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| After some adjustments, the U.S. Department of Housing and Urban Development said it is ready to move forward with mortgage reforms under the Real Estate Settlement Procedures Act.Under the new RESPA rule, which is scheduled to take effect on Jan. 1, 2010, mortgage brokers and lenders will be required to provide prospective borrowers with a standard Good Faith Estimate that clearly discloses key loan terms and closing costs, HUD announced Monday. Yield-spread premiums paid by wholesale lenders to mortgage brokers must be fully disclosed to borrowers on the new form.
Mortgage brokers consider the YSP disclosure requirement unfair because competing mortgage bankers are not required to disclose servicing released premiums earned after loans are closed. But mortgage bankers support more clarity on YSP disclosures. In addition, closing agents will be required to provide borrowers with a new HUD-1 settlement statement that compares, line by line, estimated costs with actual costs. “For the first time in more than 30 years, HUD is updating mortgage rules to help consumers shop for the lowest cost mortgage, avoid costly and potentially harmful loan offers, and save an average of $700,” the announcement said. In May 2008, executives from the Mortgage Bankers Association and the American Land Title Association testified before the House Committee on Small Business that proposed RESPA reforms would complicate — not simplify — the loan origination process. MBA called for more coordination with the Federal Reserve, which is responsible for the Truth In Lending Act. ALTA warned that the imposition of volume discounts could create an anti-competitive environment, hurt small businesses and reduce choices for settlement service providers. In today’s statement, HUD said it is withdrawing on provision of the final rule that redefines “required use,” a prohibited practice where borrowers are steered toward higher cost mortgage services provided by affiliated businesses. The withdrawal followed more than 1,200 public comments. HUD plans to propose revised language. “After further consultation with the public, stakeholders and Congress, we will propose a clearer and more effective ‘required use’ definition that truly protects borrowers from those who force them to use affiliated businesses,” HUD Secretary Shaun Donovan stated in the news release. Donovan noted that the new rule is part of a broader reform to make the mortgage process more clear and transparent. Related: RESPA Rule White Paper Revised RESPA Rules Released |
7 Refinance Strategies
Refinance to a lower interest rate: If interest rates have dropped since you took out your original mortgage, refinancing to a lower rate can help you save money on your monthly payments and reduce the overall cost of your loan. Refinance to a shorter loan term:...
