HUD Secretary Donovan Moving Forward With RESPA Reform

Written By: Joan Ewing, NAMP-CALP, FHA DE Underwriter

Hello Everybody - I hope everybody is doing well and keeping busy. I sure am busy.

I have been following the changes going through the House of Representatives and the changes being made by HUD Secretary Shaun Donovan with much interest. Recently there have been lots of changes proposed, many of which will probably come to fruition. The latest changed - announced Monday, May 11th - you heard it hear first!! is the intent of the RESPA Reform. You can view the new docs on the hud.gov/news/release web site.

The new changes are scheduled to take effect on January 1, 2010 (only 6 months away). These changes will update the mortgage rules for the first time in more than 30 years. These changes will assist the consumers to show for the lowest cost mortgage and avoid costly and potentially harmful loan offers. These changes could save the consumer an average of $700.

“This administration is committed to proving consumers with clear and transparent information when they make the biggest purchase of their lives,” said Donovan. The RESPA changes are part of a bigger reform to the mortgage process.

There is one change that has been tabled for now in order that the bigger scope of the beginning of the RESPA changes could begin. The change that has been tabled for the now is the definition of “required use”. HUD is working on a clearer and more effective definition that protects borrowers from being forced to use affiliated business of the lender.

I have reviewed the new Good Faith Estimate (GFE) and Settlement Statement (HUD1) and the two forms should leave little doubt in the mind of the consumers what was disclosed at the time of application.

Starting with the GFE, which is now three (3) pages, the form is very personal to the borrower, i.e., in the Summary of Your Loan the questions begin with “Your” loan amount; “Your” loan term. Very specific - as to the amount, terms etc. Questions that the Loan Office will need to complete and answer with their borrower. There is also a “Shopping Cart” on the form which will allow borrowers to easily compare loans.

More interesting is the HUD1 Statement, which is also three (3) pages. The lines of the HUD1 now reference the numbers of the GFE. Any borrower going to closing will only need to take the GFE and easily find the numbers that were disclosed and what the actual numbers they are paying at closing. Again the form is very specific i.e., Line 801 of the HUD 1 - Our origination change (from GFE #l) these forms are also a protection to the lenders as much as to the borrowers - there will not be an “I was told” one thing by the LO and was charged something else. If this happens - everything will hopefully be specific enough to avoid any problems.

More changes will be coming to the mortgage industry, in part of because of the disastrous crisis that we have been muddled in for the past year and a half; I am sure those of us in the mortgage industry will like some of the changes and will not like other changes. However, once we get experienced in the new forms and procedures, it will be like we never knew any other way. We must remember that without borrowers, we have no jobs. Huge numbers of jobs were lost and many of our co-workers are still looking for jobs, so as a personal aside, if these changes increase consumer confidence and increase mortgage sales - I can live with them.

Well - this is all for this week. Keep busy. Keep Processing - More Later.

About the Writer. As an active FHA DE Underwriter for the past 15 years, Joan Ewing is a proud NAMP Certified Ambassador Loan Processor (CALP). Joan brings years of FHA Government experience to her writings, letting her readers tap into her underwriting knowledge base. If you would like to become a writer for NAMP, please email us at: blog@mortgageprocessor.org.

SOURCE: Published by NAMP Publishing Group, a division of the National Association of Mortgage Processors (http://www.MortgageProcessor.org)