How Do You Itemize When RESPA Says You Can't Itemize?
The 2010 RESPA rules made a number of changes to how the HUD form is filled out, including a requirement that certain fees be lumped together rather than itemized. While this was meant to help consumers, it frustrated lenders who for one reason or another needed to itemize on the HUD 1 settlement sheet. Easy HUD Smart Itemization provides a RESPA-compliant way around this.
Why The Change?
The 2010 RESPA changes were specifically in response to certain predatory lending practices that were partially responsible for the bursting of the real estate bubble. A lack of a consistent format made it hard for consumers to accurately compare loans and shop for the best deals. Prior to 2010, it was easy for unscrupulous lenders to misrepresent the loan's true free structure.
The itemization change came from the practice of quoting a fee and then tacking on additional service charges and other costs, often driving the base fee to many times the quoted amount. Under the 2010 RESPA rule, lenders have to report certain fees on the GFE as lump sums without itemization so that borrowers can see the true cost of the loan.
Sometimes You Need To Itemize
So what do you do when you need to itemize? Although many borrowers are happy to see the total cost of the loan, some want to see individual charges. They want to understand where all that money is going. In some cases they might have different pots of money designed to pay different types of fees.
Complicating this is that in some cases the itemization is mandatory. This became a problem when the Department of Veterans Affairs issued a circular the same year putting caps on origination fees charged when offering VA-guaranteed home loans. Since the origination fee was now lumped together with other fees on line 801 of the HUD settlement statement, there was no way to show VA rules were not being violated.
Smart Itemization Keeps Everyone Happy
You could manually complete itemizations for your clients, but if you ever forget a charge and the itemization doesn't agree with the figure on the GFE then you are likely to be in trouble. What you really need is a RESPA-compliant software solution that includes itemization.
Easy HUD real estate title software includes a Smart Itemization feature that maintains RESPA compliance by listing the sum of fees where required on the HUD form, but with the option of adding an optional itemization page. Any time a client needs itemization, for reasons ranging from VA requirements to personal curiosity, Easy HUD users can fill out the Smart Itemization for each line. The sum of the itemized charges will be listed on the GFE, and the itemized list will be printed separately from the HUD form.
This kind of flexibility is what separates Easysoft products from other software choices. We balance the sometimes contradictory requirements set out by the law with the needs of our users to find a solution that satisfies all parties.