RESPA Final Rule and a Lender’s Perspective

On Nov 11, 2009, I attended the Real Property Section of the Essex County Bar Association (ECBA) New Jersey meeting on “2009 RESPA Changes.” Darcie Gore of Bank of America (BoA) was one of the guest speakers and John R. Dusinberre, Esq of ECBA was the moderator.

After giving 50 or so presentations myself about RESPA Rule implementation for settlement agents, it was nice to sit back and listen. It was also interesting to see a leading lender’s perspective, plans and guidance. Here’s my take from the meeting:

» BoA’s go-live date for new GFE is January 1, 2010.

• Talk about going down to the wire.

» BoA wants settlement agents to submit a draft HUD for approval one-week prior to closing, so they can
carefully review all fees prior to loan funding.

• Interestingly, a draft HUD prepared a week ahead may not even have closing figures. Settlement agents
typically don’t receive their final closing figures until the day of the closing.

» BoA will make list of “lender identified service providers” (for the purpose of tolerances computation) online.

• This seems problematic to me. First, RESPA rules require a list of service providers be given as an
attachment “along with” the Good Faith Estimate (GFE.)

• Secondly, an online list will continue to be refined/updated, surely a nightmare for settlement agents
preparing a HUD. So, this will need further clarification from BoA.

» If any last minute repair issues are discovered during the final walk-through, BoA will have to be notified as
they will need to determine if the repair charges result in changed circumstances.

• A final walk-through happens the day before the closing. It seems impractical to close an entire loop for
minor repair work just hours before the closing.

• Unless major issues are discovered, it seems like agreeing to a repair payment with a third party and
showing it on the HUD with the seller incurring charges, would be the most appropriate.

» BoA has set up a dedicated toll-free hot-line number and email to address any compliance related issues.

» Because New Jersey is an attorney closing state, there was lot of discussion about how to record attorneys’ fees. John Dusinbere presented an approach separating fees on 1102 (the portion pertaining to conducting closing) and 1109 (the portion pertaining to other legal services). His method is in close alignment with our position at Easy Soft, which we’ve been advocating for almost a year for our customers. (I’ll address “recording attorneys’ fees” in an up-coming blog post.)

» BoA considers the 1102 charge as one that affects the APR calculations, but they have not taken a position on the other legal services charge (likely on 1109) and whether it also affects the APR. Remember, the Mortgage Disclosure Improvement Act (MDIA) that went into effect July 30, 2009 requires a new Truth in Lending (TIL) disclosure statement be issued if the APR rises by more than 0.125% and starts a new 7-day waiting period. So, this can get tricky very quickly!

The Essex County Bar meeting was a strong indicator of the on-going issues residential real estate attorneys, title companies, closing companies and lenders still have to iron out before January 1, 2010.

In August, Easy Soft began offering webinars to help real estate industry professionals get ready for RESPA reform. We continue to offer our two popular RESPA webinars each week and invite you to attend. More details at: http://www.easysoft-usa.com/hud-software.html