Posts Tagged ‘Texas Mortgage’

How Key Issues May Play Out in Reg Reform Debate

Friday, February 19th, 2010

American Banker  |  Friday, February 19, 2010

By Stacy Kaper  

WASHINGTON — With Congress set to return to work on Monday, Senate Banking Committee Chairman Chris Dodd is pushing an ambitious agenda in an attempt to build momentum behind a regulatory reform bill.

The Connecticut Democrat is hoping to introduce a revised bill next week, and hold a panel vote during the first week in March.

Yet the fate and makeup of a revised reform bill is unclear. With that in mind, we offer the following frequently asked questions.

Is anything actually settled yet?
So far the most set part of the legislation appears to be language to strengthen the government’s resolution powers over institutions whose failure would pose a risk to the economy. Sen. Bob Corker, the only Republican still willing to negotiate with Dodd on reform at the moment, has been hammering out resolution authority with Sen. Mark Warner.

Essentially, the two want to ensure that a systemically important firm must first exhaust bankruptcy proceedings if it appears ready to fail, but allow the government some leeway to seize and dismantle a firm if it must do so to protect the economy. The bill is likely to make it extremely difficult — if not outright impossible — for the government to keep any failing firm afloat, including not allowing it to place a systemic company into conservatorship.

Are there any issues with that?
Getting into bankruptcy rules gets tricky, because that is the purview of the Senate Judiciary Committee, not the banking panel. There’s also a question of how the government would pay to resolve a failing big firm. The House reform bill would create an industry fund ahead of time, while the Senate bill is unlikely to follow suit.

What about the systemic-risk council?
The New York Times caused a few waves when it reported that Dodd is leaning toward letting the Treasury Department oversee a council designed to oversee systemically important firms. The Connecticut Democrat told the paper that the Treasury secretary could serve as chairman of the council, while the chairman of the Federal Reserve Board would serve as vice chairman.

What’s that really mean?
Not much. Dodd has long made it clear that he favors a systemic-risk council over giving greater authority to a regulator like the Fed. Most observers presumed the Treasury would be the logical choice to lead it. The more important question is who enforces what the council recommends. The most likely candidate is whatever primary regulator already oversees the firm.

What about the Fed?
There are a lot of moving pieces here and one big mystery is how far the Senate will go toward stripping the central bank of its power. Dodd’s original bill called for eliminating the Fed’s supervisory authority and leaving it focused solely on monetary policy — a position the Fed and the Obama administration adamantly oppose.

One potential compromise is to let the Fed have an active role in regulating just the most significant systemically important firms, instead of all bank holding companies and state-chartered member banks. This would greatly reduce the number of companies the Fed oversees, yet still let the central bank have some direct window into the largest firms. It is unclear if anyone — the administration, the Fed or the Banking Committee — likes this idea, however.

Who would regulate the rest of the bank holding companies?
The betting right now would suggest that the Federal Deposit Insurance Corp. would regulate all state-chartered banks and their holding companies, while an empowered Office of the Comptroller of the Currency would oversee all federally chartered banks and their holding companies. The Fed would either be left with just the systemically significant firms, or potentially lose any role in supervision.

What about strengthening consumer powers?
For right now, that issue is tabled. Corker, in agreeing to work with Dodd, said the other issues should be worked out first, which is still happening. How much progress the two will make before next week is anyone’s guess, but they are both traveling together on a trip to Central America as part of their work on the Senate Foreign Relations Committee. In theory, they could work a lot out over a plate of pupusas.

Sen. Richard Shelby, the panel’s lead Republican, however, is working on his own substitute legislation. How either bill will resolve the issue is unclear.

Dodd is likely to propose an independent division within a bank regulator but Republicans are concerned over how much power it should have.

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HUD continues guidance on new RESPA forms; Delivers more FAQs four weeks after rule effective date

Wednesday, February 3rd, 2010

Issue Date: RESPA News Monthly
January 2010, Posted On: 2/2/2010
In-Depth Reports

Late last year, many industry professionals predicted that the Department of Housing and Urban Development (HUD) would continue releasing more rounds of RESPA final rule frequently asked questions (FAQs) well into the New Year. This prediction was validated on Jan. 28 when HUD issued yet another revision to its already massive document. The guidance is intended to help industry members with questions as they implement the new Good Faith Estimate (GFE) and HUD-1 Settlement Statement forms. The forms went into effect on Jan. 1.

 

In this new round of FAQs, HUD added some new questions and made some revisions to existing FAQs. On Page 4, HUD added language to its answer for the following question: May a loan originator require the use of its affiliate for the tax service or flood certificate? HUD originally stated, “No, a loan originator may not require the use of its affiliate for tax service or flood certificate.” It has added the following: “But a loan originator may require the use of a non-affiliated provider.”

HUD added several new FAQs that addressed questions about the formatting of the new forms. It clarified the following:

  • Changing the pagination of the GFE is not permitted;
  • The GFE may be on legal size paper;
  • Shading and margins may be changed on the HUD-1; and
  • Lines may be added to the HUD-1 and a blank line within a series may be deleted from the form.

HUD also provided an answer to the question on whether an FHA loan correspondent is considered a broker or lender if he closes a loan in his name and is not table-funded by his sponsor, but rather is funded from his own funds or from a warehouse line of credit which he controls. According to HUD, in this scenario, the correspondent is considered to be a lender.

HUD also noted that if a mortgage broker provides the initial GFE and the lender accepts the loan, the lender cannot issue a new initial GFE, but rather is bound by the terms disclosed to the borrower by the broker.

In addition, there is a new FAQ that says loan originators cannot require borrowers to sign consent forms as a condition of issuing a GFE.

“A loan originator may not require a borrower to sign consents to verify employment, income or deposits as a condition of issuing a GFE as such a requirement may inhibit borrowers from shopping for the best loan by leading borrowers to believe that they are committed to obtaining a loan from that loan originator (see 24 CFR § 3500.7(a) (5) and (b) (5)),” HUD said. “However, the borrower may voluntarily sign consents prior to the issuance of the GFE to facilitate the loan process.”

On Page 8 of the FAQs, HUD clarified that if a borrower locks the interest rate after a GFE has been issued, a revised GFE must be issued within three days of the interest rate lock. This revised GFE would reflect the date that the interest rate lock is good through by putting this information in line 1 and putting “N/A” in line 4 of the “Important dates” section on Page 1 of the form.

“Any interest rate-dependent charges (block 2, line A and block 10 on the GFE) and terms that changed must also be updated on the revised GFE,” HUD said.

HUD also included more guidance on disclosing appraisal management fees. However, according to some chatter among lender compliance professionals on a real estate blog, this guidance may not be all that helpful.

“We have conflicting new FAQs,” one blogger wrote. “If an appraisal management company retains independent appraisers to perform the appraisal, the portion of the fee retained by the appraisal management company for management of the process of obtaining the appraisal may have to be folded into block 1 of the GFE and line 801 of the HUD-1. And, only the portion of the fee retained by the appraiser may be disclosed in block 3 and on line 804 of the HUD-1.”

On Page 26, the FAQ states:

“Q: What charges are part of the charge in block 1 of the GFE, ‘Our origination charge?’

A: Block 1, “Our origination charge” on the GFE contains all charges for origination services performed by or on behalf of a lender and/or a mortgage broker. Origination services includes, but is not limited to, the following: taking of the loan application, loan processing, underwriting of the loan, funding of the loan, acting as an intermediary between a borrower and lender, obtaining verifications and appraisals, and any processing and administrative services required to perform these functions.”

The phrases “services performed by or on behalf of a lender” and “obtaining verifications and appraisals,” are what seem to be troubling and one blogger wrote that HUD contradicts itself in a separate FAQ on Page 46. The FAQ reads:

“Q: If an appraisal is ordered through XYZ appraisal vendor management company and the appraisal is subcontracted to ABC Appraisal Company, what name is identified in line 804 on the HUD-1?

A: XYZ appraisal management company must be identified on Line 804.”

“So which is it? Is the portion of the fee for referring out the appraisal an administrative fee (and is this a violation of Section 8(a) and 8(b) of RESPA for taking a referral fee and taking a split of the appraisal fee without providing appraisal services), or is putting the appraisal management company on the HUD as the appraiser kosher? Note that if the title agent farms out the closing or a portion of the closing, the fee paid to the closer is disclosed on line 1102. Why should the appraisal be handled differently,” the blogger questioned.

Moreover, on Page 11, HUD addresses the question of whether or not a loan originator has to show an appraisal fee (or other fee) paid to a third party on the GFE and HUD-1, even if the loan originator wants to cover 100 percent of the fee. HUD says yes.

“The loan originator must list all required third-party services on the GFE and HUD-1 regardless of whether the charge is paid by the borrower, seller, loan originator or any other party (except for administrative and processing services),” HUD said. “If any party other than the borrower is paying for a service that was on the GFE, such as the appraisal fee, the charge remains in the borrower’s column on the HUD-1. A credit from the paying party to the borrower to offset the charge should be listed on the first page of the HUD-1 in lines 204-209 and, if the service was paid by the seller, lines 506-509 respectively.”

Regarding the written list of service providers that the loan originator must give to the borrower, on Page 15, HUD clarifies that a loan originator may include a statement on this document that the listing of a service provider on the “written list” does not constitute an endorsement of that service provider.

On Page 28, question seven asks if the yield spread premium can be shown as “paid outside of closing” on the GFE and the HUD-1? HUD says no.

“The yield spread premium is applied as a credit to the borrower in block 2 on the GFE and in line 802 on the HUD-1,” HUD noted.

HUD also provides more guidance on “changed circumstances,” the “Important dates” section, where to disclose an escrow waiver fee, condominium certificates, the disclosure of third-party services, transfer taxes, curing tolerances and seller-paid items.

HUD issued its first round of FAQs in August. At that time, the guidance spanned 16 pages and provided insight on a little less than 100 questions. Now, the document is 57 pages and includes a table of context that categorizes about 275 Q&As. For a copy of the latest FAQ report, go here.

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HUD Issues Clarification On RESPA FAQ #8 – Written List of Providers

Wednesday, December 30th, 2009

Due to additional information received from the industry and a review of settlement service and title practices, the following question replaces the previous GFE-Written List of Providers Question 8:

8)         Q:  In some cases, law or local custom may require, or consumers may prefer, to have one provider conduct the settlement and another provider perform the remainder of the services included within the “Title Services and Lender’s Title Insurance” category on the GFE (Block 4 on page 2).  How should the fees and providers for these services be listed on the GFE, the Written List of Service Providers, and the comparison table on page 3 of the HUD-1 (page 2 of the HUD-1A)?

A:  The preferred method of disclosing the GFE Block 4 charges on the Written List of Service Providers is to list a set of single providers where each is capable of coordinating or performing all of the services provided within the “Title Services and lender’s title insurance” category.  Due to a wide variety of practices across the country, an alternate option is explained below that allows for the separate identification of providers to conduct settlement (or closing) and providers of lender’s title insurance and the related services on the Written List of Providers and the HUD-1/1A.

GFE

  • In all cases, the GFE shall be completed with the total estimated fees for “Title Services and Lender’s Title Insurance” combined in Block 4.  Provider names are not listed on the GFE.

Written List of Providers

  • For Block 4, the loan originator may separate the services in the Written List of Providers to show providers that conduct settlements (or closings) separately from providers of lender’s title insurance and the related services
  • If Block 4 services are separated on the Written List of Providers, the associated estimated fee for the component service must be listed next to the header for the list of providers of that service
  • The sum of the estimated fees for the two services must equal the amount in Block 4
  • Only two (2) categories of service providers may be listed:  providers that conduct settlements (or closings) and providers of lender’s title insurance and the related services

HUD-1 page 3, HUD-1A page 2

  • If the consumer chooses neither service provider from the list:
    • The lump sum of Block 4 would be placed in “Charges that Can Change”
      • Both service providers should be listed in the blank for service provider names, for example: XYZ Settlement Services/ABC Title Agency
      • If the consumer chooses a provider of one of the services from the list:
        • The service provider that was chosen from the Written List would be included in “Charges That in Total Cannot Increase More than 10%” with the associated estimated fee from the Written List of Providers in the GFE column and the actual fees for that service from that provider in the HUD-1 column.  The service performed by the provider not chosen from the Written List of Providers would be listed in the “Charges that can Change Section” with the associated estimated and actual fees.
          • The total of the estimated fees in the GFE column (from both tolerance sections) must equal the amount in Block 4 of the GFE
          • The total of the actual fees in the HUD-1 column (from both tolerance sections) must equal the total of all “Title services and lender’s title insurance” actual charges
          • If the consumer chooses the providers of both services from the Written List:
            • The Block 4 total is listed in the “Charges That in Total Cannot Increase More than 10%” column.
              • Both service providers should be listed in the blank for service provider names, for example: XYZ Settlement Services/ABC Title Agency
              • The total estimated and actual fees for both providers would be listed in the respective GFE and HUD-1 columns.

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HUD issues new FAQs: Attorney points out inconsistencies

Wednesday, November 25th, 2009

The Department of Housing and Urban Development (HUD) has issued numerous revisions to its frequently asked questions (FAQ) report, which it created to address the hundreds of questions industry members have been wrestling with since HUD issued the RESPA final rule in November 2008. Initially released by HUD on Aug. 13, the first FAQ contained 89 questions that spanned 15 pages. Since then, HUD has added 164 more questions spanning 51 pages and sources have indicated they expect even more from HUD all the way into April 2010.

The FAQs specifically address questions surrounding the new Good Faith Estimate (GFE) and HUD-1 Settlement Statement, with the most recent draft issued on Nov. 19, which includes nine new FAQs. Just two days prior, HUD released an FAQ with 13 new questions. Many people are sitting on the edges of their seats waiting for their questions to be included with the periodically released revisions, while others scrutinize HUD’s answers and attempt to implement any changes into their systems to reflect the new guidance before the nearing Jan. 1 implementation deadline.

This report is addressing the Nov. 17 FAQ release, listing all the new FAQs issued on this date, plus a close look at some of the problems one attorney thinks some of the new FAQs might cause.

Can I change the font size?

According to Howard Lax, a partner with Mich.-based Lipson, Neilson, Cole, Seltzer & Garin PC, there are many places throughout the rule in which HUD hasn’t provided enough guidance. He worries that this will lead to inconsistencies on how various lenders and closing agents will fill out and interpret the line items.

These predicted inconsistencies are contradictory to one of HUD’s original reasons for issuing the RESPA final rule, which is to provide clarity and standardization throughout the industry for consumers, Lax said. HUD has indicated that other reasons for creating the new forms is to save the consumer money, provide an easier way for the consumer to shop for a loan and to avoid significant differences in settlement costs between the GFE and HUD-1.

One inconsistency Lax refers to is the point size of the form. HUD says the following in an FAQ: “The Rule does not state a minimum font size that may be used on the GFE, HUD-1 or HUD-1A.”

Why does the point size matter?

“It defeats the whole purpose of the disclosure in the first place,” Lax said. “It’s supposed to be clear. I think that you will have some that will be unreadable. The print will be so small, that the consumer won’t be able to read it.”

Lax added that with the number of services some loan originators will “stuff” into Block 3 on Page 2 of the GFE, “Required services that we select,” many will have to decrease the point size of the GFE font in order to keep the form to HUD’s mandated three pages. He is concerned that with a smaller point size than the current 9 point that the form has, some consumers, especially senior citizens, will confuse matching the fees to the correct service.

HUD’s early advice to add lines to the GFE would result in narrowing the spacing between lines. The choice HUD had was to either 1) allow for an attachment to the GFE or an additional page to list all of the services and fees, or 2) give the loan originator free range on the point size, with the danger that some may make it unreadable, Lax said.

 

HUD also permits loan originators to create more columns in Blocks 3 and 6 of the GFE. According to Lax, this advice comes too late to change loan origination software and forms now being printed and shipped to loan originators.

 

“I do not see how this is going to prevent our clients from going to 6 point print or smaller in the form,” he added.

 

What can I put on lines 104 and 105 of the HUD-1?

In another FAQ, HUD says lines 104 and 105 on the HUD-1 should be used to disclose “additional items owed by the borrower that are not on the GFE and items paid by the seller prior to settlement and being reimbursed to the seller from the borrower at settlement.” According to Lax, HUD should have restricted this statement to include a caveat that says, “according to the terms in the purchase agreement.”

“It’s a wild card type of thing,” Lax said. “HUD’s answer is open-ended. It says that basically, anything that you want to put in the 100 section, you can stick in the 100 section. If you have additional items that aren’t in the GFE, such as taxes, then they can probably go in this 100 series, rather than in the 210 section.”

Examples of fees that would be listed on lines 104 and 105 are the cost of a home inspection, or a situation where the buyer has agreed to reimburse the seller for a carpet that the seller installed.

According to Lax, the issue here is that by opening up these lines to anything, it will make the use of the form inconsistent.

“Part of the reason for having a HUD-1 in the first place was so that you have consistent settlement statements,” Lax commented. “You have consistency so that the consumer, if he knows there is a certain charge, would see it in a certain place. We are losing that consistency by the way HUD is giving us instruction in the FAQs to create certain wild cards.”

Lax said he recommends that HUD limit the purpose of lines 104 and 105.

“The purpose of that section is the gross amount due to the borrower: the contract sale price, the cost of personal property and the total of the settlement charges. It’s designed to be a broad-based general summary of the cost of the home before you have credits and debits and HUD isn’t using it for that,” he said.

Can I attach additional pages to the GFE?

Lax pointed out another FAQ that needs further clarification. HUD answers the following question on Page 9 of its FAQ report.

“May additional pages be added to the GFE to allow for all charges to be shown? If so, is it an addendum or an extension of page 2?”

HUD’s answer: “No. Additional pages or addendums may not be added to the GFE. The standardized GFE form set forth in Appendix C to the Rule is the required GFE form and must be provided exactly as specified, except that Blocks 3, 6 and 11 on Page 2 may be adapted to use in particular loan situations, so that additional lines may be inserted there, and unused lines may be deleted.”

Sources have indicated that in a live educational presentation, Ivy Jackson, director of the Office of RESPA and Interstate Land Sales at HUD, said you can add a page to the GFE in a situation where the lender or broker would like to include a statement explaining to the borrow why certain fees, which may be paid by the seller in a particular transaction, are listed as buyer-paid fees on the GFE. This is unconfirmed and HUD has not yet responded to RESPA News for clarification.

According to Lax, regardless of Jackson’s statement, the FAQ is contradicting other HUD guidance, because HUD mandates that you add a list of settlement services providers for the consumer. To clarify, Lax said what he believes HUD doesn’t want you to do is make references back and forth between pages on the GFE and other information provided in addition to the GFE.

“In other words, you are going to give them lists of providers, but you are not going to have references back and forth between the lists and the GFE and vice versa. You’re not going to write on the GFE, ‘see attached sheet’ and you’re not going to have on the list, ‘see Block so and so for fees,’” Lax noted. “You are also not going to help consumers to shop for settlement service providers by placing contact information and fees in your lists of available service providers.”

Who needs to keep information to justify changed circumstance?

In the Nov. 17 FAQ report, HUD added the following to its “changed circumstances” section:

“If there is a changed circumstance, do the mortgage broker and the lender both need to retain documentation of the reasons for any revised GFE?”

HUD’s answer: “Yes. If there is a changed circumstance resulting in a revised GFE, loan originators (mortgage brokers and lenders) both must retain documentation of the reasons for providing the revised GFE for no less than 3 years after settlement.”

According to Lax, this is unnecessary redundancy and contradictory to the rule itself.

“Only the party that’s issuing the revised GFE should be responsible for justifying that decision,” Lax opined. “I think it’s equally poor for HUD to impute knowledge of the broker to the lender and vice versa, because you’ve only got three days from the date that either one learns of the changed circumstances to issue the revised GFE.”

Lax added that in the rule, there is no requirement that both the lender and broker have to keep the GFE.

“If there are changed circumstances, either the broker or the lender can issue a revised GFE, but only one of them has to keep it — whoever issues it. HUD is not only adding the rule, they’ve only added half way. They’re saying both the lender and broker have to keep all of the information that would justify the changed circumstance, but they’re not saying you both have to keep the GFE,” Lax noted.

Another FAQ Lax commented on was regarding where to put homeowners association (HOA) transfer fees. According to HUD, the charge for this fee will not be disclosed on the GFE, unless it is a service required by the loan originator. The charge for the HOA transfer fee may be shown on a blank line in the 1300 series on the HUD-1.

According to Lax, this will “blindside” the buyer at the closing and could end up in a transaction that doesn’t close or an unhappy consumer. Lax said because this fee, which can sometimes be substantial, will not be disclosed on the GFE, by the time the consumer gets to the closing table, it’s going to be too late for the consumer to discuss this fee with the seller

Full list of new FAQs included in HUD’s Nov. 17 release:

Q. What is the minimum font size that may be used on the GFE, HUD-1 or HUD-1A?

A. The Rule does not state a minimum font size that may be used on the GFE, HUD-1 or HUD-1A.

Q. May additional pages be added to the GFE to allow for all charges to be shown? If so, is it an addendum or an extension of page 2?

A. No. Additional pages or addendums may not be added to the GFE. The standardized GFE form set forth in Appendix C to the Rule is the required GFE form and must be provided exactly as specified, except that Blocks 3, 6, and 11 on Page 2 may be adapted to use in particular loan situations, so that additional lines may be inserted there, and unused lines may be deleted. Lines may be added to Blocks 3, 6 and 11 vertically and horizontally.

Q. If a loan originator permits a borrower to shop for “Title services and lender’s title insurance,” should the “written list” consider “Title services and lender’s title insurance” one service or would all of the sub-services (such as conducting the settlement) be listed as separate services?

A. “Title services and lender’s title insurance” is a category that comprises services within the defined term “title service,” including conducting the settlement. Sub-services included within “Title service and lender’s title insurance” may not be listed as separate services on the “written list.”

Q. If there is a changed circumstance, do the mortgage broker and the lender both need to retain documentation of the reasons for any revised GFE?

A. Yes. If there is a changed circumstance resulting in a revised GFE, loan originators (mortgage brokers and lenders) both must retain documentation of the reasons for providing the revised GFE for no less than 3 years after settlement.

Q. If the borrower selects a service provider that was not selected or identified by the loan originator, is this considered a changed circumstance?

A. No, if the borrower selects a service provider that was not selected or identified by the loan originator it is not considered a changed circumstance.

Q. If the borrower initially selects a service provider not on the loan originator’s written list, but then chooses to use a service provider identified by the loan originator, is this a changed circumstance?

A. No. If the borrower initially selects a service provider not on the loan originator’s written list, but then chooses a service provider identified by the loan originator, this is not considered a changed circumstance.

Q. If a settlement agent revises a HUD-1 to cure a technical error or to reflect a tolerance cure, may the settlement agent mark the HUD-1 as “Amended” to distinguish from the original HUD-1?

A. Yes. If a settlement agent revises a HUD-1 to cure a technical error or to reflect a tolerance cure, the settlement agent may mark the HUD-1 as “Amended” to distinguish it from the original HUD-1.

Q. May a credit for a tolerance cure be listed on Page 1 of the HUD-1?

A. The cure for a potential tolerance violation may be listed as a credit to the borrower on Page 1 of the HUD-1 with a description of the service(s) the credit is applied to. If the tolerance cure is applied to the overall tolerance category “Charges That in Total Cannot Increase More Than 10%,” the tolerance cure credit may be listed as a “lump sum” amount on a blank line in Lines 204 thru 209 with a description of the tolerance category cure. The comparison chart on Page 3 of the HUD-1 should reflect the credit given for that service to cure the potential tolerance violation in the appropriate tolerance category.

Q. What are examples of charges that would be listed in Line 104 and Line 105 on the HUD-1?

A. Lines 104 and 105 on the HUD-1 are for additional items owed by the borrower that are not on the GFE and items paid by the seller prior to settlement and being reimbursed to the seller from the borrower at settlement.

Q. May a real estate agent rebate a portion of the agent’s commission to the borrower? If so, how should the rebate be listed on the HUD-1?

A. Yes, real estate agents may rebate a portion of the agent’s commission to the borrower in a real estate transaction. The rebate must be listed as a credit on Page 1 of the HUD-1 in Lines 204-209 and the name of the party giving the credit must be identified. Real estate agent or broker commission rebates to borrowers do not violate Section 8 of RESPA as long as no part of the commission rebate is tied to a referral of business.

Q. If the settlement agent hires or pays a third party to facilitate electronic filing, where would that charge be shown on the HUD-1?

A: If the settlement agent uses a third party to facilitate electronic filing and the third party is not a governmental entity, the service to facilitate electronic filing is considered an administrative or processing fee included in the charge for “title services” in Line 1101 on the HUD-1.

Q.  If it is required by state or local law for a seller to pay a portion of the total charge for transfer taxes, on what line should the seller’s charge be listed on the HUD-1?

A. If it is required by state law for a seller to pay a portion of the total charge for transfer taxes and therefore not on the GFE, the seller’s charge should be listed as a charge in the seller’s column in Lines 1204 and 1205 on the HUD-1, and the total charges for transfer taxes should be itemized to the left of those columns (see HUD FAQ report for example).

Q. Where should the charge for the Homeowners Association (HOA) transfer fee be disclosed on the GFE and HUD-1?

A. The charge for the HOA transfer fee, unless it is a service required by the loan originator, need not be disclosed on the GFE. The charge for the HOA transfer fee may be shown on a blank line in the 1300 series on the HUD-1.

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FTC Extends Enforcement Deadline for Identity Theft Red Flags Rule

Monday, November 2nd, 2009

At the request of Members of Congress, the Federal Trade Commission is delaying enforcement of the “Red Flags” Rule until June 1, 2010, for financial institutions and creditors subject to enforcement by the FTC.

The Rule was promulgated under the Fair and Accurate Credit Transactions Act, in which Congress directed the Commission and other agencies to develop regulations requiring “creditors” and “financial institutions” to address the risk of identity theft. The resulting Red Flags Rule requires all such entities that have “covered accounts” to develop and implement written identity theft prevention programs to help identify, detect, and respond to patterns, practices, or specific activities – known as “red flags” – that could indicate identity theft.

The Commission previously delayed the enforcement of the Rule for entities under its jurisdiction until November 1, 2009. The Commission staff has continued to provide guidance to entities within its jurisdiction, both through materials posted on the dedicated Red Flags Rule Web site (www.ftc.gov/redflagsrule), and in speeches and participation in seminars, conferences and other training events to numerous groups. The Commission also published a compliance guide for business, and created a template that enables low risk entities to create an identity theft program with an easy-to-use online form. FTC staff has published numerous general and industry-specific articles, released a video explaining the Rule, and continues to respond to inquiries from the public. To assist further with compliance, FTC staff has worked with a number of trade associations that have chosen to develop model policies or specialized guidance for their members.

On October 30, 2009, the U.S. District Court for the District of Columbia ruled that the FTC may not apply the Red Flags Rule to attorneys. Today’s announcement that the Commission will delay enforcement of the Rule until June 1, 2010, does not affect the separate timeline of that proceeding and any possible appeals. Nor does it affect other federal agencies’ ongoing enforcement for financial institutions and creditors subject to their oversight.

The Federal Trade Commission works for consumers to prevent fraudulent, deceptive, and unfair business practices and to provide information to help spot, stop, and avoid them. To file a complaint in English or Spanish, visit the FTC’s online Complaint Assistant or call 1-877-FTC-HELP (1-877-382-4357). The FTC enters complaints into Consumer Sentinel, a secure, online database available to more than 1,700 civil and criminal law enforcement agencies in the U.S. and abroad. The FTC’s Web site provides free information on a variety of consumer topics.

MEDIA CONTACT:

Office of Public Affairs
202-326-2180

 (Red Flags October 09)

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TAMP Convention Pictures

Sunday, October 4th, 2009

 

   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
   
 
   
   
   
   
   
   
   
   
   
 
   
   
   
   
   

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New Life for the First-Time Credit?

Sunday, September 27th, 2009

By Kenneth R. Harney
Saturday, September 26, 2009

Will Congress extend the wildly popular $8,000 home-buyer tax credit beyond its Nov. 30 expiration date?

That’s a question generating huge pressure on Capitol Hill from would-be buyers who haven’t found the right house, realty agents, builders, lenders and squads of lobbyists working on their behalf.

Here’s the first hint of an answer: On Sept. 17, the leadership of Congress’s primary tax-writing committee introduced a tax credit bill that’s likely to zip through the House and quickly move to the Senate. House Ways and Means Committee Chairman Charles B. Rangel (D-N.Y.) sponsored the bipartisan Service Members Homeownership Tax Act (H.R. 3590), which would extend the credit 12 months for thousands of military, Foreign Service and intelligence agency personnel who have been posted abroad in 2009.

Rangel’s bill, with 29 co-sponsors, would keep the credit alive through Nov. 30, 2010, for service members who had at least 90 days of overseas duty assignments in 2009 and who otherwise meet the eligibility tests for the credit. The bill would also prohibit the Internal Revenue Service from “recapturing” the $8,000 credit when service members are forced to sell or rent out their houses because they are ordered to deploy to a different duty station.

Under the rules of the program, buyers who obtain the credit must use their houses as a principal residence for 36 months or repay the credit to the IRS. As a result of the 36-month rule, many military and diplomatic employees have been hesitant to buy a house and claim the credit, or are worried that their absence from the country could force them to repay the money.

For example, the spouse of a Foreign Service officer posted to the Philippines this summer for a two-year assignment wrote to Rep. Earl Blumenauer (D-Ore.) to alert him to a flaw in the tax-credit program. The Oregon couple bought their first home earlier this year, encouraged by affordable prices and the $8,000 credit. But having now been posted abroad, they cannot claim to occupy the house as their principal residence. Under current rules, they even face recapture of the full credit.

Blumenauer, who is a member of the Ways and Means Committee, said, “It is absurd that thousands of Americans serving our country, away from friends and family, must choose between their service work and homeownership.” He wrote corrective legislative language that ultimately was incorporated into Rangel’s tax bill.

Though nothing is guaranteed on Capitol Hill, legislation eliminating tax penalties on the military during wartime looks like a good bet for early passage in both houses. Equally significant: It now appears likely that there will be an $8,000 tax credit available a year from now — at least for some purchasers. That raises the question: Why not leave it in place for all first-time buyers?

There’s growing support for that on both sides of the Capitol, but there are also some complicating issues. In the Senate, the most outspoken advocate for months has been a Republican, Sen. Johnny Isakson of Georgia, a former real estate broker. He wants not only to extend the credit to Dec. 1, 2010, but to raise the maximum to $15,000, and make it available to all home buyers next year.

But recently, key Senate Democrats produced their own version of an extension, limited to six months, retaining the ceiling at $8,000 and targeting only first-time purchasers. The bill’s primary sponsor is Sen. Benjamin Cardin (D-Md.). Democratic co-sponsors include Majority Leader Harry M. Reid of Nevada and Debbie Stabenow of Michigan. Republicans John Ensign of Nevada and Isakson have signed on as well.

In a statement, Cardin raised what may prove to be the crucial issue affecting the scope and duration of any credit extension: cost. “A six-month extension is a fiscally responsible way to provide adequate time to nudge even more prospective homebuyers off the sidelines,” he said.

Estimates of the revenue costs of the current credit vary widely, from $3 billion to $8 billion and higher. How do you pay for any extension without worsening the budget deficit? The new Rangel bill includes an answer: You raise taxes somewhere else — you “pay as you go.” The Rangel bill pays for most of the service members’ credit extension by increasing IRS penalties on taxpayers who fail to file partnership or “S” corporation returns.

This would raise an estimated $327 million over the next 10 years. Where and how to raise taxes to cover the far larger cost of a six-month or 12-month extension of the current tax credit could prove much more controversial.

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Mortgage Texas News Recap

Saturday, September 12th, 2009

Maryland Title Co. Owner Gets 7 Years in Prison

September 11, 2009

U.S. District Judge Catherine C. Blake sentenced Deborah Williams, a title company owner from Pasadena, Md., to 84 months in prison for mail fraud and diverting settlement funds for her benefit. Williams was ordered to forfeit $3.4 million. Williams was the sole officer and director of Day Title, a title company with offices in Severna Park, Md., that conducted real estate closings and issued title insurance policies. According to Rod Rosenstein, U.S. attorney for the District of Maryland, Williams concealed her illegal transactions by falsely representing on settlement documents that her company had paid off lien holders and then sent the falsified settlement documents to the lender by commercial carrier. She initiated stop payments of payoff checks that had been disbursed or intentionally failed to mail the payoff checks to the lien holder.

FNC Hires New President

September 11, 2009

FNC Inc., a real estate collateral technology provider based in Oxford, Miss., has hired Glen Evans as president. Most recently, he was a senior vice president at FTN Financial, a subsidiary of First Tennessee Bank. Mr. Evans, who has been in the business for 25 years, will report directly to FNC CEO and co-founder, Bill Rayburn. “FNC has grown beyond its start-up phase,” Mr. Rayburn said. “Glen’s background and industry knowledge will help us expand our mortgage clients and our business.” FNC’s new president previously ran FTN Financial’s correspondent services division. The company said Mr. Evans’ primary goal will be to help the firm meet its revenue goals.

Fitch Cites Negative Equity/Job Losses for Downgrades

September 11, 2009

A continuing rise in negative home equity and unemployment has led to rating actions on 581 prime residential mortgage-backed securities transactions issued between 2005 and 2008, according to Fitch Ratings, New York. “While actual loan losses to date remain low on average for the transactions reviewed (36 basis points), average delinquency has almost doubled since the start of the year to 11% and continues to grow due to high average roll-rates from performing to delinquency,” Fitch said in a report. About 45% of the borrowers in the private-label MBS reviewed by Fitch owed more on their mortgages than their homes were worth, according to Grant Bailey, a senior director at the rating company.

GAO Throws Cold Water on GSEs Becoming Utilities

September 11, 2009

The Government Accountability Office, in a new report, has entered into the debate over the future of Fannie Mae and Freddie Mac, blistering some of the most widely discussed options for revamping the two. Though the watchdog agency did not take a formal position on what policymakers should do with the GSEs, it essentially declared two ideas unworkable — fully privatizing Fannie and Freddie or turning them into public utilities. Those options could spur inefficiencies, raise mortgage rates and take banks out of the business of offering traditional mortgages, the GAO concluded. The report offered detailed pros and cons of other options including nationalizing Fannie and Freddie, simply restoring the firms to their previous status, breaking them up into multiple entities or turning them into cooperatives. In the year since the federal government seized the GSEs, options for how to deal with them have multiplied, even though the Obama administration has said it will not deal with the issue until 2010. While many Republicans and other conservatives have pushed for years to privatize the GSEs or eliminate them, the GAO found only one benefit to such an approach: enhanced market discipline. But the agency warned that it was not clear if privatized GSEs could support the mortgage market during a crisis.

Homebuyer Tax Credit Boosted Sales by 314,000

September 11, 2009

Introduced earlier this year as part of the president’s economic stimulus bill, the $8,000 first-time homebuyer tax credit, to date, has prompted 314,000 additional consumers to get off the fence and purchase a home, according to new figures released by the White House. The National Association of Realtors estimates that the tax credit will boost home sales by an additional 350,000 by the time it expires on December 1. Overall, 1.8 million first-time homebuyers may take advantage of the tax credit, according to NAR economists. Meanwhile, homebuilders, Realtors and other housing groups are trying to get the word out that buyers must go to closing by November 30 to take advantage of the tax credit. In mid-October, housing groups will mount a public campaign to extend and increase the tax credit and possibly expand it to all homebuyers. But for now, the lobbying is low key so potential first-timers won’t get the idea they can sit back and wait for an extension. In July, 30% of existing home sales were by first-time buyers.

Lone Star Unit Buys Assets from AZ Mortgage Banker

September 11, 2009

Caliber Funding, which is controlled by private equity firm Lone Star Funds, has agreed to acquire what it calls “certain technology and operational assets” from StoneWater Mortgage for an undisclosed sum, according to a source close to the deal. Both non-depository lenders are based in Arizona. Caliber expects to retain most of StoneWater’s employees. No further information was available on the deal, including figures on the firms’ origination and servicing volumes. A spokesman for Caliber confirmed the transaction. The Dallas-based Lone Star has been bottom fishing in the mortgage market the past year. A year ago the private equity firm made headlines when it paid 22 cents on the dollar ($6.7 billion) for $30.6 billion in mortgage CDOs held by then struggling Merrill Lynch & Co. (This was prior to Merrill’s sale to Bank of America.) The PE firm also bought CIT’s home lending business.

Wilbur Ross Bidding on MI United Guaranty?

September 11, 2009

Investor Wilbur Ross, one of the most active bidders on distressed mortgage assets, is gearing up to make a run at mortgage insurance giant United Guaranty Inc., a unit of American International Group, according to MI and investment banking sources. One investment banker described Mr. Ross — a principal in WL Ross & Co., New York — as the leading bidder on UGI, the nation’s fifth largest MI in terms of policies-in-force. (Figures courtesy of the Quarterly Data Report.) However, it’s unclear if Mr. Ross is bidding on all or part of the company and whether he has partners on the deal. Spokespersons for both AIG and UGI had no comment. Mr. Ross had not returned a telephone call as National Mortgage News went to press. Over the past 18 months he has acquired two large non-prime residential servicing portfolios. Ross was part of an investor group that bought failed Florida bank BankUnited FSB, a large player in the payment option ARM market. He also recently hired James Lockhart, former director of the Federal Housing Finance Agency, who is familiar with the MI industry and its role in guaranteeing loans sold to Fannie Mae and Freddie Mac. “Ross’ interest in the MI business is very important,” said one MI executive. “It shows the importance of this business. He can be an important part of the MI business moving forward.”

Real Estate Investor Convicted of Fraud

September 10, 2009

Mario Bernadel, a real estate investor from Phoenix, has been convicted of running a mortgage fraud scheme involving at least 32 residential properties in the greater Phoenix area. According to John J. Tuchi, interim U.S. attorney for the District of Arizona, participants in the scheme recruited unqualified straw borrowers, submitted fraudulent loan applications on their behalf, obtained mortgage loans in excess of the selling price and then took the excess amount of the loans out through escrow. Bernadel recruited and trained mortgage brokers, straw buyers and an escrow officer in the scheme and, following the funding of the loans, received cash back. The homes purchased through the scheme have been foreclosed or sold at a loss. Seven other co-conspirators were also charged and have pleaded guilty and await sentencing. The scheme resulted in $20 million in loans obtained by fraud and a loss of more than $2 million. Bernadel’s conviction is part of “Operation Cash Back,” in which 40 defendants were indicted and arrested. Bernadel is the 20th defendant to date who has been convicted. U.S. District Judge Stephen M. McNamee set sentencing for Nov. 30.

Reverse Lender Gets New Leader

September 10, 2009

Generation Mortgage Co., Atlanta has named Scott Peters president and chief executive, replacing Joe Morris. Mr. Morris, who served as president and CEO since the company’s inception in 2006, will take on the role of executive director, industry relations, where he will represent Generation Mortgage as an industry advocate to play a stronger role with organizations such as the National Reverse Mortgage Lenders Association, lend support to wholesale relationships and will also be active legislatively. Mr. Peters joins Generation Mortgage from Nortel Networks Corp., where he led the Global Business Services division. He also held senior leadership positions within General Electric Capital Corp., MassMutual, BellSouth Corp., The Profit Recovery Group International and CompuCredit Corp.

Beige Book Reads Well for Home Sales in Some Areas

September 10, 2009

The Federal Reserve, in its new Beige Book report, says home sales are increasing somewhat in the Boston, Chicago, Richmond and San Francisco districts but the housing sector in general is not out of the woods yet. The St. Louis area has seen no noticeable improvement in housing conditions and most Fed districts reported that sales were “below the levels of a year earlier.” The central bank noted that housing demand “remained stronger at the low-end of the housing market.” As for home construction, the news is bleak with only Chicago and Dallas reporting small increases in housing activity. In the commercial real estate market, construction remained at low levels overall, “although Chicago and Dallas reported a small increase in activity” the Fed said. Overall, the central bank said economic activity is stabilizing or improving in the vast majority of the country and that the worst recession since the 1930s may be over

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