New RESPA Rule Implementation – 30-Day Review
Now that over a month has passed, since the new RESPA Rule has gone into full effect and we have seen hundreds of closings processed with new GFE/HUD forms, it’s clear that the sky is not falling. Like any change, there’s always resistance in the beginning, but eventually all smart people figure out a way to cope with change.
Based on direct discussion with the countless settlement agents I have assisted in completing their HUD closing docs, here are the top challenges I see that settlement agents are facing:
- Charges which are normally paid by Seller are being shown on the GFE, which makes HUD preparation twisted: This is a big one. For example, sellers in many jurisdictions (e.g. New Jersey) pay transfer taxes, yet many lenders are showing them on the GFE. This complicates HUD settlement statement preparation unnecessarily.
- Lenders are asking that additional information to be shown on GFE-HUD comparison page: We have seen some outrageous demands from lenders to show additional details on GFE-HUD comparison sheet, which we believe are not required by the new rules. I guess lenders are just being overly cautious.
- The HUD-1A Settlement Statement (for refinance) might be a thing of past: Due to many practical reasons (e.g. any part of the lender’s itemization paid out of closing), the HUD-1 form is to be used even for refinance. Perhaps, it might be easier to always use the HUD-1 only. It provides more space and avoids last minute surprises of moving from HUD-1A to HUD-1.
- In states where attorneys handle the closing, many lenders are asking that all legal fees be shown on 1102, regardless of whether the fee is considered a closing/settlement fee or not. We think it’s wrong to do so and that it will present complications, if the settlement agent is on the “lender identified list.
- Finally, we have seen many new GFE’s without an identified providers list. What happened to the requirement to include a provider’s list WITH the GFE? Are lenders having hard time finding providers who want to be on the list? It’s our understanding that if a list is not attached to the GFE, all providers are considered bucket-2 providers (part of the 10% tolerance group).
I am very pleased to report that our HUD software is able to handle pretty much anything that comes its way. Particularly, I’m pleased with the fact that since all output forms are fully editable, our customers have been able to meet strange requirements from the lender. When we were designing Easy HUD 3.0 software in early 2009, whoever proposed making all output forms editable, God bless him/her!
Please let me know your thoughts in the comments section below.