December 14, 2009 by MSI
In November 2008, the Department of Housing and Urban Development (HUD) announced the final results of its efforts to overhaul and reform the Real Estate Settlement Procedures Act (RESPA). RESPA is about closing costs and settlement procedures and is a consumer protection statute, enforced by HUD, designed to help homebuyers be better shoppers during the home purchase and refinance processes. RESPA requires that consumers receive specific disclosures at various times throughout the mortgage process and outlaws potential kickbacks that increase the cost of settlement services.
The major changes in the reform include a new RESPA Reform Good Faith Estimate (GFE) which requires a more detailed disclosure of key loan terms and closing costs and a newly revised HUD-1, which requires lenders to provide borrowers with information to make it easier to compare closing costs. The new GFE is three pages in length, providing much more information about the proposed loan than the previous one page GFE.
While we’re confident that this reform will benefit the consumer, there is one potentially challenging relocation implication. While the revised HUD-1 form is now three pages in lieu of two and provides a side-by-side comparison to help buyers compare terms disclosed on the GFE with those shown on the HUD-1, Line 801 now represents a combined charge inclusive of the origination fee along with all other non-lender pass-through fees (processing, underwriting, commitment etc.). The implication for relocation is that if your employee’s lender does not break out the fees through a separate attachment there may be questions as to which items are reimbursable versus which are not according to the corporation’s specific relocation policy.
The catalyst of this reform was to assist borrowers with additional standardization and to prevent any future housing crises. The new RESPA regulations are scheduled to take effect on January 1, 2010.
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