{"id":218873,"date":"2009-12-31T10:41:46","date_gmt":"2009-12-31T15:41:46","guid":{"rendered":"http:\/\/www.pennerlawfirm.com\/blog\/?p=112"},"modified":"2009-12-31T10:41:46","modified_gmt":"2009-12-31T15:41:46","slug":"sweeping-changes-to-the-closing-process-gotta-have-faith-good-faith","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/218873","title":{"rendered":"Sweeping Changes to the Closing Process: Gotta Have Faith, Good Faith"},"content":{"rendered":"

This article is part two of a three part series by Attorney Jamie Feigelson.<\/p>\n

As we last discussed, the new HUD rules are set to go into effect on January 1, 2010, but the enforcement of such rules will not be implemented until April 2010 to give time to settlement agents and lenders to adjust to the changes. The changes to both the Good Faith Estimate (\u201cGFE\u201d) and HUD settlement statement will have a tremendous impact on the entire settlement process.<\/p>\n

To begin, the first change is that all residential lenders and mortgage brokers will be required to use a new GFE that clearly discloses loan terms and closing costs. Settlement agents and attorneys will also be using a new settlement statement for all residential loan closings. The statement will mirror the GFE and disclose any variances from the original figures. The main differences between the new and old GFEs are the standardization of the form; the grouping of fees; and the tolerance for variations from the GFE amounts at settlement.<\/p>\n

The new GFE is a three page standardized document (as opposed to the old four-page version) that gives loan terms and an estimate of settlement charges.\u00a0 The consumer should easily be able to compare GFEs from various lenders when shopping for loans. On a new third page, there is a comparison of the original GFE figures and the settlement statement figures, with an explanation of the tolerances. There is also a summary of the loan, including amount, term, rates, initial monthly payment, prepayment penalties and other loan terms.<\/p>\n

In addition, on the new GFE, certain fees have been grouped together.\u00a0 This allows the consumer to see a total cost for each category, rather than a random list of fees. The fees are broken down into four categories:<\/p>\n

    \n
  1. The “Origination Charge” is the total of all fees incurred for originating the loan.\u00a0 Only one origination charge is disclosed and includes all service charges (charges paid to the lender\/broker, including the YSP, and all junk fees lumped into one amount) and the charge or credits for the interest rate chosen is added to or subtracted from the service charge to arrive at one lump origination charge.<\/li>\n
  2. “Required Services Selected by the Lender”, such as appraisals, credit reports, and flood certifications and tax service fees are grouped, but each charge is listed separately.<\/li>\n
  3. “Title Services” includes the settlement agent’s charges for lender’s title insurance, the settlement fee, title searches, title examinations, commitments, and ALL other charges payable to the settlement agent.\u00a0 There is a separate line item for Owner’s title insurance, since this is an optional purchase.<\/li>\n
  4. “Required Services that You Can Shop For”, which includes surveys, home warranties, pest reports, etc.<\/li>\n<\/ol>\n

    In addition to these groupings, there are separate line items for “Government Recording Charges”, “Transfer Taxes”, “Initial Escrow Deposit”, “Daily Interest” and “Homeowner’s Insurance”. This process will allow the borrowers to fully understand their fees during the application process, and it will help to eliminate junk fees.<\/p>\n

    Lastly, the new rules mandate that the final charges on the settlement statement can vary from those on the GFE only as follows:<\/p>\n

      \n
    1. For the Origination Charge and Transfer Taxes:\u00a0 Zero Tolerance.\u00a0 The GFE and settlement statement must match exactly.<\/li>\n
    2. For Required Services selected by the Lender, Title Services, Owner Title Insurance, Required Services That You Can Shop For (if you use companies identified by the lender) and Government recording charges:\u00a0 There is a tolerance for a 10% increase for the total of these charges.<\/li>\n
    3. For the Initial Escrow Deposit, Daily Interest and Homeowner’s Insurance:\u00a0 There is an unlimited tolerance for increases from the GFE.<\/li>\n<\/ol>\n

      NOTE – There are no restrictions on decreases of fees. Borrowers must love the sound of that.<\/p>\n

      After this GFE is completed, it is given to the borrower for review. At closing, the settlement agent or closing attorney will be required to put together a HUD which matches the GFE (see variances above). There should be no surprises by the time the closing happens, unless borrowers decide to not read the GFE at all. But HUD is here to protect the borrowers, and it appears they will achieve that. As for the closing agents and attorneys, that will be covered on the next blog. Part III of the blog will discuss the HUD form and the changes to it (tentatively entitled \u201cA Rock and a HUD Place\u201d).<\/p>\n","protected":false},"excerpt":{"rendered":"

      This article is part two of a three part series by Attorney Jamie Feigelson. As we last discussed, the new HUD rules are set to go into effect on January 1, 2010, but the enforcement of such rules will not be implemented until April 2010 to give time to settlement agents and lenders to adjust […]<\/p>\n","protected":false},"author":4219,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-218873","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/218873","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/4219"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=218873"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/218873\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=218873"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=218873"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=218873"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}