More Guidance on RESPA Rule

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A new publication from the U.S. Department of Housing and Urban Development promises to regularly address the most pressing issues related to the Real Estate Settlement Procedures Act rule.

HUD posted additional guidance yesterday on its Web site regarding the new RESPA rule in a document entitled RESPA Roundup. The housing agency noted that the document is the first edition of the RESPA Roundup and that it will periodically issue further editions “to enhance communications with consumers and industry stakeholders by providing information on RESPA topics chosen specifically to address the most pressing issues.”

In addition to addressing the interpretive rule that it issued in June 2010 regarding home warranty company payments to real estate brokers and agents, HUD advised that when an originator requires that a consumer select a provider of a particular service from a limited list of providers created by the originator, then the charge must be disclosed in Block 3 of the good faith estimate. Block 3 is the block for services required by the loan originator and for which the originator will select the provider of each service.

HUD equated the requirement that a borrower select a service provider from a limited list of providers with an originator making the selection of the provider. The situation was contrasted to cases in which a government loan program requires a borrower to select a service provider from a government approved list — in which case the charge is disclosed in Block 6 of the GFE. HUD advised that the “answer is different because limitations placed on a borrower by a government loan program are fundamentally different from limitations placed on a borrower by a loan originator.”

On balloon-payment loans, the agency advised that in both the GFE and the HUD-1 settlement statement, the loan term stated in the note — and not the amortization period — should be entered as the loan term. For example, if a loan has a 5-year term to maturity and payments on the loan are based on a 30-year amortization period, the five year term is disclosed as the loan term.

Apparently, HUD issued the guidance on this point after industry members noted that certain regulators at the Federal Deposit Insurance Corp. took the position that the amortization period should be entered as the loan term.

The agency also advised that if the borrower does not purchase a service that is included in the GFE, such as owner’s title, there should be no entry for the service on page two of the HUD-1 settlement statement, and the estimate of the charge should not appear in the tolerance comparison charts on page three of the HUD-1.

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Mortgage Daily Staff

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