The Veridian Blog

Happy New Year Everyone!

The U.S. Department of Housing and Urban Development (HUD) issued new regulations under the Real Estate Settlement Procedures Act (RESPA) Regulation X, last year that are set to go into effect on January 1, 2010.  These important regulatory changes will place new requirements on lenders to ensure borrowers are better positioned to understand their mortgage transaction and terms of their loan. 

Key changes will include:

1.      Good Faith Estimate – now, the “new RESPA Reform Good Faith Estimate” (GFE), this can no longer be issued for pre-approvals as a property address is now required for the application to be complete.  The GFE must be issued no later than three business days after the loan originator receives an application.

2.      List of Service Providers – Borrowers must receive a list of service providers in the local area for any required settlement service for which the borrower can shop.  Not sure whether this will include appraisers at this point.

3.      Fee Changes – GFE must contain a total of the Adjusted Origination Charge and charges for all settlement services.  This is one amount that includes all lender and broker fees/credits involved in the transaction.  All lender and broker fees/compensation will be listed under one all-inclusive Origination Charge.  Settlement charges disclosed on the GFE must be accurate (within tolerances), both initially and throughout the application process. 

4.      Fee Tolerances – These have been established for variances between the GFE and HUD.  Unless there is a valid Changed Circumstance, lenders and brokers are prohibited from exceeding certain fee tolerances ranging from 0 to 10%.

5.      Changed Circumstances – A GFE may only be re-issued under this scenario, which does not include loan origination changes by lender/broker or transfer taxes.  More info on this to be developed in the future.

6.      Re-Disclosed GFE – Re-disclosure to the borrower must occur within three days of the event that led to the change.  For example, changes in credit, loan amount, property value or loan program.

Lending is not going to get any easier in 2010.  Based on the last few years, all of this is subject to revision and further changes.  Please contact us if you have any questions with the new laws.