The Trusted Adviser May 2010 | Volume 3 - Number 5

Update from ATG Administration

New RESPA Regulation Nears the Six-Month Mark

by David Huffman, Senior Vice President - Title Operations

We've been operating for several months under the new RESPA regulation. While the rule was intended to improve disclosure, several ambiguous provisions have resulted in conflicting interpretations of the rule. In attempts to provide clarity, the Department of Housing and Urban Development (HUD) has released several versions ofFrequently Asked Questions(FAQs). ATG has also released a dozen REsource® updates specifically to correct unanticipated HUD-1 Settlement Statement issues.

Prior to implementation of the new Rule, there was a great deal of speculation about how the new Good Faith Estimate (GFE) and the Tolerance Buckets would impact ATG members' ability to compete with lender-selected title providers. There was considerable debate about whether it made sense to be included on the lender's list of providers in "Seller Pay" states like Illinois, Indiana, and Wisconsin. While many were concerned that lenders would attempt to steer customers to their affiliated providers it appears that providers continue to be selected based upon service, convenience, and price. To date, lenders, brokers, and title companies are doing their best to get the deals closed.

ATG members with strong lender relationships have taken the opportunity to work with local lenders and find the most appropriate way to issue the new GFE. Communities with larger national lenders and mortgage brokers have yet to agree on a uniform way to deal with some of the ambiguities in the rule. Here are some of the common issues we've experienced:

  • Lenders have asked for itemizations of the rollup and roll-down lines. HUD FAQs, page 52: The commitment fee, wire fee, and other miscellaneous fees are included as processing and administrative fees that are part of the definition of "title services". All of these types of fees must be included in the charges shown on Line 1101 of the HUD-1, and are not to be itemized separately.

  • Lenders have asked that their fee or other undisclosed amount be paid to the mortgage broker. HUD FAQs, page 48: Line 801 includes all charges received by a loan originator, except for any additional charge (points) for the interest rate chosen on the loan. The amount on Line 801 also includes all amounts received for any service, including administrative and processing services, performed by or on behalf of the lender or any mortgage broker

  • Settlement agents often do not receive the GFE or the lender's provider list. HUD FAQs, page 61: Yes, the lender may transmit the information necessary to prepare page 3 of the HUD-1 to the settlement agent in a streamlined document that looks similar to page 3 of the HUD-1, such as a pro-forma, but the settlement agent must prepare the HUD-1 including page 3. While this doesn't specifically address the delivery of the GFE or the provider list, it does indicate that the settlement agent may rely upon the information the lender provides.

  • Many mortgage brokers are requesting preliminary HUD-1s long before the closing and then requiring that our fees remain the same. HUD does not specifically address this and we've heard that other title companies are charging for preliminary HUD-1s.

  • Lenders that close their own loans are requesting the agent/underwriter split for lines 1107 and 1108 of the HUD-1. The regulation requires that this information be shown on the HUD-1.

The new process and rules are a dramatic departure from the regulatory framework we have worked under since RESPA was enacted in 1974. Real estate lawyers must be familiar with the regulation and the changes. ATG has many tools available to ensure that your transition to the new rule is a smooth one, including educationalOnDemandprograms from ATG and Ramquest, personalized in-office training, and live seminars. You will find answers to many of your questions regarding resources available to members and the new rule atNew Closing Procedures: Information and Trainingon the ATG website, We thank you for your continued support as we work through this transition period.

THE TRUSTED ADVISER is published by Attorneys’ Title Guaranty Fund, Inc., P.O. Box 9136, Champaign, IL 61826-9136. Inquiries may be made directly to Mary Beth McCarthy, Corporate Communications Manager. ATG®, ATG® plus logo, are marks of Attorneys’ Title Guaranty Fund, Inc. and are registered in the U.S. Patent and Trademark Office. The contents of the The Trusted Adviser © Attorneys' Title Guaranty Fund, Inc.

[Last update: 5-27-10]