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"The only difference between a diamond and a lump of coal is that the diamond had a little more pressure put on it."
- Anonymous
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- Happy Holidays!
- Compliance
- Investor Updates
- Question of the Month
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From all of us at MBS, thank you for your business. We wish you a relaxing holiday and at least a short break from thinking about new RESPA changes! Enjoy a bright and Happy New Year. |
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Revised Settlement Cost Booklet
On December 15, 2009, the U. S. Department of Housing and Urban Development (HUD) issued a revised Settlement Cost Booklet, "Shopping for Your Home Loan," as part of the new RESPA implementation.
On January 1, 2010, HUD will require lenders and mortgage brokers to provide applicants with a copy of the new 49-page Settlement Cost Booklet within three (3) days of applying for a mortgage loan. The Booklet includes an impressive scheduled purchasing timeline, shopping information, definitions, contacts and detailed sections explaining how to understand the new GFE and HUD-1, which are also effective for loan applications as of January 1, 2010. Besides the Settlement Cost Booklet, a letter from HUD to the industry was released December 17, 2009. Some upcoming changes, a statement of commitment and partnership and a few FAQs are included in the letter.
FHA Eliminates Cap on Origination Fees
Under Section 203.27(a)(2), there is a FHA cap on origination fees. This section essentially provides a one percent cap on mortgages and a two and one-half percent cap on mortgages for properties under construction.
The November 17, 2009 HUD Final Rule Section 203.27(a)(2), (See pages 68227 and 68239), now revises this section to state that a mortgagee may collect: "A charge to compensate the mortgagee for expenses incurred in originating and closing the loan, provided that the Commissioner may establish limitations on the amount of any such charge." See also the Electronic Code of Federal Regulations.
The effective date of the elimination of the FHA origination fee cap is January 1, 2010. Based upon comments about the rulemaking, FHA believes the RESPA policy statements, also effective this date, will help limit the total origination charges the cap was attempting to regulate. Furthermore, FHA feels the elimination of the cap in correlation with the disclosure requirements will allow market forces to lower the fees for all borrowers. Considering the language allows the Commissioner to establish limitations, it is unknown how long there will be no fee limits. Only time will tell whether or not this results in higher or lower origination fees.
For clients testing loans through ComplianceEase in ProClose, the FHA Investor Criteria Loan Origination Fee test will be updated to provide a "Not Tested" result for all loans with an application date on or after January 1, 2010.
Final Model Privacy Form under the Gramm-Leach-Bliley Act
On November 17, 2009, the Federal Banking Agencies, Commodities Futures Trading Commission, and the Securities and Exchange Commission released a final model privacy form.
The Financial Services Regulatory Relief Act of 2006 amended the Gramm-Leach-Bliley Act (GLB), requiring the agencies to propose a model form so consumers can easily compare the privacy practices of different financial institutions. The use of the model form is optional; however, if the model form is used, a "safe harbor" is given as the form complies with the disclosure requirements and rules of providing privacy notices under GLB. The purpose of the privacy notice is to inform consumers of the information-sharing practices and notify consumers of their right to opt-out of certain sharing practices. The following gives a brief overview of the two pages of the final model form to ensure your institution has a better idea of what is required to meet the disclosure requirements.
The final model form has two pages, and may be printed on a single piece of paper.
PAGE ONE of the form has five parts:
- The title;
- An introductory section called the "key frame" which provides context to help the consumer understand the required disclosures;
- A disclosure table that describes the types of sharing used by financial institutions consistent with Federal law, which of those types of sharing the institution does, and whether the consumer can limit or opt out of any of the institution's sharing;
- Only if needed, a box titled "To limit our sharing" for opt-out information; and
- The institution's customer service contact information.
The "What?" box permits institutions to select from a menu of terms the types of information collected and shared (other than the SSN). Information (if needed) about limiting sharing or opting out comes after the disclosure table. (If there is a mail-in opt out form, it is at the end of page one.) The date, month and year of the most recent version of the notice is included in the top right-hand corner. Institutions may include their own identifier at the bottom of the page if it does not interfere with the clarity or text of the form.
PAGE TWO provides additional information, ensuring the notice includes all elements described in the GLB act as implemented by the privacy rule. There is a section for Frequently Asked Questions (‘FAQs") at the top of the page, and a section below for definitions. The FAQ appears on the top of the page to identify those institutions jointly providing notice. Several places are designated for insertion of the institution's name. The FAQ on the collection of information allows institutions to select from a menu of terms. A new box at the bottom of page two entitled "other important information" can be used in two ways: 1) to discuss and/or state international privacy law requirements; and 2) to provide an acknowledgement of receipt form.
This is just a brief overview of the model form. To learn more, see the final rule, including Appendix A, with the final model form. Though the use of the model form is optional, it provides a great example and guidance in meeting the disclosure requirements of the GLB.
Indiana's New Notice to Borrower/Prospective Borrower
Pursuant to Indiana Code 24-5-23.5-8(a) and pertaining to applications received after December 31, 2009, MBS created a Notice to Borrower/Prospective Borrower, (MBS form ID IN4PD1), based on the Model Form. According to the code, a creditor shall, not later than three (3) business days after receiving a completed written application for a mortgage loan from a borrower or prospective borrower, provide to the borrower or prospective borrower a notice, on a form prescribed by the homeowner protection unit under subsection (b), that includes the following:
- Contact information for the homeowner protection unit established by the attorney general under IC 4-6-12, including:
- an electronic mail address for the homeowner protection unit; and
- the toll free telephone number described in IC 4-6-12-3.5.
- A statement that the borrower or prospective borrower may contact the homeowner protection unit to report:
- a suspected violation of section 7 of this chapter; or
- other information about suspected fraudulent residential real estate transactions, as authorized by IC 4-6-12-3.5(b).
- A statement that the borrower in a real estate transaction that involves the making, refinancing, or consolidation of a mortgage loan has the right to inspect the HUD-1 or HUD-1A settlement statement during the business day immediately preceding settlement, as provided by the federal Real Estate Settlement Procedures Act (12 U.S.C. 2601 et seq.), as amended.
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More than one investor released a notice regarding FHA case numbers being required on key documents. Please note the Government Case number prints on critical MBS documents including but not limited to Security Instruments, government riders and government specific forms.
Bank of America
Bank of America eliminated their 5-year and 7-year Balloon Programs. The final day to lock these programs was December 11, 2009.
Effective immediately, the new Bank of America mailing address for trailing documents is:
BAC Home Loans Servicing, LP
Attn: Florida Document Processing
4951 Savarese Circle - Mail Code: FL1-907-01-11
Tampa, FL 33634
For a short period, documents from the Simi address are being forwarded.
Flagstar Bank
Several HomePath High Balance products were eliminated November 19, 2009 by Flagstar Bank including:
3/1 LIBOR ARM and the Interest-Only Option
5/1 LIBOR ARM and the Interest-Only Option
30 Year Fixed Interest Only
On November 11, 2009, Flagstar Bank memo 09260 clarified Flagstar's HUD-1 signature requirements. In all escrow states, all borrowers and sellers must sign the Certification Addendum to HUD-1 Settlement Statement (Doc #3701, MBS form ID AALAB1) at closing and settlement agents must sign the final HUD-1 Settlement Statement. In non-escrow states, the borrower, seller and settlement agent must sign the final HUD-1 Settlement Statement. In non-escrow states, Doc #3701 is not acceptable. Regardless of state, all FHA loans require a signed and completed FHA HUD-1 Addendum (MBS form ID AADE0G).
Effective December 11, 2009, Flagstar Bank also suspended new loans under the HomeStyle Renovation Program (Doc #5719). Loans must be delivered and purchased by February 19, 2010.
GMAC Bank
GMAC Bank introduced a new 20-year Conforming Fixed Product in a memo September 30, 2009. The products became available November 2, 2009 and codes are W78 (20-Year FNMA Fixed) and W79 (20-Year FHLMC Fixed).
On November 3, 2009, GMAC Bank asked their correspondents to make all note endorsements to Ally Bank instead of GMAC Bank.
Wells Fargo
The Wells Fargo HVCC form was updated effective December 9, 2009. The MBS version of this form (ID AAGWS1) is current.
Effective with loans delivered on or after January 4, 2010, Wells Fargo requires all sellers to be MERS members, able to register and transfer loans through MERS. The Seller must register all loans with MERS at the time of delivery to Wells Fargo. The Seller must be named as the servicer and investor at time of registration (loans cannot be registered in the name of Wells Fargo). For easy and automated MERS Registration, use ProMerge through ProClose! Ask your MBS client services representative for more information.
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| Question of the Month (from HUD Letter): |
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We understand HUD is exercising restraint in enforcement of RESPA's new requirements for 120-days to FHA-approved lenders who demonstrate a good faith effort to comply. Does this mean we can still use the old forms?
Answer
No. The idea that lenders, brokers and closing agents can delay implementing the new Good Faith Estimate and HUD-1 Settlement Statement beyond January 1, 2010, is incorrect. After January 1, the only circumstance where the old HUD-1 form can be used is when the most recent GFE the borrower received was issued in 2009 on an old form. There should be no confusion about when the mortgage industry must begin using the new forms. The date is January 1, 2010.
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