AND DEFICIENCIES

MORTGAGE SERVICING TRANSFERS

¡ Provide to loan applicants at the time an application is submitted, or within 3 business days after submission of the application. ¡ The disclosure must indicate whether the servicing of the loan may be assigned, sold, or transferred to any other person at any time while the loan is outstanding. ¡ The disclosure is only required on closed-end (non-HELOC) first lien loans covered by RESPA. ¡ Model language is provided. ¡ Co-applicants that live at different addresses must receive their own copies of the disclosure.

SE SERVICI CING D NG DISCL SCLOSU SURE ST STATE TEMENT NT

¡ Notice required

§ Responsibility § Contents

¡ Consumer Protections

WHEN SERVICING IS TRANSFERED

LOAN SERVICING INQUIRIES

¡ Qualified Written Requests ¡ Required Responses

§ Initial § Final

¡ Protection of Credit Rating

LOAN SERVICING INQUIRIES

NEW STUFF

¡ Provide within three business days of application ¡ Counselors in the applicant’s location ¡ List current (within 30 days) ¡ Data provided by the CFPB ¡ Required for HELOCs ¡ Not required for reverse mortgages

HOMEOWNERSHIP COUNSELING NOTICE

ERROR RESOLUTION AND INFORMATION REQUESTS

¡ Replaces QWRs ¡ Applies to most errors, complaints and information requests ¡ Written responses within certain timeframes

¡ Does not apply to flood insurance ¡ Requires borrower notifications prior to placement ¡ Certain rules for paying for insurance

• ut of an escrow

account

FO FORCED PLACEMENT

¡ Specific servicing related policies and procedures ¡ Early intervention for troubled borrowers ¡ Continuity of contact ¡ Loss mitigation procedures

LARGE SERVICERS