Now that everyone has closed loans with the New 2010 RESPA changes, how are your Settlement Agents treating you? MBS-ProClose listens and responds to our clients regarding requests you are receiving from them. Thanks to your communication, we've made changes to help both you and your Settlement Agents prepare the HUD-1:

1. Send Settlement Agents the Disbursement Sheet instead of the HUD-1
   MBS-ProClose updated the Disbursement Sheet (ZDDPA1) to break down what is included in GFE block 1 and GFE block 2, and show only the total for "Your Adjusted Origination Charges" in the Borrower Column. We had requests to add just page 3 of the HUD-1 to the closing package so the Settlement Agents can easily complete the "Loan Terms" section when they produce the Final HUD-1. If you want to add page 3 of the HUD-1 to your closing package, please contact your Client Support Representative.
2. Send Settlement Agents a Sample HUD-1
   If you are using the HUD-1 from ProClose, this form should satisfy you Settlement Agents. You have a couple options with the HUD-1:
   • You may print "SAMPLE" on the form if the settlement agent uses it only as a guide to complete the Final HUD-1.
   • You may print the totals on pages 1 and 2 of the HUD-1 or leave them blank.
3. Complete the "Loan Terms" Section on HUD-1 page 3
   The "Loan Terms" section of page 3 of the HUD-1 raised several inquiries. (A) In this section, the "Your initial monthly amount owed for principal, interest and any mortgage insurance" amount is a total of principal, interest and mortgage insurance.
   
   
   
   (B) In the block for "Total monthly amount owed including escrow payments," the amount printing after "You have an additional monthly escrow payment of..." includes mortgage insurance, all insurance and tax escrow amounts.
   
   (C) The amount showing in "...a total initial monthly amount owed of..." includes the principal, interest, mortgage insurance, all insurance and tax escrow amounts.
   
   
   
   Reminder, you cannot add A + B to equal C since A and B both include mortgage insurance.

National Flood Insurance Program Extended
On April 16, 2010, Congress approved the Continuing Extension Act of 2010 (H.R. 4851). Among other things, this bill extends the Federal Emergency Management Agency (FEMA's) statutory authority to issue flood insurance policies under the National Flood Insurance Program (NFIP). The amendment includes a retroactive effective date of February 28, 2010 and expires May 31, 2010. It is likely the NFIP will be further extended in future bills.

NEW RESPA FAQ
HUD posted a new version of the RESPA Rule FAQ April 2, 2010. Now a 62-page document, new and updated topics include preapprovals, worksheets, Block 1 of the GFE and credits, among others. All updates are shown in bold in the FAQ. ProClose Answers is updated to include the new HUD questions and answers.

Mortgagee Letter 2010-13 issued by HUD March 31, 2010, is a follow up to Mortgagee Letter 2009-51. The letter discusses FHA guidelines for using an Appraisal Update Report and clarification for lenders as to the validity period of an appraisal with and without an update form. Key things to note are: 1) Two prohibitions on the use of the Appraisal Update report were added; 2) An appraiser must use the Market Conditions Addendum (Fannie Mae 1004MC) with the Appraisal Update form to provide support that the value of the property has not dropped; and 3) HUD defines the rules regarding the validity period.

If a lender does not use the Appraisal Update Report to extend the validity period of the original report, the loan must close within 150 days of the original appraisal report date. (If a borrower signs a valid contract of sale within 120 days of the original appraisal date, the lender has the option to extend the appraisal for 30 days to accommodate the closing of the loan.) If a lender does use the Appraisal Update Form, the loan must close within 240 days of the effective date of the original appraisal report. The 30-day extension is not permitted. The Appraisal Update form may only be used once.

Freddie Mac Announced it will Cease Purchasing Interest-Only Loans
In a February 25, 2010 release, Freddie Mac (FHLMC) announced that on or around Sept 1, 2010 they will no longer purchase interest-only mortgages (fixed or adjustable rate). Some Investors are doing the same (see Investors below). FHLMC will release more details closer to the discontinuation date.

Effective April 1, 2010 - Escrows required on Higher-Priced Mortgage Loans
C.F.R. Section 226.35 (see (b)(3)), which applies only to first lien higher-priced loans, requires an escrow account be established for property taxes and premiums for mortgage-related insurance mandated by the lender or creditor, such as hazard, liability and credit insurance. A Higher Priced Mortgage Loan (HPML) is a first-lien loan with a rate1.5 percentage points above the average prime offer rate (APOR) as computed from the Freddie Mac Primary Mortgage Market Survey (PMMS). For second-lien loans, the trigger is 3.5 percentage points above the APOR. While the definition of a higher-priced loan is limited to one securing the consumer's principal dwelling, the term "dwelling" also includes structures considered personal property under state law, such as mobile homes, boats and trailers when used as the consumer's principal dwelling.

The escrow requirement applies only to taxes and mortgage-related insurance "required" by the lender. Therefore, premiums for optional insurance products obtained by the consumer need not be escrowed. The Fed also exempted from the escrow requirements loans secured by shares in a co-op. In addition, for loans secured by condominiums, insurance premiums need not be escrowed where the condominium association must maintain a master policy to insure the units. A lender or servicer may allow a consumer to cancel an escrow account only if the lender or servicer receives a dated written request from the consumer no earlier than 365 days after loan consummation.

This provision was also promulgated under Section 129(l) of TILA; therefore, a violation would appear to subject a lender to liability for the enhanced HOEPA penalties. However, a violation will not extend the rescission period.

The escrow requirements are effective for applications received on or after April 1, 2010, with an additional delayed effective date of October 1, 2010 on applications for loans secured by manufactured housing.

Montana released SAFE Act compliant administrative rules
Montana promulgated its administrative rules conforming to the requirements of HUD's SAFE Act. The revised rules add mortgage loan originator, mortgage banker and mortgage broker requirements. They became effective February 12, 2010. Read more regarding the provision.

Maine amended its effective date for SAFE Act compliance
The Maine legislature recently passed bill H1146, which delayed the implementation of Maine's SAFE Act compliant licensing provisions from July 31, 2010 to January 1, 2011. The reasoning for the 5-month delay is to "avoid overlapping and duplicative requirements," as mortgage companies transition from the existing state registration system to a new national system.

California Department of Real Estate released licensing requirements
The California Department of Real Estate released several new requirements: the Pre-License Education Requirement; NMLS&R Application and Fee Requirement; Fingerprint/Background Requirement; and, Financial Responsibility/Credit Report Requirement. These are all in furtherance of California Senate Bill 36, which was enacted in October 2009, in order to bring California into compliance with the SAFE Act by January 1, 2011.

Since USDA announced Guaranteed funds will be exhausted by April 30, 2010, investors such as BB&T and Wells Fargo suspended accepting new USDA/Rural Development loan applications. The USDA program is wonderful for rural America, so while funding is likely to return, for now check with your Investor before doing USDA loans.

Bank of America
Bank of America updated 6 of their ARM Disclosures (1FE3177US, 1FE6076US, 1FE4338US, 1FE4263US, 2FE6172US and 2FE3178US). The MBS forms department is updating the documents for release this month.

Effective April 9, 2010, Bank of America suspended their non-conforming loan products. They plan to offer a more competitively priced non-conforming product in the future. The last day to lock the current programs was April 8, 2010. MBS plans to add the new products to ProClose when Bank of America releases them.

BB&T
As of April 1, 2010, BB&T is no longer accepting any applications for Interest-Only loans. At least 13 BB&T interest-only programs were retired. All loans already in the pipeline must be delivered to BB&T by June 1, 2010. No lock extensions allowed.

GMAC
On 3/29/10 GMAC announced new 10-year Conforming Fixed Products:

• W90 10-Year FNMA Fixed, 8 and 10-year loan terms in annual increments
• W91 10-Year FHLMC Fixed, 5 and 10 year loan terms in annual increments

The new products are available for registrations and loan locks as of April 5, 2010. GMAC's standard 15-year Fannie Mae (product code 345) and Freddie Mac (product code 347) products remain in place for loan terms from 11 and 15 years.

Reflective of the current trend toward restriction of the interest-only loan market, GMAC tightened guidelines for Conforming Interest-Only products, eliminating them as an option on cash out (i.e. equity) refinance, 2-4 Unit Property and Investment Property loans effective with locks on and after March 29, 2010. They also discontinued the Freddie Mac Super Conforming 5/1 Interest-Only LIBOR ARM (product code W11).

US Bank
US Bank is eliminating all Initial Interest Freddie Mac products, effective with applications taken on or before May 31, 2010. Unexpired locked loans must close and be purchased by US Bank no later than Friday, July 16th. The eliminated product codes are Interest-Only LIBOR ARMs (product codes 3385, 3386 and 3387). Any loans not meeting these deadlines may be switched to an amortizing product or into a USBHM Interest-Only ARM product (product codes 330, 331 or 3332) and must be requalified into the new program.

On March 31, 2010 US Bank announced 2 new products: FHA and VA 5/1 ARMs (product codes 1024 and 2024 respectively). Loans registered/locked as of Friday, April 2nd are eligible for these new programs.