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RESPA Changes to Good Faith Estimate and HUD-1

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RESPA Changes to Good Faith Estimate and HUD-1 ANNOUNCEMENT………………………#09-34, December 29, 2009 To: All Michigan Mutual Brokers Re: RESPA Changes to the Good Faith Estimate and HUD-1 RESPA Changes to Good Faith Estimate and HUD-1 Table of Contents Important Updates on the Good Faith Estimate .................................................................. 1 Changed Circumstances ...................................................................................................... 1 Fee Disclosure & Accuracy ................................................................................................ 2 Fee Tolerances .................................................................................................................... 3 Important Updates on the Good Faith Estimate/HUD-1 RESPA Reg. X mandates significant changes to the mortgage loan disclosure process. Michigan Mutual, Inc. (MMI) will require all Mortgage Brokers to be in full compliance with the changes effective January 1, 2010. The following updates highlight new requirements for Mortgage Brokers pertaining to the Good Faith Estimate. All loans with an application taken on or after January 1, 2010, must contain the new GFE form, at time of application and the HUD-1 at closing. Note: Michigan Mutual, Inc. will not fund any loans if the new HUD-1 or HUD-1A was not used; these loans cannot be cured. Mortgage Brokers are responsible for providing the initial GFE and Settlement Service Provider (SSP) list to the borrower within three business days of completing their application. Both documents must be included with initial submission to MMI. The GFE must be accurate as the Mortgage Broker will be held to the fees disclosed on the initial GFE. The initial GFE is a binding GFE, subject to any changed circumstances. Please refer to the next section for additional information on “changed circumstances.” After the borrower has received the initial GFE and SSP, the Mortgage Broker is responsible for obtaining and documenting the borrower’s expressed intent to proceed with the transaction. The Intent to Proceed acknowledgment form must be included with initial submission. Changed Circumstances The Mortgage Broker must issue a re-disclosed GFE and SSP list to the borrower within the required time frame of three business days of the Broker receiving the changed circumstance information. NOTE: MMI requires immediate submission of all redisclosed GFE’s and accompanied Changed Circumstance form. 1 If a changed circumstance occurs, only those fees affected by the changed circumstance may change. If the estimates within the GFE are inaccurate and a valid changed circumstance does not occur, the Mortgage Broker is bound to the amounts shown on the most recent disclosed GFE. If a changed circumstance occurs, the Mortgage Broker must re-disclose within three business days after receipt of the information regarding the changed circumstance or the ability to re-disclose (and increase a fee) is lost. Mortgage Brokers must retain documentation relating to the changed circumstance and fee change, if re-disclosed, for three years. A “changed circumstance” is defined as follows: Acts of God, war or disaster 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 A revised GFE must be issued upon a lock event (locking the rate or expiration of the lock) and may be issued in the event the borrower requests a change in the mortgage loan that was identified in the GFE and that changes the settlement charges or terms of the loan. Please Note: changes in YSP cannot affect Origination charges in Box 1 of GFE. Changes in YSP will impact (+/-) Box 2 and A (Your Adjusted Origination Charge). Fee Disclosure & Accuracy The accuracy of initial GFE is critical. The following applies to wholesale transactions: All broker origination fees, including broker compensation, disclosed on the GFE should match those fees listed on the Mortgage Broker Fee Agreement (MBFA) form. Under no circumstances can the broker compensation disclosed in Box 1 (“Our Origination Charge”) increase from the amount disclosed on the initial GFE. Please Note: Box 1 to include MMI’s underwriting fee of $775 and the actual 4506T processing fee (see MMI’s website for a detailed 4506T processing fee schedule). It is essential that the MBFA and the GFE align throughout the loan process and at loan closing. o Brokers are responsible for ensuring that the MBFA is kept current with the GFE should any changed circumstance occur that impacts the fees on the MBFA. o Broker compensation disclosed in Box 2 (“Your Credit or Charge for the Specific Interest Rate Chosen”) on the GFE can only increase if the Loan Program or Product changes; the Rate changes as the result of a lock or re-lock; or if the borrower requests changes to the loan amount or terms. 2 o With the RESPA amendments, the MBFA is critical as the new GFE does not provide a breakdown of broker fees and compensation. The MBFA supplements the GFE – and it will help ensure the borrower can clearly determine broker fees and compensation. The following applies to all transactions: For all services where the borrower may select the provider, Mortgage Brokers must provide borrowers with a list of Settlement Service Providers (SSP) in the borrowers’ geographic area along with the costs for the services. At least one vendor for each potential service must be provided. Fee Tolerances Page 3 of the HUD-1 will reflect a reconciliation between the settlement charges disclosed on the GFE and the actual charges reflected on pages 1 & 2 of the HUD-1. All charges and fees will be subject to the tolerances defined below. 1. Charges that cannot increase at settlement (ZERO tolerance): Origination Charges shown in Box 1 on GFE Credit or charges for the specific interest rate selected (Box 2 on GFE). Adjusted origination charges (after the interest rate is locked), reflected in Box A on GFE. Transfer taxes shown in Box 8 on GFE 2. Charges that cannot increase in the aggregate by more than 10% at settlement: Required settlement services that the lender selects, such as appraisal services Title services and lender’s title insurance (if selected by lender or if the borrower uses a company identified on the Settlement Services Provider List) Owner’s title insurance (if the borrower uses a company identified on the Settlement Services Provider List). Required settlement services (such as Pest Inspections) that the borrower selects from the Settlement Services Provider List Government recording charges 3. Charges that can increase at settlement (not subject to limitation): Required settlement services that the borrower can select, if the borrower selects a service provider not listed on the Settlement Services Provider List Title services and lender’s title insurance, if the borrower selects a service provider not listed on the Settlement Services Provider List Owner’s title insurance, if the borrower selects a service provider not listed on the Settlement Services Provider List Initial deposit for borrower escrow account Daily interest charges 3 Homeowner’s insurance Please note: For 1 and 2 above, should a changed circumstance occur that directly impacts the fee effected by the change circumstance and a revised GFE be provided within three business days after receipt of the information regarding the changed circumstance, the tolerance is determined by reference to the fees disclosed on the most recent GFE as compared to the fees at closing. Only fees directly impacted by the change circumstance can be added and/or increased and re-disclosed. Please contact your account executive should you have any questions. 4 Understanding the Good Faith Estimate Information Enter primary borrower provided on the and if space permits, sample GFE is additional co‐borrowers. intended for use If space does not permit, with applications enter primary borrower sent to MMI only. and 'et al'. If locked, use rate expiration date. If not locked, enter 'N/A'. Enter 'N/A'. Ten days from Date of GFE (date of Enter loan amount on the security GFE=day 0). instrument. Excludes Sundays Enter number of years and months (e.g., Enter rate lock 30 years 1 month). period (e.g., 15, 30, 45, 60). If not locked, enter 'N/A'. Enter initial p&i and mortgage insurance payment, excluding escrows and ACH discount. Enter the rate driving the initial Enter maximum payment, not the fully payment, indexed amortized amount. excluding ACH discount. Enter monthly payment without escrow amount (p&i and mortgage insurance only). Must match the payment amount disclosed above in 'summary of your loan'. Understanding the Good Faith Estimate Enter 0 if no fees are charged. Check only one box. There cannot be both a credit and a charge in the same The total of all fees transaction. paid to BOTH the lender & broker, including YSP, but excluding discount Par pricing. points used to buy down the rate. Over par pricing, such as YSP. Under par pricing, such as discount points used to buy down the rate. Total of sections 1 and 2. Enter the service, not the name of the service provider. This is required to be Enter fees, if charged by the title company, disclosed on all related to the settlement. purchase transactions, regardless of intent to purchase. Enter the service, not the name of the If the transaction service provider. includes an ownership of property transfer between parties, enter the charge for If no escrows, enter '0' in the fee column. transfer tax. Charge cannot be added later or be increased absent a Changed Circumstance. Enter insurance to be purchased at or before settlement. Understanding the Good Faith Estimate Completion of columns 2 & 3 are optional. Completion of this chart is optional. These are examples of the most common fees that fall into each block on the GFE. The GFE Page 2 “Example Fees” are representative only and based on assumptions applicable to a typical loan.
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