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RESPA REFORM Navigating the New G.F.E.

Summary of the Changes

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RESPA REFORM Navigating the New G.F.E.

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    1. RESPA REFORM Navigating the New G.F.E.

    2. Summary of the Changes…. Fee Tolerances Set Origination Charges – zero tolerance to change Required Settlement Fees subject to 10% variance Settlement Service Provider List Must be provided where borrower can choose a provider Re-Disclosure Restrictions Rare! For Eligibility and Interest Rate Locks.

    3. Delivery of the GFE The initial GFE distributed by any loan originator in a transaction becomes the binding GFE Lenders will be accountable for mortgage broker’s GFE If lenders prefer to generate the GFE, they must do so within 3 days of the broker’s application date Mortgage bankers (non-table funded) are responsible for the GFE through HUD-1 compliance

    4. Top of the Form Enter Name (Entity name not LO) Enter Business Address Telephone Number Email Address

    5. Important Dates! Line1 State the date which the interest rate is available Line 2 State the date all other settlement charges will be available – MUST BE AT LEAST 10 DAYS If borrower shows intent to proceed within the 10 days fees may not change.

    6. Important Dates! Line3 How many days must the applicant go to settlement once the interest rate is locked Line 4 State how many calendar days prior to settlement the loan must be locked

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

    8. Summary of your Loan Self Explanatory: Pacific Union Financial, LLC does not have prepayment penalties or Balloon Programs.

    10. Escrow Account Information Enter the same initial monthly payment (principal, interest and mortgage insurance) in the box for monthly amount owed Mark if the loan will have escrows or not. Escrows are required on all FHA loans, LTV’s above 90% in CA and above 80% in all other states.

    11. Summary of Settlement Charges Box A is driven from information on page 2 of the GFE Box B is driven from information on page 2 of the GFE We will review these in MORE DETAIL!!!

    12. Page 2 of the HUD / Costs Block 1: Includes all of the charges that all loan originators will receive! Broker & Lender Fees (broker origination fees, processing, admin charges and lender fees such as wire fee, underwriting fee, document fee, lender fee etc). All incluseive!!! Includes YSP!!!! SUJECT TO ZERO TOLERANCE -except for “changed circumstances”

    13. Page 2 of the HUD / Costs Block 2: First Box is typically used in a retail – where there is no discount and YSP is not typically shown. Second Box is the YSP and it is used to reduce ADJUSTED ORIGINATION CHARGES Third Box is for Discount Points and would increase ADJUSTED ORIGINATION CHARGES Note: Only 1 Box may be chosen!!!

    14. BOX A: Adjusted Origination Charges Lowered or increased by Yield Spread and Discount points respectively. If rate is locked this figure should not change! May change if rate is subsequently locked from a float or expires. Changes require re-disclosure

    15. Now let’s take a look at some examples Loan Amount $200,000 Origination Point 1% = $2,000 Administrative Fee $500 Interest Rate 5%

    16. Changed Circumstance Loan Amount $200,000 Appraisal came in lower than expected resulting in a 50 bp loan adjustment Interest Rate 5% Origination Points 1.5% Lender Administrative Fee $500

    17. Loan Amount $200,000 Wholesale Pricing Interest Rate 5% Broker Compensation $4,000 + $200 Processing Fee Yield Spread Premium 1% = ($2,000) Lender Administrative Fee $300

    18. Changed Circumstance Loan Amount $200,000 Interest Rate 5% Yield Spread Premium .5% = ($1,000) Broker Compensation $4,000 + $200 processing fee Lender Administrative Fee $300

    19. Retail Disclosure

    20. Loan Amount $200,000 Interest Rate 5.25% Lender Credit ($1,000) Origination Points 0 Lender Administrative Fee $500

    21. Pricing Scenario Number 2 A credit to Settlement Charges - WHOLESALE Loan amount $200,000 Interest Rate 5.25% Yield Spread Premium (2.5%) Broker Compensation $4,000 + $200 processing fee Lender Administrative Fee $300 Wholesale Disclosure

    22. Pricing Scenario Number 2 (HUD-1) Let’s take a look at how this is reflected on the HUD – Retail

    23. Settlement Services A list of service providers must be provided to the borrower. Local vendors should be listed If the borrower chooses from the list, settlement charges are subject to the 10% tolerance limit. If no service providers are listed, then it is assumed the customer could not shop and fees will be bound by tolerances

    24. Blocks 3 - 11

    25. Settlement Services 10% Tolerance applies to: Blocks 3-7 Tolerance applies where the lender requires use of a specific provider or the borrower uses a provider selected or identified by lender. Services in Block 4,5 & 6 are not subject to any tolerance if the borrower does not used an identified provider.

    26. Box 3 Required Services Required Services that we (the lender) select: Examples are: Credit Flood Appraisal Tax Service MORTGAGE INSURANCE Show individual charges but sum in the block to the right

    27. Box 4 Title Services & Lender’s Title Estimate third party services for ALL closing services. This means everything!!!! Closing / Escrow Fee Email Fee Doc Prep Fee Endorsements AND THE PREMIUM FOR LENDERS COVERAGE!

    28. Box 5 Owners' Title Subject to the 10% Tolerance Includes insurance premium Includes endorsements Not applicable for Refinances Enter “N/A” Yes it must be disclosed even if the seller pays it!

    29. Box 6 Settlement Services you can shop for Subject to the 10% Tolerance If they use a listed settlement provider Not Subject to 10% tolerance if chosen by borrower and not on lenders service provider list. Examples Pest Inspection Survey Show individual charges but sum on the right

    30. Box 7 & 8 Recording & Transfer Taxes Box 7 Recording Fees All Documents to be recorded Subject to the 10% Tolerance! Box 8 Transfer Tax ZERO TOLERANCE!

    31. Curing Transfer Taxes DONE ON HUD1

    32. Curing Variances greater then 10% DONE ON HUD1

    33. Comparison Chart page 3 HUD- 1 Retail

    34. Box 9 & 10 Initial Escrow Deposit & Per Diem Interest Box 9 Initial Escrow Deposit Estimate the amount required for impound reserves No tolerances Check the applicable boxes If some tax or some insurance and not all then use the “other” box Box 10 Daily Interest Charges From the date of settlement Use the close date on the contract!

    35. Box 11 Homeowner’s Insurance Estimate of Premiums Hazard Insurance Flood Insurance Earthquake Walls In

    36. Box B and Box A+B Box B Sum of blocks 3-11 are totaled A+B Sum of A+B = total costs to borrower

    37. ITEMS PAID OUTSIDE OF CLOSING

    38. Handing Origination Fee as Points

    39. 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

    40. 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 dependant 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

    41. Re-Disclosure Restrictions Lenders will be bound to fees disclosed on the initial GFE, except in certain situations where there are “changed circumstances” associated with a loan. The definition of “changed circumstances”: Changes or inaccuracies in information relating to the borrower or the transaction that was relied upon in providing the GFE Changes to the loan amount or estimated value of the property New information regarding the borrower or transaction not relied upon when the initial disclosure was provided Acts of God, war or disaster A lock event (locking the rate or expiration of the lock) or a change in the deal structure If a changed circumstance occurs, only those fees affected by the changed circumstance may change. If the estimates within the GFE are inaccurate but no change circumstance occurs, the lender is bound to the amounts shown on the last disclosed GFE

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