Posted On: October 30, 2009

RESPA REFORM: IVY JACKSON ISSUES CLARIFICATION ON YIELD SPREAD PREMIUM CREDIT TO BORROWER ISSUE

The Director of the Office of RESPA and Interstate Land Sales for the U.S. Department of Housing and Urban Development, Ivy Jackson, clarified an major issue today that addresses industry confusion over the Yield Spread Premium "YSP". Several wholesale lenders issued guidance that the new RESPA restrictions required anyone who is not funding their own loan to have all the YSP, any money made on the interest rate, credited to the borrower. Some wholesale lenders were under the belief that anyone who brokered a loan would not be allowed to make any money on the loans interest rate or YSP.

For example under the current rule if the par rate today was 5.5% and its paying 100.500% that the broker would make their origination of 1% plus .5% on th rate in YSP. However, some wholesale lenders have been issuing guidance to mortgage brokers throughout the country that say the new RESPA restrictions forces the loan originator to credit the .5% YSP to the borrower at closing. This is not accurate as Ivy Jackson clarifies below:

Ivy Jackson said this is not accurate and states that "while true that any YSPs are now shown as a credit to the borrower in Box 2 under "Your Adjusted Origination Charges." The rule eliminates the 1% cap on origination charges for FHA loans.

Based on the wholesaler bankers example and a $100,000 loan, if the broker is going to make $1500.00 on the loan and there is a $500 YSP; Block 1 or "Our Origination Charge" would show $2000.00, Block 2, would show $500, resulting in an "Adjusted Origination Charge" of $1500.00."


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Posted On: October 28, 2009

RUMOR: RESPA REFORM BILL TO BE DELAYED SIX MONTHS: HUD DENIES DELAY

The Real Estate Settlement Procedures Act "RESPA" regulations set to take place on January 1, 2010 has purportedly been delayed by HUD for six months. We are now waiting for an official announcement to take place by HUD to officially confirm the six month delay which should make the new implementation date on or around July 1, 2010.

We don't know what precipitated this possible delay by HUD but the real estate industry has stepped up their criticisms on the new rule, including a recent letter sent to HUD by numerous trade organizations, issues with the new Truth In Lending Act form "TILA" integration, and other federal enforcement agencies concerns about the transparency of the new HUD-1 have forced HUD to re-evaluate parts of the new rule. Of course one of the other problems is that many in the real estate industry are still very much unaware or uneducated on the new RESPA Rule.

UPDATED at 10:39 PM:
Assistant Secretary of Housing David Stevens informed me that there will not be a delay in the implementation of the Jan. 1, 2010 RESPA rule. The information we received came from numerous credible sources in Washington, D.C. but it appears that the information regarding the delay according to HUD will not occur.

UPDATE #2 AT 11:53 ON THURSDAY:
Kelly McCarel atRESPA NEWS.COM is now confirming "that HUD has been holding private meetings about the possibility of a delay" according to their sources.

However, Assistant Secretary of Housing Dave Stevens stated to us in an email at 3:00AM this morning that "There have been all sorts of discussions on readiness but a delay on implementation has not been one of them. The industry needs to be prepared for January 1st."

Stay tuned.............

Latest Update November 13, 2009
HUD Announced a 120 day (4 month) delay in HUD Enforcement of the new rule or as HUD calls it a "Restraint in Enforcement."

Posted On: October 23, 2009

HOME VALUATION CODE OF CONDUCT "HVCC" APPEARS TO BE A SHORT-LIVED EXPERIMENT

Housing Wire reports that Rep. Gary Miller (R) of California's bill to sunset the HVCC in HR 3126 passed the House Financial Services Committee this week. Several industry associations have quietly confirmed to me that the Home Valuation Code of Conduct (HVCC) will soon be dead. The HVCC under HR 3126 sunsets through the Consumer Financial Protection Agency (CFPA). Many observers believe the sunsetting of the HVCC under the CFPA is instrumental in getting the CFPA passed in congress.

The CFPA bill passed the House Financial Services Committee by a vote of 39 to 29 which was a major victory for Rep. Barney Frank (D). Many observers believe the HVCC will still be quickly phased out even if the CFPA doesn't win as congress is quickly growing weary of the consumer and industry complaints about some Appraisal Management Companies (AMC). Consumers, local taxing bodies, and some in the real estate industry point to increased appraisal fees and unqualified appraisers from distant states appraising local property with unsubstantiated valuations which they believe is further deteriorating the real estate markets across the United States.

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