2010 Changes in RESPA

New for 2010! The Department of Housing and Urban Development (HUD) is rolling out a series of new changes surrounding RESPA, the Good Faith Estimate, and the HUD-1 settlement statement all borrowers receive at closing. Below is an outline of some of these changes.

RESPA Background
The Real Estate Settlement Procedures Act, also known as RESPA, was passed by Congress in 1974 to give borrowers a clear estimate of fees that would be incurred during the mortgage process. RESPA is overseen by HUD. The purpose is to simplify forms for borrowers so they know what costs they can anticipate when they’re purchasing or refinancing.

Definition of “Application”
Even though the application process will stay the same, the definition of the actual “application” will change. HUD is now defining the application as the time at which the mortgage originator obtains 6 key pieces of information from a potential borrower:

1. Borrower’s name
2. Borrower’s SSN
3. Borrower’s gross monthly income
4. Subject property address
5. Estimated subject property value
6. Amount of mortgage loan sought

Good Faith Estimate
The mortgage originator will be required to disclose a Good Faith Estimate within 3 business days of receiving this information – but the Good Faith Estimate itself become less of an “estimate” and more of a “binding forecast” – effectively requiring the lender to cover any overages in charges incurred between application and closing.

HUD-approved “Changed Circumstances”
In some cases, HUD won’t require lenders to cover changes in fees that occur because of previously-approved circumstances beyond a lender’s control. These include Acts of God, disaster, emergencies, or if initial information is found to be inaccurate. Other circumstantial events (such as a last-minute out of town business trip requiring a Power of Attorney and new documents) would also fall under this category.

Effective Dates
These new guidelines went into effect on January 1, 2010. New Good Faith Estimate and HUD Settlement Statements will be used at the closing table. If there are any overages not covered through HUD-approved changed circumstances, the lender can “cure” these fees within a 30-day cure period if they’re not able to rectify overages at the closing.

For more details, please listen to our most recent podcast regarding the new RESPA changes.