Effective January 1, 2010,  the Department of Housing and Urban Development (HUD) modified the RESPA (real estate settlement protection act) rules.  This is the first major change in 30 years.  It is designed to help consumers comparison shop for mortgage loans by “bundling” the fees that lenders and title companies charge consumers.

Some highlights include:

  • The GFE (good faith estimate) that you get when you request a loan from a lender must be issued no later than 3 business days after the loan originator received a loan application.  The GFE settlement costs expire after 10 days, unless specified by originator.
  • The GFE interest rate lock deadline bay be set for any period of time established by the lender.
  • A GFE must be issued within 3 business days of receiving information.
  • If no real estate issues change nor borrowers situation changes, the GFE can not change.
  • The initial Truth in Lending (TIL) must be delivered at least 7 days before closing.  The final TIL must be delivered at least 3 business days before closing.
  • A revised TIL is required if the APR increases by 0.125% and must be received by the borrower at least 3 days before closing.

Issues to be aware:

  • No more RUSH closing.  Be prepared to extend or modify closing dates.
  • Pay attention to the rules and be aware of the effect on dates.
  • Work with your loan originator and make sure they understand the process.
  • Watch for issues that can cause date changes (appraisals, boundary issues, flood plains, environmental issues, etc.)
  • The HUD lines are now correlated to the applicable GFE references.
  • Bundled costs are no longer itemized (credit report fees, mailing costs, recording costs, etc.)
  • Buyer and Seller Credit and Debits are relocated in the 200/500 section.  Pay attention to the Owner’s Title Insurance and how it is recorded.
  • When lenders make a loan, they are paid via a Yield Spread Premium, YSP, (the cost of funds to the lender – the price the consumer is paying is the “spread”).  The YSP will be reported as an “origination charge”.
  • Understand which costs cannot change from the GFI, which costs CAN vary by 10%, and which costs are allowed to change at closing.  The lender must cure and reimburse any violations within 30 days of closing.

When working with a Realtor, Lender and Title Company, make sure all three are competent and understand the buying (and selling) process.