RESPA Lawyer Blog

The U.S. Housing and Urban Development (HUD) made a number of surprising management changes last month including the shuffling of Ivy Jackson, the Director of the Office of RESPA and Interstate Land Sales to the Office of Insured Health Care Facilities. Ivy Jackson's departure took the real estate industry by surprise and created uncertainty for state regulators who were relying on her to educate them the new RESPA regulations this year.

The Sterbcow Law Group would like to thank Ivy Jackson for her contributions over the years at RESPA. She will always be remembered as a federal regulator who was fair to the real estate industry and to consumer interests while at RESPA. Ms. Jackson's work ethic, honesty, and experience will be missed.

HUD promoted Teresa Baker Payne to the position of Assistant Deputy Assistant Secretary and Barton Shapiro was named Acting Director of RESPA and Interstate Land Sales. Ms. Payne and Mr. Shapiro both bring experience to their new positions. Ms.Payne and Mr. Shapiro both are excellent choices for their respective roles at HUD.

Continue reading "RESPA: DEPUTY DIRECTOR IVY JACKSON IS SHUFFLED OUT OF RESPA DIVISION" »

The U.S. Housing and Urban Development's Real Estate Settlement Procedures Act (RESPA) Division released new updated FAQs on Jan. 28, 2010. The new RESPA frequently asked updated question and answers (FAQs) are in bold.

One of the new questions asks whether a loan originator can require the use of its affiliate company for the tax or flood certificate. The updated RESPA guidance says that the loan originator may not require the use of its affiliate for the tax service or flood certificate, but a loan originator may require the use of a non-affiliated provider.

The Department of Housing and Urban Development (HUD) released the new Settlement Cost Booklet. The 49 page informational booklet must be delivered to consumers within three days of the application along with the Good Faith Estimate (GFE) for a mortgage loan by their lender or mortgage broker. Even though the HUD informational guide was released on Dec. 16, 2009 it must be used beginning on Jan. 1, 2010. Failure to provide the new HUD booklet to consumers within three days of the loan application is a violation of the Real Estate Settlement Procedures Act (RESPA) Section 5.

An electronic copy of HUD's Settlement Cost Booklet can be sent to the borrower electronically in lieu of the printed booklet.

HUD announced today a delay in "HUD ENFORCEMENT" on the new RESPA Rule which goes into effect on Jan. 1st, 2010 on FHA loans. We need to highlight the fact that only HUD Enforcement of the new RESPA rule has been delayed for 120 days on FHA loans. Civil litigation on the new RESPA Rule goes into effect on Jan. 1st, 2010 and therefore is not delayed.

We applaud HUD for delaying enforcement of the new rule for 4 months it still exposes companies that do not implement the new changes to potential civil litigation issues for not complying with the new rule.

Another RESPA attorney said it best: "Better pin on your badge and strap on your gun looks like HUD will look to the plaintiff's bar to bring the heat in the first 4 months."

Below is a copy of the HUD press release:

Continue reading "RESPA: HUD OFFICIALLY DELAYS "HUD ENFORCEMENT" OF NEW RESPA REFORM RULE" »

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."

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."

The Federal Housing Administration recently announced significant changes to FHA Condominium financing. The FHA condo approval changes go into effect on October 1, 2009 and the ramifications for developers, condominium associations, buyers, and sellers could be serious.

Some of the highlights of these changes include:
1. Any condominium development approved prior to October 1, 2008 (10/1/2008) loses its FHA approval and must formally re-apply.
2. No spot approvals, all applications must go to FHA directly but DE lenders can approve but with enormous liabilities if they miss one item.
3. Existing condominiums, regardless of whether they were FHA approved prior to October 1, 2008 or not will have to reapply for HUD approval. This means if a seller wants to sell their condominium unit, even if they received an FHA loan in 2006, that a new borrower won't be able to get an FHA loan on your unit unless your condominium has been re-approved by HUD.

FHA's actions could be disastrous for condominium sales across the United States especially given the fact that most loans today are FHA loans. If you think the HUD approval process is quick, think again, because most lawyers estimate that it takes them six months to get HUD approval. If this guideline change isn't implemented then I'm sure the approval process will become inundated so fast that it could overwhelm the process even further causing delays that could quickly reach a year or more. A borrower can still qualify for a Freddie Mac, Fannie Mae, VA, or USDA loan but if Freddie and Fannie are the borrower's only option to get condo financing they should prepare themselves to pay significantly higher fees for the same loan that FHA would have provided to them had the Condo been FHA approved.

To see if your Condominium will be affected by the new FHA Approval process please go to this website and see if your condominium is listed.

See below for the entire letter.

Continue reading "THE FEDERAL HOUSING ADMINISTRATION (FHA) CONDOMINIUM APPROVAL CHANGES COULD DEVASTATE CONDOMINIUM SALES" »

On July 30, 2009, some of the provisions of the Mortgage Disclosure Improvement Act of 2008 (MDIA) go into effect and lenders, mortgage brokers, title agents, real estate agents, and real estate brokerages need be alert as to these new federal governmental regulations. Here are the details for the MDIA:

1. The 3/7/3 Rule requires a seven business day waiting period once the initial disclosure is provided before closing a home loan (business days are everyday except Sundays and Holidays). This means that before a borrower can close on a transaction the borrower must receive the initial Good Faith Estimate (GFE) and initial TIL statement disclosing the final Annual Percentage Rate (APR) seven days prior to closing.

2. If the final annual percentage rate APR is off by more than .125% from the initial GFE disclosure then the lender must re-disclose and wait yet another three business days before closing on the transaction.

3. The consumer has the right to cancel and not proceed with the transaction if they so choose.

4. Lenders are forbidden from collecting money for appraisals, loan applications, etc. prior to the delivery of the Truth In Lending (TIL). Lenders can only collect from the borrower the credit report fee at the time of prior to delivery of the final TIL. No other fees are permitted to be collected at the time of application. If the TIL is sent by mail, additional charges can occur after the 3rd business day after the borrower receives the TIL in the mail.

5. The following language must be clearly written on the initial and final TIL: "You are not required to complete this agreement merely because you have received these disclosures or signed a loan application."

If you are a real estate agent or title agent you need to manage the process very carefully by:

A. Making sure that you check the initial Good Faith Estimate and Truth In Lending form for your buyers and look for discrepancies in charges. The new rules were put in place to protect consumers from being low balled one figure by a loan officer only to find out at the closing table that the fees charged were much higher. The new MDIA rules will absolutely delay closings if these steps are not followed carefully.

B. Buyers, sellers, and real estate professionals should not schedule a closing until the borrower has completed the seven day waiting period as required in the initial TIL.

Continue reading "MORTGAGE DISCLOSURE IMPROVEMENT ACT (MDIA) GOES INTO EFFECT ON JULY 30, 2009" »

U.S. Rep. Barney Frank officially introduced legislation to create the Consumer Financial Protection Agency (CFPA). The legislation, which is backed by the Obama Administration, would consolidate the consumer protection powers of the fifty various federal financial regulatory agencies by creating a single regulatory agency. The creation of this single regulatory agency is the single most important aspect of the proposed 229 page Consumer Financial Protection Agency proposal.

The current financial governing system encourages abuses in the industry to take place because of the loopholes created by an inefficient and ineffective regulatory structure. The loopholes are exploited even further by the mass infighting that many of the governmental regulatory bureaucracies regularly display. The consolidation of these various federal agencies into one rule-making and investigative federal division should provide more uniform rules for those in the real estate industry and for consumers of real estate products.

The CFPA will have sole authority to draft and interpret regulations under the existing consumer financial services and fair lending statutes. The recent Good Faith Estimate/HUD-1 Settlement Statement forms developed by HUD and the Truth In Lending Act form is a prime example of decisions being made by one federal agency without input from a completely different agency. The biggest benefit consolidation presents to the industry and to the consumer is that this will increase the number of enforcement investigators. The consolidation of regulatory investigators is crucial because quite often investigators in one agency stop investigating abuses that relate to other agencies due to a myriad of reasons.

Continue reading "THE CONSUMER FINANCIAL PROTECTION AGENCY (CFPA) PROPOSAL INCLUDES RESPA AND TILA REGULATORY GOVERNANCE" »

The Sterbcow Law Group would like to Congratulate Dave Stevens who was confirmed as the new Commissioner of the Federal Housing Administration (FHA) on Friday, Dave Stevens is a phenomenal choice to help turn FHA around. Long & Foster's loss is America's gain and judging by our experience with Mr. Stevens on the Real Estate Services Providers Council (RESPRO) the real estate industry and consumers will be better off with his policy making decisions in the near future.

David H. Stevens was the past President & COO of Long & Foster Realtors; Vice President of Mortgage, Title, and Insurance Division for Longer & Foster; Executive Vice President for Wells Fargo Home Mortgage; on the Lender's Advisory Council for the Mortgage Bankers Association (MBA); on the Board of Directors of the National Association of Mortgage Brokers (NAMB); on the Board of Directors of the Real Estate Services Providers Council (RESPRO).