Title Guaranty 2011 Settlement Services Workshop RESPA Update

1. Title Guaranty 2011 Settlement Services WorkshopRESPA Update

2. WHERE ARE WE TODAY?   Working with RESPA for about 18 months   HUD issued its last Q & As April 2, 2010 and are found at: http://portal.hud.gov:80/hudportal/documents/huddoc?id=resparulefaqs422010.pdf HUD now communicates via ‘RESPA Roundup’ publications. Five RESPA Roundups have been issued. The July 2010, September 2010 and December 2010 issues can be found in the RESPA Roundup archive at: http://portal.hud.gov:80/hudportal/HUD?src=/program_offices/housing/rmra/res/resroundup One RESPA Roundup concerning the Federal Reserves Loan Origination Compensation rule was published in March 2011 and can be found at: http://www.hud.gov/offices/hsg/rmra/res/mlocomplrodup31811v3.pdf The most current RESPA Roundup was issued in April 2011 and can be found at: http://portal.hud.gov/hudportal/documents/huddoc?id=RESPARoundup-April2011.pdf Copies of the RESPA Roundups are in your materials. 2

3. RESPA ROUNDUP HIGHLIGHTS   From the July 2010 RESPA Roundup If the consumer did not purchase a service that was listed on the GFE there should be nothing entered on the HUD and the estimate of the charge should not appear on the comparison chart on Page 3 of the HUD-1. A service not purchased should not be included in the tolerance calculation.   From the September 2010 RESPA Roundup On July 30 and August 6, 2010, the VA issued Circulars (26-10-9 and 26-10-9-Change 1) on the itemization of credits and title service charges on VA loans. Pursuant to the Circulars, loan applications for VA insured mortgage loans taken on or after October 1, 2010, must include an attachment to the HUD-1 itemizing (a) seller, lender, mortgage broker, or real estate agent/broker credits and (b) title services charges. Lenders are encouraged to combine any itemizations of credits and title charges with the VA origination statement required by Circular 26-10-1.   From the April 2011 RESPA Roundup Where the loan originator has not provided the consumer with a GFE, when completing the HUD-1 comparison chart the loan originator’s instructions to the settlement agent must indicate that the settlement agent must fill in the GFE columns with $0 and the HUD-1 columns with the actual charges from Page 2 of the HUD-1. If this results in one or more tolerance violations, the loan originator may cure the tolerance violation(s) by reimbursing the borrower the amount by which the tolerance was exceeded at settlement or within 30 calendar days after settlement.     3

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5. ‘TRUE’ BUYER VS ‘TRUE SELLER’ FEES   There is a difference between ‘true’ Seller fees versus a Seller paying for ‘true’ Buyer fees. If there is a true Seller fee it should not be on GFE and should be placed on Seller side of HUD. If a Seller is paying a true Buyer fee on behalf of the Buyer; the fee should be on the GFE, it does not go on Seller side of HUD (page 2). It is placed on page 2 of the HUD on the Buyer’s side. The fee is also placed on the HUD page 1 in 200’s (204-209) (reducing the monies the Buyer owes) and in the 500’s (504-509) (reducing the proceeds due the Seller). 5

6. REQUIRED BY LENDER - PAID BY THE SELLER Fees charged due to a service required by the Lender must be on the GFE in Block 3 and on the HUD-1 in the 800s; i.e. a termite inspection fee on a FHA loan. If in the Purchase Agreement, the Seller agreed to pay for a Lender required service, then the fee is also placed on page 1 of the HUD in 200’s (204-209) (reducing the monies the Buyer owes) and in the 500’s (504-509) (reducing the proceeds due the Seller). 6

7. STATE MANDATED SERVICES - NOT LENDER REQUIRED If a service (i.e. septic inspection) is required due to a state mandate, the fee for the service should not be on the GFE. On the HUD, the fee is placed in the 1300’s and not calculated in 10% tolerance. 7

8. NOT LENDER REQUIRED – AGREED TO BY BUYER AND SELLER If a service is to be performed as outlined in the Purchase Agreement but is not required by Lender (i.e. radon inspection, home inspection) it is placed in the 1300’s on the side of party responsible for payment and is not calculated in 10% tolerance. 8

9. THERE ARE TWO WAYS TO CURE Line by Line - adjacent to each fee as a POC By Lender item or on the front of the HUD as a Lump Sum. The Lender will dictate whether a cure will be at settlement or within 30 days of settlement. Best practice is to cure as soon as possible and cure must be done within 30 days of settlement. 9

10. CURE EXAMPLE 10

11. CURE EXAMPLE CONTINUED 11

12. LINE BY LINE CURE 12

13. LUMP SUM CURE 13

14. ODDBALL ITEMS If the loan amount changes the day of closing you must obtain a revised GFE prior to closing – Investors are checking for this. HOA Condo questionnaire fees. These are not typically charged in Iowa. If a HOA charges a fee, this can be treated as a changed circumstance. A revised GFE must be issued within 3 business days of receiving sufficient information to establish a changed circumstance. Typically, knowledge of the fee would come from receipt of a document, an email or even a telephone conversation. If the revised GFE was not issued or not issued timely – the fee must be cured. Escrow for repairs the Buyer is paying for are placed in either line 104 or 105. A Special Assessment for a Buyer is placed in either line 104 or 105. Desk Review fees required by Investors (not every loan) are treated as changed circumstance. A revised GFE should be issued (Block 3 fee) and place in the 800’s separate from the appraiser fee with a different payee. Child support judgments are placed in the 100’s. 14

15. OUT OF STATE - THINGS TO CONSIDER Obtain a copy of a typical ‘state’ HUD reflecting fees Ask about owner’s policy Ask about revenue stamps Ask about junk fees – typically prepaid finance charges. 15

16. THINGS TO REMEMBER Obtain copies of all invoices Verify Seller side HUD items are actually Seller fees not Buyer fees paid by the Seller 1104 includes the base policy plus all endorsements - so endorsement should not be listed out separately on other 1100 lines - see HUDs FAQs on pages 52 and 53 (Q & A #s 8 and 10). A copy of HUD’s FAQs is in your materials. 16

17. SCENARIOS: GFE TO HUD - EASY RIGHT? The HUD Page 3 - Terms should match GFE terms which should match the note. If not, a revised GFE may be needed. If Block 3 has lender required termite, it is placed in the Buyer’s 800’s series. If it is customary in the marketplace for the Seller to pay this fee, a credit must be shown on page 1 of the HUD. The fee is not moved to the Seller side of the HUD. Block 6 items should transfer to 1300s and are not included in the 10% tolerance calculation. In Iowa, transfer taxes are not paid by Buyer. The GFE should indicated ‘n/a’ and the tax should not be on Buyer’s side of HUD. Insurance on the GFE in Block 11 - for a Purchase this should have a dollar amount, for a Refinance this should be $0. 17

18. THINGS ON THE HORIZON Consumer Financial Protection Bureau ‘Know Before You Owe’ project Two proposed samples for combining the GFE and TIL found at: http://www.consumerfinance.gov/knowbeforeyouowe/ (Copies of the two proposed forms are in your materials) On December 6, 2010, FinCEN proposed - AML Plan for Non-Bank Mortgage Lenders Mortgage Brokers and More Mortgage Bankers to File SARs http://www.ffiec.gov/press/pr021610.htm Comment letters were due by February 6, 2011 - the Proposal is still pending. HUD’s comment letter indicated HUD is of the opinion that ‘closing and settlement agents, attorneys and title companies acting as closing agents’ should be covered by AML and SAR requirements (page 5 of HUD’s comment letter – a copy is in your materials).   Loan Originators must have NMLS number by July 29, 2011. 18

19. RED FLAGS  Recent Title Transfers Recent Quit Claim Deed and to non-relative Cash back on Purchase Payment to funds on HUD to non-lien holders Excessive Builder incentives Examination of Title Commitment indicates Seller not owner of record Incomplete or altered documents Sales price higher than list price Seller not an individual Use of Power of Attorney without explanation POA dated same day as settlement POA is dated (older than six months) – verify the POA is still in effect 19

20. RED FLAGS (con’t)  POA not prepared by an attorney POA for Trustee of a Trust – this is not allowed Short sale to related party Unusually high commission to real estate agent Obvious errors - names misspelled Borrower is not purchaser on Purchase Agreement Seller on the Purchase Agreement is not listed as owner on title or appraisal Purchase Agreement is not signed or not dated Last minute changes to the Purchase Agreement Notary related to Seller or Buyer Insurance policy shows an address other than the collateral address for a refinance of a primary residence 20

21. Resources FFIEC 2009 Mortgage Fraud White Paper - The Detection and Deterrence of Mortgage Fraud Against Financial Institutions: http://www.ffiec.gov/press/pr021610.html   FinCEN’s Mortgage and Real Estate Fraud website page: http://www.fincen.gov/news_room/rp/mortgagefraud.html   HUD’s RESPA website page: http://portal.hud.gov:80/hudportal/HUD?src=/program_offices/housing/rmra/res/respa_hm   HUD will respond to questions it receives via email - email questions to: HSGRESPA@hud.gov   Consumer Financial Protection Bureau website: http://www.consumerfinance.gov (you can sign up to receive updates)   Iowa Bankers Association GFE & HUD Loan Fee Placement Guide is in your materials - reprinted with the permission of the IBA. 21

22. Questions 22