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In this Analysis, Robert
M. Jaworski examines the important Real Estate Settlement Procedures Act (RESPA)
changes implementing the new Good Faith Estimate (GFE) and HUD-1/1A effective
January 1, 2010. Mr. Jaworski provides a recap of the new rules, identifies
important implementation issues, and discusses the challenges involved in
providing much-needed clarity. He writes:
The New GFE.
new GFE consists of three pages. The first page is the most critical, with HUD
envisioning consumers using it to comparison shop for a mortgage loan. On it,
the Loan Originator will disclose estimated loan costs ("Your Adjusted
Origination Charges," "Your Charges for All Other Settlement Services" and the
"Total Estimated Settlement Charges") and loan terms (initial loan amount,
term, initial interest rate, initial monthly payment amount, whether the
interest rate can increase, and whether the loan allows for negative
amortization or provides for a prepayment penalty or a balloon payment).
provide the consumer with an opportunity to shop for a better deal, these costs
and terms (except for the interest rate and any costs and terms that are
dependent upon the interest rate), must remain "fixed," i.e., within prescribed
tolerances, for at least 10 business days, absent "changed circumstances." The
initial interest rate is also fixed, but only for the period stated on the
GFE-which can be less than 10 days-unless the consumer locks in that rate. If
the consumer accepts this "offer," the terms and costs must then remain fixed
through the closing, again within the same prescribed tolerances and absent
The New HUD-1/1A.
New Rule also changes the form of HUD-1/1A Settlement Statement to more easily
permit comparisons with the new GFE. The new HUD-1 form is three pages long and
the HUD-1A is two pages. The first page of the HUD-1 is unchanged. The second
page of the HUD-1 and the first page of the HUD-1A are changed to include (1)
fee terminology consistent with that used on the new GFE, specifically, "Our
origination charge," "Your credit or charge for the specific interest rate
chosen," "Your adjusted origination charge," "Title services and lender's title
insurance," and "Required services that you can shop for"; (2) references to
the line number on the GFE at which the same charge appears; and (3) a
breakdown of the portion of the total title insurance premium that goes to the
title underwriter and the title agent.
final page of both forms is new. It includes comparison charts of the loan
terms and attendant costs disclosed on the GFE (or, if a revised GFE has been
issued based on changed circumstances, the most recent such GFE) with the
actual terms and costs of the loan being closed, and shows the borrower whether
the tolerance limits on fees have been exceeded. This page, at the bottom, also
directs borrowers with questions to "please contact your lender."
the full version of Robert M. Jaworski on RESPA: Spring Is in the Air --
An Assessment of the New Year's Day 2010 GFE/HUD-1 Rules Changes with your lexis.com
ID. Additional fees
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