Know the New RESPA Rules
Know the New RESPA Rules
Big changes to federal rules under the Real Estate Settlement Procedures Act took effect Jan. 1. Among other things, the Good Faith Estimate and HUD-1 forms have been redesigned to make it easier for buyers to understand settlement costs. These two forms are at the heart of every transaction, so it’s essential that you’re aware of the changes and that you know how to get your questions answered.
The new rules require mortgage originators to lump the origination costs — including the interest rate and underwriting fees — under one bundled fee on the GFE; once lenders receive GFEs from mortgage brokers, they have to accept the charges.
Not all costs on the GFE are locked in; charges affected by "changed circumstance" can be modified as needed, but the loan originator must issue a new GFE, and only the fee subject to the "changed circumstance" can be altered. Another class of charges is subject to a 10 percent tolerance, which gives those fees a little room to vary from the original estimates. Among these charges are title insurance fees, as long as the borrower uses the title company listed by the mortgage originator. If the buyer chooses a different company, there’s no restriction on how much the charge can change at closing.
The Learning Begins
As you can see, there are a lot of moving pieces to these new rules. For that reason, the U.S. Department of Housing and Urban Development has made clear it wants to give the industry time to learn them. It has directed its enforcement offices to exercise a four-month period of restraint for FHA loans as long as there’s a good faith effort to comply. HUD has asked federal and state compliance officers to apply restraint to non-FHA deals as well. "We are sensitive to the concerns of the industry as it integrates these new rules into its day-to-day business practices," HUD Secretary Shaun Donovan says.
At its Web site, HUD has published answers to many frequently asked questions about the GFE and HUD-1 forms. An example: "How should payments by the seller or real estate agent that are for settlement services included on the GFE be shown on the HUD-1?" HUD’s answer: "If a seller or real estate agent pays for a charge that was included on the GFE, the charges should be listed in the borrower’s column, with an offsetting credit reported in lines 204–209 of the HUD-1, identifying the party paying the charge."
To find answers like this one, visit www.HUD.gov. Alternatively, you can go to REALTOR.org/RESPA. There, you’ll see a link, "RESPA FAQs" — on the right, under "Additional NAR Resources" — where you’ll find answers to FAQs from both HUD and NAR.
More RESPA resources
Here are other resources worth checking out:
- Free seminar recordings. The NATIONAL ASSOCIATION OF REALTORS® has hosted two sessions with nationally recognized RESPA expert Philip Schulman. Recordings of the seminars, along with accompanying handouts, are available at REALTOR.org/RESPA. Under "Related Events" on the bottom right, click "Recorded Webinars and Presentations."
- "Ask the Expert." Through this new resource at REALTOR.org/RESPA, you can e-mail your questions to Schulman and other experts. Under "In This Section" on the RESPA page, click "Ask the Expert."
- HUD resources. Among other things, the agency offers recordings, with slides, of RESPA training conference calls. Go to www.HUD.gov and search for "webcast archive."
In the months ahead, NAR will be talking with HUD to learn how well the new forms are working and offering its help to improve them. Visit REALTOR.org for new developments.