Blog - Recent News & Events in the Local Industry
6/5/2010 - Increased Scrutiny on "Settlement Agencies" by: Brena Huffman
With the rapidly changing market conditions, it is more common today for clients to get referred to a "Settlement Agent" or "Traveling Notary" to conduct their closing in effort to save time or money. However, there is no substitute for quality and experience and HUFFMAN LAW's fees are usually lower than these outfits. When you use an attorney to conduct your closing:
-You can get answers to legal questions and receive guidance concerting title and other legal issues.-Trust Funds are insured and audited by the State Bar.-An attorney must obey the State Bar's Rules of Professional Conduct & Ethics.Click on the LINKS below to see what
the North Carolina Bar has said about this recent surge in "Settlement Agencies"
1/1/2010 - New RESPA Regulations Take Effect - New HUD-1 by: Brena Huffman
For the first time in 30 years, the U.S. Department of Housing and Urban Development as issued a change to the RESPA HUD Settlement Procedures, including a new HUD-1 Settlement Statement and Good Faith Estimate (GFE). These changes will apply to all RESPA covered real estate transactions (primary residence, non-investment properties) that initiate after January 1, 2010. Below are links to the two new forms.
The major changes my clients will see at the closing table relating to "Closing Costs" are the Attorney Fees/Settlement Agent Fees are combined together with the Lender's Title Insurance Costs and entered as one fee on Line 1101. This may be confusing and seem to be a fee higher than normal, however it is simply a combined fee now. However, I continue to break my fee out and show it in the margin of Line 1103 for comparison. No longer can independent fees, such as Notary, Title Search, Overnight Fees and Attorney Fees be broken out on separate line items. Additionally, the fee in Line 1101 must meet the cost tolerance requirements if the Closing Agent was referred to the client by the Lender. The Owner's Title Insurance Cost are now broken out separately on Line 1103. Although this coverage is optional, I recommend it because it usually only costs a few dollars more. Also new to this HUD-1 is the split of the Agent's and Underwriter's portion of the Policy Premium as disclosed on Lines 1107 & 1108. Contact our office for additional questions relating to Title Insurance and the GFE.
Here is an excerpt from www.HUD.gov:
Fact Sheet on HUD's final RESPA RuleFor the first time ever, HUD will require mortgage lenders and brokers to provide borrowers with an easy-to-read standard Good Faith Estimate (GFE) that will clearly answer the key questions they have when applying for a mortgage including:
What's the term of the loan?
Is the interest rate fixed or can it change?
Is there a pre-payment penalty should the borrower choose to refinance at a later date?
Is there a balloon payment?
What are total closing costs?
HUD estimates that by improving upfront disclosures on the GFE, and limiting the amount estimated charges can change, consumers will save nearly $700 in total closing costs.
Based on substantial public comment, HUD withdrew a proposed requirement that closing agents read and provide a 'closing script' to borrowers in favor of a new page on the HUD-1 Settlement Statement that allows consumers to easily compare their final closing costs and loan terms with those listed on the GFE.
HUD's new Good Faith Estimate has been reduced from four to three pages, including an instructional page to help borrowers better understand their loan offer. In addition, the GFE will consolidate closing costs into major categories to prevent junk fees and display total estimated settlement charges prominently on the first page so the consumer can easily compare loan offers. HUD will specify the closing costs that can and cannot change at settlement. If a fee changes, HUD will limit the amount it can change.
To help borrowers compare their Good Faith Estimate with their HUD-1 Settlement Statement, each designated line on the final HUD-1 will now include a reference to the relevant line from the GFE. Borrowers will now be able to easily compare their estimated and actual costs in the same manner many commenters suggested.
HUD will require lender payments to mortgage brokers (often called Yield Spread Premiums) to be disclosed in a more meaningful way. These payments are directly dependent on the interest rates that consumers agree to. To ensure that HUD's new requirement will not create a consumer bias against brokers, the Department did rigorous consumer testing and found the new Good Faith Estimate helped consumers to select the lowest cost loan nine-out-of-10 times, regardless of whether the loan was originated by a lender or a broker.
Loan originators will be required to provide borrowers their Good Faith Estimate three days after the loan originator's receipt of all necessary information. To facilitate shopping, loan originators could not require verification of GFE information (tax returns etc.) until after the applicant makes the decision to proceed.
HUD will allow lenders and settlement service providers to correct potential violations of RESPA's new disclosure and tolerance requirements. Lenders and settlement service providers will now have 30 days from the date of closing to correct errors or violations and repay consumers any overcharges.
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