Home Equity Training

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RESPA REFORM
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What is RESPA Reform?

• RESPA Reform was enacted by the U.S. Department
  of Housing and Urban Development (HUD). The final
  rule was published on 11/17/08 with the goal of
  providing consumers greater protection
  surrounding the terms, fees and settlement
  charges of their mortgage loan.
• The new RESPA rules apply to loan applications
  taken as of 1/1/10.

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Principles of RESPA Reform

• Primary Goals include
• Helping the customer shop for the best loan
• Shopping Leads to Greater Competition and Lower
  Prices
• Key final terms of the loan disclosed to the
  borrowers at closing
• Preserve a competitive market for all settlement
  service providers

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Important Changes

• New Good Faith Estimate Disclosure
• Timing of upfront fee collection
• Changed Circumstances Concept
• New Tolerance and redisclosure requirements
• Greater emphasis on communication between the
  broker and the lender at time of application
  through closing
• New HUD-1 Settlement Disclosure

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Good Faith Estimate

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New Definition - Application

• Stearns Lending considers an application
  complete for RESPA, GFE purposes when the
  originator (mortgage broker or lender) has the
  following
• Borrowers name
• Borrowers monthly income
• Borrowers social security number
• Property Address
• Estimated value of the property
• Loan Amount

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At Application

• The GFE must be given to the borrower within 3
  business days of receipt of these 6 pieces of
  information.
• The broker is responsible for preparation of the
  Good Faith Estimate and any redisclosure until
  the complete loan file is submitted to Stearns
  Lending for underwriting and approval.
• If a transaction involves more than one mortgage
  loan, a separate GFE for each loan is given to
  the applicant.

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Intent to Proceed

• RESPA states the borrower must express their
  intent to proceed prior to
• Collection of any upfront fees other than a
  credit report fee, and
• Verification of any information provided by the
  applicant
• The new Good Faith does not have signature lines.
  The borrower does not sign the GFE, they can
  initial receipt of the GFE by their name on the
  first page but this is not required.
• There can be no other attachments to the GFE, no
  other document in the file is to be named GFE.

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Certification of Intent to Proceed
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Good Faith Estimate (GFE)

• The new GFE is designed to create more
  transparency regarding key loan terms, fees and
  charges to encourage the borrower to shop and
  compare terms offered by different lenders.
• The originator is responsible for providing
  accurate figures of the true costs of the loan at
  application, avoiding surprises at settlement.
• The new GFE includes all charges typically paid
  by a borrower regardless of who is paying the
  charges (borrower, seller, lender) on an
  individual transaction.
• For applications taken beginning 1/1/10 or only
  the standardized GFE form defined by RESPA may be
  used. If a loan has an application date prior to
  1/1/10, we can use the previous GFE and the
  settlement agent will use the old HUD-1.

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Good Faith Estimate (GFE)

• Loan Originators, (mortgage brokers and lenders)
  are bound to the settlement charges and terms
  listed on the GFE initially provided to the
  borrower, subject to certain tolerances.

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PreApprovals

• If there is no subject property, the transaction
  is not considered an application for RESPA
  purposes.
• A GFE cannot be issued.
• Verification and/or processing of the loan
  request cannot begin until the borrower selects a
  property, receives the GFE and expresses intent
  to continue with the loan.

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GFE Getting it Right

• Dates,Fees,Details
• What you need to know

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GFE Page 1

• The first page of the GFE acts as an overview of
  the loan transaction. A snapshot of the terms of
  the loan for which the borrower applied.
• Included on the first page
• loan originator contact information,
• important dates,
• summary of loan terms
• total of estimated settlement charges.
• This page is designed to make shopping for a loan
  easier for the consumer.
• Our job as a lender is to review the brokers GFE
  for accuracy and completion. In Wholesale at
  submission our TIL package will no longer include
  the GFE.
• After submission if we are preparing the GFE due
  to changed circumstances, our system will
  complete the form based on our data entry.

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GFE Getting it Right, Page 1 Contact
Information

• In the first section you must fill in the name,
  business address, phone number and email address
  of the loan originator completing the GFE.
• Broker contact information is shown until the
  time the processed loan file is submitted for
  approval, then Stearns contact information will
  be entered
• In the second column the borrowers names,
  property address and the date the GFE is prepared
  is entered.

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GFE Getting it Right, Page 1Important Dates

• The important dates section notifies applicants
  of the timeframe the terms quoted at application
  are available to them.
• When a loan is locked the GFE is reissued because
  this section updates to give the borrowers
  accurate information.

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GFE - Getting it Right, Page 1-Important Dates

• Line 1. Enter the date through which the quoted
  interest rate will be available. You may enter a
  date and time, or if the rate is floating enter
  N/A. If the loan is locked the lock expiration
  date is shown here.
• Line 2. RESPA requires all other settlement
  charges quoted at time of application to be
  binding for a minimum of 10 business days. For
  wholesale and retail do not count Saturday and
  Sunday. Enter that date here. If a revised GFE is
  issued, the date in this box is 10 days after the
  date on the reissued GFE.
• Line 3. Enter the term of the rate lock here. If
  the loan is floating enter N/A. This field will
  be updated at the time the loan is locked and a
  new GFE reissued.
• Line 4. This field represents the number of days
  prior to settlement that the rate must be locked.
  The minimum number of days for Stearns Lending is
  14. If the loan program requires a greater number
  of days, enter that here. We chose 14 days
  because that is the shortest rate lock period we
  currently offer. This does not mean the borrower
  needs to wait 14 days to settle, they can lock
  and go to closing as soon as possible.

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GFE Page , Summary of your loan

• This section of the GFE highlights critical terms
  of the loan to the consumer.
• Line 1. The loan amount applied for
• Line 2. The term of the loan in years
• Line 3. The interest rate shown on the note at
  closing. If the loan is a 3-2-1 buydown the
  interest rate on the note not the buydown rate is
  quoted. For an ARM loan, the initial interest
  rate is quoted.
• Line 4. The initial monthly payment amount of
  principal, interest and mortgage insurance. If
  the loan program has other than monthly payments,
  total the amount of payments made in a year and
  divide by 12. That number goes here.

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GFE Page 1Summary of your loan

• This section of the GFE highlights critical terms
  of the loan to the consumer.
• Line 5. If the interest rate can rise, check Yes
  and enter the maximum interest rate over the life
  of the loan and the number of months before the
  first interest rate change. If a fixed rate loan
  check No.
• Line 6. If a loan has negative amortization,
  check the box Yes and enter in the maximum amount
  the principal can rise. We do not offer
  negatively amortizing loans at this time. Check
  the box No.
• Line 7. If a fixed rate loan check No. If an ARM,
  enter the month of the first increase and the
  maximum associated payment amount. The maximum
  payment over the life of the loan is also shown.
• Line 8. Check Yes or No to show whether there is
  a prepayment penalty. If yes, state the maximum
  amount of the prepayment penalty, assume payoff
  on day 1. Interest paid through the end of the
  month on an FHA loan at the time of payoff is not
  considered a prepayment penalty.
• Line 9. Check Yes if the loan has a balloon
  payment and enter the amount and number of years
  until the balloon is due, otherwise check No.

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GFE Getting it Right, Page 1Escrow Account
Information

• It is important for a consumer to know if their
  loan payment includes impounds for taxes and
  insurance. This box tells the consumer to ask
  their loan officer for information regarding
  impounds. The payment quoted in this section is
  only principal, interest and mortgage insurance.
  Check the box No or Yes depending on the
  situation. If the loan includes an impound
  account, information regarding impounds is on
  page 2 of the GFE.

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GFE Getting it Right, Page 1Summary of
Settlement Charges

• The total charges shown in boxes A and B are
  detailed on page 2 of the GFE. This section gives
  the borrower the total amount of estimated
  settlement charges from both origination and
  other settlement charges.

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GFE Page 2

• Page 2 displays loan fees as subtotals by service
  provided to the consumer, another tool for
  shopping for the best loan.
• The fees quoted at time of application on page 2
  are compared to the charges at closing on the
  HUD-1 to insure none have increased at closing
  more than is allowed by the regulation.
• The lender is bound to the fees quoted at
  application. In a wholesale transaction, the
  lender is not able to unbind the agreement
  between the broker and the applicant.

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GFE Page 2,Your Adjusted Origination Charges

• Block 1. Our origination charge
• The dollar amount shown in this block represents
  all compensation paid to the broker and lender.
  This total is not dependent on who is paying the
  compensation. For example lender paid
  compensation to the broker as well as seller paid
  fees benefiting the broker or lender are included
  in the total.

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GFE Page 2,Your Adjusted Origination Charges

• Enter the total of the following fees in block 1
• YSP, or Lender to Broker Compensation Broker Fee
• Origination Fee Processing Fee
• Administration Fee Application Fee
• Underwriting Fee Courier Fee
• Messenger Fee Wire Fee
• SSN/Tax Return Verification Fee Lock Fee
• Employment Verification Fee Extended Lock Fee
• MERS Registration Fee Doc Prep Fee
• Commitment Fee

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GFE Page 2,Your Adjusted Origination Charges

• Block 2 Your credit or charge (points), for the
  specific interest rate chosen
• Block 2 represents the fees paid or credit given
  to the borrower for the interest rate. This box
  reflects the net impact of any discount, YSP or
  other loan level price adjustment.
• Important to note boxes 2 and 3 cannot be
  checked at the same time. The fee or credit shown
  is the net impact of all charges related to the
  interest rate chosen.

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GFE Page 2,Your Adjusted Origination Charges

• Check one of three boxes
• Box 1 wholesale, do not check.
• Box 2 if there is a credit for the interest
  rate, check the box, enter the dollar amount of
  the credit and the interest rate, carry the
  dollar amount of the credit as a negative number
  into the column.
• Box 3 - if there is a charge for the interest
  rate, (discount points and loan level price
  adjustments) check the box, enter the dollar
  amount of the charge and the interest rate, carry
  the dollar amount as a positive number into the
  column.
• Again, the net charge or credit is reflected do
  not choose both a credit and a charge.
• The amount from block 1 is added to the amount in
  block 2 and the total shown in box A.

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GFE Page 2, Your Adjusted Origination Charges

• Impact of a Lock
• Once the loan is locked, the interest rate
  dependent charges only are updated. These are the
  net charges/credits shown in block 2.
• Origination Fees as disclosed in block 1 are not
  allowed to increase. These fees represent the
  charges involved in processing a loan and do not
  include rate dependent fees.
• It is important to take care when quoting the
  origination charges at application as these fees
  cannot change unless an appropriate changed
  circumstance exists and is documented and
  approved by Stearns Lending.
• We will address changed circumstances later in
  the presentation.
• Exception if the loan origination fee is a
  percentage of the loan amount then only that
  portion of the Our Origination Fee in box one
  can change when the loan amount changes. For
  example, on a 100,000.00 loan with 1
  origination fee and 500.00 processing, box 1
  1500.00. The loan amount changes to 120,000,
  then box 1 updates to 1700.00.

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GFE Page 2,Your Adjusted Origination Charges

• Example 1
• Loan Amount 200,000
• Interest Rate 5.00
• Broker Price 101.00 (1 YSP)
• Broker Fees origination 4,000.00, processing
  500.00
• Stearns Fees 750.00 administration
• Credit for Interest rate to borrower 1.00 (1
  YSP)

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GFE Page 2,Your Adjusted Origination Charges

• Example 2
• Loan Amount 200,000
• Interest Rate 4.50
• Broker Price 98.00 (2 discount points)
• Broker Fees origination 2,000.00, processing
  500.00
• Stearns Fees 750.00 administration
• Charge for Interest rate to borrower 2.00 (2
  discount points)

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GFE Page 2,Your Adjusted Origination Charges

• Example 3
• Loan Amount 200,000
• Interest Rate 4.75
• Broker Price 100 par no discount or YSP
• Broker Fees origination 2,500.00, processing
  500.00
• Stearns Fees 750.00 administration
• Charge for Interest rate to borrower 0.00

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GFE Page 2,Your Adjusted Origination Charges

• Impact of Float to Rate Lock on Example 1
• Loan Amount 200,000
• Interest Rate was 5.00 with 1 YSP now to get 5
  the borrower must pay 1 discount
• Broker Price 101.00 became 99.00 a swing of 2
  points
• Broker Fees origination 4,000.00, processing
  500.00
• Stearns Fees 750.00 administration
• Credit for Interest rate towards closing costs
  for borrower 1.00 (1 YSP) became charge for
  interest rate of 1.00

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GFE Page 2,Your Adjusted Origination Charges

• What happens now?
• The cost of the loan increased 4,000.00 (2
  points) based on market changes.
• RESPA tells us the origination charge is not
  based on the interest rate but represents
  compensation to the broker and lender for
  originating and processing the loan.
• Before the rate lock, the broker was receiving
  2,000 compensation from the lender, now to
  continue to earn the 5250 origination fee
  originally quoted, this compensation needs to be
  paid by the borrower.
• What do I do?
• Contact the broker If the broker is holding his
  origination charge constant then the burden of
  payment has shifted from Stearns to the borrower.
  This will create additional prepaid finance
  charges to the borrower and may trigger a new
  Truth in Lending disclosure due to APR increases
  above tolerance. If the broker wants to reduce
  his origination fees then include that reduction
  in the redisclosure.
• A point to remember once a fee is reduced, it
  cant be raised again unless there is a
  qualifying changed circumstance. You may need to
  remind your broker of this if he chooses to lower
  his origination charge in this example.

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GFE Page 2,Your Adjusted Origination Charges

• Impact of Float to Rate Lock, improving market
  Example 3
• Loan Amount 200,000
• Interest Rate 4.75 was the par rate, now when
  paying 4.75 the borrower earns 1 YSP as a
  credit for that interest rate
• Broker Price 100 par no discount or YSP, now
  101
• Broker Fees origination 2,500.00, processing
  500.00
• Stearns Fees 750.00 administration
• Charge for Interest rate to borrower 0.00,
  becomes credit of 1

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GFE Page 2,Your Adjusted Origination Charges

• What happens now?
• The cost of the loan decreased 2,000.00 based on
  market changes.
• RESPA tells us the origination charge is not
  based on the interest rate but represents
  compensation to the broker and lender for
  originating and processing the loan. Therefore
  broker and lender origination charges do not
  change.
• Since the market improved and costs for the
  interest rate selected decreased, the borrower
  receives a credit towards their closing costs.
• The borrower continues to pay their portion of
  broker and lender compensation.

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GFE Page 2,Your Adjusted Origination Charges

• Example 4
• Loan Amount 200,000
• Interest Rate 6.00
• Broker Price 102.5
• Broker Fees origination 2,000.00, processing
  500.00
• Stearns Fees 750.00 administration
• Credit for Interest rate to borrower 2.50

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GFE Page 2,Your Adjusted Origination Charges

• What happens now?
• The Adjusted Origination Charges in box A are
  allowed to be a negative number. In this case the
  credit for the interest rate was larger than the
  origination charges. This credit will be carried
  down to offset the other settlement services in
  box B on the bottom of page 2.

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GFE Page 2, Your charges for All Other Settlement
Services

• This section lists each third party settlement
  provider selected by the originator other than
  title. The description of the service, not the
  provider name, and the charge for each must be
  included. The total of all these fees is entered
  in the right hand column. Examples include
  credit report, appraisal, appraisal review, flood
  certification, property tax services, FHA upfront
  MIP and VA funding fee.
• These fees are limited to a 10 increase at close
  unless there is a changed circumstance.
• Brokers and Loan Officers need to create working
  relationships with their vendors to get accurate
  estimates at the time of application.

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GFE Getting it Right, Page 2Your charges for
All Other Settlement Services

• All fees related to closing go in box 4 and is
  shown as a total. The fees are not itemized
  individually. Included in this box are fees such
  as title search, examination and endorsements,
  lenders title insurance fee, delivery fee,
  settlement or escrow fee, sub escrow fee, notary
  fee, messenger fee, email fee, and attorneys
  fees for documents needed at close (not loan
  documents). Any fee relating to the settlement,
  escrow or title services except for owners title
  insurance goes here.
• Again, it is important for the Broker and Loan
  Officer to create close working relationships
  with the title companies in the borrowers
  neighborhood so these fees are as accurate as
  possible.

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GFE Getting it Right, Page 2Your charges for
All Other Settlement Services

• In a purchase transaction the fee for owners
  title insurance and any endorsements, independent
  of who is paying for them, is entered here.
• In a refinance, enter NA.

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GFE Getting it Right, Page 2Your charges for
All Other Settlement Services

• Any required third party services that the
  borrower can shop for is listed here. Describe
  the service, (for example, pest inspection,
  survey) and list each estimated charge. The total
  goes in the right hand column.
• For services disclosed in boxes 4, 5 and 6, if
  borrowers are permitted to shop for a third party
  settlement services they must be given a separate
  written list of settlement service providers at
  the time of the GFE. This list contains the names
  of providers the estimates were based on. This
  list is prepared on a separate piece of paper
  provided along with the GFE.
• The broker is responsible for preparation of this
  list and submission at the time of application.

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GFE Getting it Right, Page 2Your charges for
All Other Settlement Services

• Box 7 enter any state and local recording fees
  for the loan and any required title documents.
  Communication with the settlement agent prior to
  preparation of the GFE is important so the
  estimate is accurate.
• Box 8 Transfer Taxes represents the sum of all
  state and local government fees that will be
  charged at settlement based on the loan
  application. This fee must be exact and there is
  zero tolerance for charging more than is
  initially quoted per RESPA. Communication with
  the settlement agent is important for accuracy.

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GFE Getting it Right, Page 2Your charges for
All Other Settlement Services

• Box 9 represents the estimate of the deposit that
  will be required for the borrowers initial
  impound account at closing. The estimate includes
  deposits for
• Property taxes Hazard Insurance
• Flood Insurance Mortgage Insurance
• Any other impounds.

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GFE Getting it Right, Page 2Your charges for
All Other Settlement Services

• The estimated per diem interest collected at
  closing is shown in box 10.
• In box 11, list the type of Hazard Insurance and
  the estimated amount, carry the total to the
  right hand column. Insurance includes, hazard,
  fire, flood, earthquake etc.

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Tolerance

• 10 Tolerance
• The total of charges in blocks 3,4,5,6 and 7 can
  increase up to 10 if the service provider is
  identified by the loan originator.
• There is no tolerance limitation if the borrower
  selects their own service provider in blocks 4,5
  and 6.
• Transfer Taxes, block 8, has zero tolerance, the
  fee cannot increase at settlement.

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GFE Page 3

• The third page of the GFE has minimal data entry
  by the originator and its primary purpose is to
  be a tool for the borrower when shopping and
  comparing loan offers from different lenders.

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GFE Getting it Right, Page 3

• This part of the GFE is informational for the
  consumer. It tells the consumer which fees can
  and cannot change and the associated tolerance.
• If at closing there is a change greater than the
  tolerances allowed, the lender is responsible for
  the correction and that correction is shown on
  the HUD-1.
• Communication with brokers and settlement agents
  prior to documents being released is the key to
  success.

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GFE Getting it Right, Page 3

• The consumer can use the tradeoff table to
  compare loan offers from the same lender. We will
  be programming the first column.

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GFE Getting it Right, Page 3

• The shopping chart is a useful tool for the
  consumer to use to compare offers from all
  lenders during the 10 business day period
  described earlier. When a borrower chooses the
  loan program and lender they will be required to
  document their intent to proceed with the loan
  before any additional fees or information,
  (verification of the application) can be
  collected.

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GFE Getting it RightSettlement Servicers
Providers List

• Anytime the borrower is allowed to shop for or
  choose a service provider, the Settlement Service
  Providers List must be given along with the GFE
  showing providers that are available to provide
  the services described.
• Key Points
• The Settlement Service Providers List is given to
  the applicant with each Good Faith Estimate
• The list must include at least one provider for
  each required service along with contact
  information
• The providers given must offer their services in
  the borrowers neighborhood.
• The applicant is not required to select from the
  list provided.
• The borrower must notify the loan originator of
  his choice of service providers for each service
  within 10 business days of the application date.
• If the borrower chooses a provider on the
  Settlement Service Providers List the fee at
  closing is limited to a 10 increase. If the
  borrower chooses their own provider then the fee
  is not limited.

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Settlement Service Providers Form Sample
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HUD Booklet

• Hud also published a new booklet to be sent to
  applicants with the Good Faith Estimate.
• The revised booklet provides the borrower
  expanded information about shopping for a
  mortgage and understanding the home purchase
  process. The format and contents of the new Good
  Faith Estimate are included in the description of
  the process and are required to be used with any
  mortgage loan application taken on or after
  January 1, 2010.
• The HUD Booklet can be found at www.hud.gov/respa.

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TILA and RESPA

• TILA differences
• TILA requires itemization of individual fees
• Seller paid fees are not included in the APR
• The YSP is not included as a prepaid finance
  charge for APR purposes
• No duplication of fees by broker and lender
• Individual Fees still used in High Cost
  calculations
• The Initial Disclosure package does not include
  the GFE. It is delivered separately by the
  broker.
• Timing wait periods RESPA fees are binding
  for 10 days. Borrower intent to proceed prior to
  verification of information or collection of fee
  other than credit report fee. MDIA 3 day
  mailing period for TIL documents prior to
  ordering appraisal, 7 days for settlement.

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Changed Circumstances

• When do I reissue a new GFE? When can a fee
  quoted on the initial GFE change?

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Changed Circumstances

• Changed circumstances include
• Acts of God, Disaster, Emergency
• a federal disaster declared by the president
  (fire, flood, tornado, earthquake, hurricane)
• Inaccurate information used in good faith to
  provide the GFE
• Loan amount, credit quality, property value,
  income
• New information obtained that was not relied on
  in providing the GFE
• Property type (SFR Units), Occupancy Change,
  FICO, underwriting conditions require additional
  services
• Locking the Loan
• Loan locks after GFE issued, Lock period expires
• Other info particular to the borrower or
  transaction,
• boundary disputes, flood insurance, environmental
  problems, unique property characteristics not
  know to originator

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Changed Circumstances

• Changed circumstances do not include
• Lender non acceptance of mortgage broker issued
  GFE
• GFE issued with no property information and the
  property information is provided later in the
  process, (Preapproval)
• GFE issued by the mortgage broker for one lender,
  which is later submitted to a different lender
• Market fluctuations on a locked loan
• Changes that should have been known at the time
  the GFE was provided, for example requirement of
  two appraisals for loan program/amount requested.
  

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Changed Circumstances

• Changed circumstances may include the following.
  Each will be considered on a case by case basis
  to determine the impact of the change to the
  costs incurred for settlement. Each decision will
  be documented on the Respa Changed Circumstance
  Detail form
• Borrower does not proceed to closing quickly
• GSE, FHA, Mortgage insurance program changes
• Regulatory changes
• Property address deemed to be incorrect
• Parties added or removed from title
• Property use changes
• Signing documents using a POA
• Vendor for a settlement service goes out of
  business
• AVM problem, Appraisal Review
• Investor Rejection of appraisal requiring new
  appraisal
• Borrower changes from standard to extended
  coverage owners title policy

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Changed CircumstancesBorrower Requested Changes

• Borrower requested changes
• Changes to the loan application originated by the
  borrower can be cause to create a new revised
  GFE, changing only those sections of the GFE
  related to the borrowers choice.
• Examples include
• Changed loan program, i.e. from ARM to fixed
• Rate lock
• Borrower chooses another property
• Borrower requests different loan amount

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Changed Circumstances Rate Lock

• When the borrower locks their interest rate, only
  the interest rate related charges may change, for
  example
• Charge or credit for interest rate chosen (box 2
  on page 2 of the GFE)
• Per Diem Interest
• Charges related to the loan terms
• All other charges must remain the same.
• For additional information about changed
  circumstances and their fee impact please refer
  to the changed circumstance chart.

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Changed Circumstances - Timing

• A new GFE must be provided to the borrower
  disclosing the costs affected by the changed
  circumstance within 3 days of discovery of the
  changed circumstance.
• The broker must reissue the GFE within 3 days of
  discovery if the loan has not yet been submitted
  to Stearns. If submitted, the broker must notify
  the account manager and/or compliance specialist
  immediately upon identification of the changed
  circumstance so a new GFE/TIL (if needed) can be
  prepared by Stearns. The underwriter may be the
  first person notified as well.

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Changed Circumstances Documentation

• In order to prepare a revised accurate GFE, the
  originator must complete the RESPA Changed
  Circumstance Detail Form.
• This form includes
• The date of the change
• The date of the redisclosure
• Details regarding the change
• Fee changes associated with the change
• The changed circumstance documentation is
  reviewed by the Compliance Specialist who will
  approve or decline the request. If approved the
  Compliance Specialist will prepare the revised
  GFE and TIL disclosures, if needed. If the loan
  is already approved, the underwriter will review
  and approve or decline the request before
  forwarding to the set up person for redisclosure.
• The form will be kept in the loan file along with
  the appropriate GFE.
• You will have a choice on DocuPrep to indicate if
  you are requesting only a GFE or a GFE/TIL
  package.

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Request for Revised GFE

• If the loan has been submitted for underwriting,
  and a changed circumstance occurs, the broker
  will complete the Request for Revised GFE form
  detailing the reason for the change. This form
  will be reviewed by the Underwriter and/or the
  Compliance Specialist prior to a new GFE being
  prepared by Stearns.

62

• Broker Fee Sheet

63
HUD-1 Getting it Right

• Dates,Fees,Details
• What you need to know

64
HUD-1 Settlement Statement

• The new HUD-1 has been revised with line items
  that correspond to the new GFE. Fees are not
  listed individually but represent those in the
  boxes on the GFE.
• The purpose is to allow borrowers to easily
  compare their final loan terms and closing costs
  with those listed on their GFE.
• A third page added to the HUD-1 lists the fees
  quoted on the GFE and shows a side by side
  comparison of those fees at closing. Three
  tolerance categories are disclosed zero
  tolerance, 10 tolerance and no tolerance
  limitations.
• Fees exceeding tolerance must be cured and the
  credit shown on the first page of the HUD-1.
• RESPA allows for a 30 day cure period.
• The last page has a summary of loan terms.
• The new HUD-1 is used in partnership with
  applicants receiving the new GFE. If an
  application is taken prior to 1/1/10, the
  previous version of the HUD is used, otherwise
  the new version is used.
• We are still requiring the borrowers and sellers
  execute a signature page attached to the HUD-1.

65
HUD-1 Example
66
HUD-1 Example
67
HUD-1 Page - 1

• Any cure to bring a fee into tolerance will be
  shown in the 200 section as a lender credit on
  page 1 of the HUD-1. Fees exceeding tolerance are
  not reduced on page 2, but shown as their actual
  charge.

68
HUD-1 Real Estate Broker Fees

• Commissions earned by Real Estate Agents are now
  shown in dollars instead of a percentage.

69
HUD-1 Items Payable in Connection with Loan

• Previously each fee was itemized separately on
  individual HUD lines, now the HUD-1 is designed
  to display fees in line with the new GFE
  subtotaled by category. Note the references to
  the GFE so the borrower can easily refer to their
  copy of the GFE.
• The adjusted origination charge is shown in the
  fee column as paid by borrower, following from
  Box A of the GFE page 2.

70
HUD-1 Paid in advance to Lender and Reserves to
Lender

• These sections of the HUD-1 carry through from
  the GFE boxes noted. The impound section (1002
  1007) are listed on the inside column with only
  the aggregate shown in the outside column.

71
HUD-1 Title Charges

• Title services is the total of any charge for a
  service involved in obtaining title insurance.
• Important note, the title insurance premium split
  between the title agent and the underwriter is
  disclosed on lines 1107 and 1108.

72
HUD-1 Recording and Transfer Charges

• Government Recording charges are detailed on the
  inside column and then the aggregate shown in the
  outside columns.
• Line 1203 Transfer Taxes has zero tolerance. If
  different than the amount shown on the GFE,
  contact the broker to explain credit needed from
  broker.

73
HUD-1 Additional Settlement Charges

• This section details the services the borrower
  shops for. The details again on the inside column
  with the aggregate charges in the outside
  columns.
• Since the borrower chose these service providers,
  the fees are not limited or considered in the
  tolerance provisions of RESPA.

74
HUD-1 Page 3 ZERO TOLERANCECharges That Cannot
Increase

• This section compares the information shown on
  the GFE to the final settlement charges. These
  fees cannot increase at closing. Any fee which
  has increased at closing must be resolved by a
  credit on page one of the HUD-1. This chart is
  not corrected, only the credit is shown to bring
  the fee back into tolerance. The funder is
  required to review this page of the HUD prior to
  releasing funds. Any credit needed is to be taken
  from broker fees and a correct HUD issued prior
  to release. If the final HUD is sent after
  closing, the post funding audit department will
  process the credit in partnership with the
  settlement agent within 30 days of close.

75
HUD-1 Page 3 10 TOLERANCECharges with an
allowable increase of 10

• These fees and charges are allowed to increase
  10 in total. The tolerance is not measured on an
  individual basis but an aggregate basis. If the
  total has increased at closing greater than 10,
  that difference must be resolved by a credit on
  page one of the HUD-1. This chart is not
  corrected, only the credit is shown to bring the
  total back into the 10 tolerance. The funder is
  required to review this page of the HUD prior to
  releasing funds. Any credit needed is to be taken
  from broker fees and a correct HUD issued prior
  to release. If the final HUD is sent after
  closing, the post funding audit department will
  process the credit in partnership with the
  settlement agent within 30 days of close.
• Note if the total amount of fees exceed the
  initial quote by 14, the 4 over the tolerance
  is the amount credited.

76
HUD-1 Page 3 Charges that can change

• These charges are for those services chosen by
  the borrower or represent fees associated with
  the closing date, for example, prepaid interest
  and the initial deposit for the impound account.

77
HUD-1 Page 3 Loan Terms Summary

• The loan terms information is completed by the
  settlement agent from information included in the
  closing document package. Borrowers may use this
  section to compare terms quoted on their GFE to
  the final documents.
• The funder and post funding auditors are
  responsible for reviewing this information for
  accuracy and coordinating with the settlement
  agent as described above for correction.

78
HUD-1

• Every HUD-1 must be reviewed within 30 days of
  closing.
• Any fees found out of tolerance must be refunded
  to the customer and an updated HUD-1 prepared by
  the settlement agent.
• The Stearns post closing auditor will audit the
  final HUD-1 against the HUD-1 provided to the
  funder and the GFE.
• The auditor is responsible for ordering a check
  and working with the settlement agent to reissue
  a new HUD-1within 30 days of close.
• The auditor will also notify the broker of the
  need for reimbursement if the error made is
  determined to have originated from the brokers
  office.

79
Lock Expiration and RESPA

• Lock Expiration
• If the lock expires, the lock cannot be extended
  or renegotiated until all prior to doc conditions
  are approved.
• To extend the lock keeping the same interest rate
  offered to the borrower, the broker may be
  required to take the increased cost out of his
  compensation.
• Or, a changed circumstance will exist due to the
  lock expiration and the broker submits the
  request for new GFE due to lock expiration, a new
  GFE/TIL is prepared and the appropriate waiting
  time begins again.

80
Submission Stages and RESPA

• Modifications/Changed Circumstances
• If during the underwriting process a changed
  circumstance is identified which was not
  initially disclosed in the loan submission, it
  may be necessary to prepare a new Good Faith
  Estimate along with a TIL document reflecting the
  change in terms associated with the new
  information.
• Once the loan file is submitted to Stearns for
  underwriting, we will prepare the updated GFE and
  document the changed circumstance form. The
  Compliance Specialist, Account Manger or
  Underwriter will contact the broker for
  preparation of the Changed Circumstance Form and
  confirmation of fees that are changing. Stearns
  will make every attempt to contact the broker
  within the 3 day window, if unable to reach the
  broker or we do not receive the information,
  Stearns will proceed with preparation of the GFE
  based on the best available information to us. At
  this point in the loan process, only Stearns will
  issue an amended GFE, the broker cannot issue the
  updated GFE.
• Changed circumstances may also be identified
  after approval but during review of prior to
  document conditions. Again, the Compliance
  Specialist, Underwriter, Account Manger and
  Document Preparation Specialist will work
  together to prepare the revised GFE/TIL if needed
  and document the file of the changed circumstance
  while working with the broker as above.

81
Submission Stages and RESPA

• Borrower Requested Changes
• When a borrower requests a change, for example,
  from an ARM to a fixed rate loan, the GFE and TIL
  documents need to be redrawn.
• The following are submitted by the broker to the
  Compliance Specialist so the loan can be modified
  and the appropriate disclosures prepared
• Submission Form
• Stearns Broker RESPA Fee Sheet
• Acceptable Changed Circumstance Form
• Documentation to support the request
• Amended GFE within 3 days of borrower request
• An acceptable Broker Prepared GFE within 3 days
  of borrower request
• Amended TIL documents, (if not being prepared by
  Stearns)
• An acceptable Broker Prepared Settlement Service
  Providers Worksheet
• Broker Certification of Borrower Intent to
  Proceed

82
Submission Stages and RESPA

• Closing Documents
• The document request form, and any supporting
  documents, is completed and sent to Stearns by
  the broker.
• Document Prep will use the estimated HUD from
  settlement to prepare the documents
• The funder or document preparation specialist
  will compare the latest version of the GFE to the
  HUD-1 page 3 and determine if any fees and
  charges exceed tolerances at the time documents
  are prepared.
• The document preparation specialist or funder
  will work with the broker to adjust the brokers
  origination fees enabling the charges to return
  to tolerance. It is the brokers responsibility
  to quote fees correctly at application to
  minimize changes and credits at closing.
• Funding
• The funder will review and compare the HUD-1
  prepared by the settlement agent to the HUD-1 and
  GFE prepared with loan documents. Any
  discrepancies must be resolved prior to
  distribution of funds.
• The funder will work with both the broker and the
  settlement agent to resolve any issues.

83
Compliance Specialist

• We are creating a new position in each Wholesale
  Branch, a Compliance Specialist whos primary
  focus is RESPA compliance.
• The Compliance Specialist is the primary resource
  for RESPA related questions from the broker
  community and the staff in the branch.
• The Compliance Specialist will review the GFE,
  Settlement Service Provider List and RESPA Fee
  Sheet auditing for acceptability on each
  submission.
• The specialist is responsible for contacting the
  broker to resolve any questions or issues
  regarding the GFE, TIL and the RESPA Fee Sheet.
• The Compliance Specialist will contact the broker
  and work out a solution if fees/charges appear to
  be under disclosed or if Stearns fees are missing
  from the GFE.
• A changed circumstance and the related fee
  documentation will be reviewed by the Compliance
  Specialist.

84
Compliance Specialist

• If you are locking after taking an application,
  the Compliance Specialist will review your
  registration package and your GFE for accuracy
  and timing requirements prior to preparation of
  the TIL disclosure package. Then your rate lock
  will be issued.
• If you are floating your interest rate and the
  GFE shows a locked interest rate, we will call
  you for clarification. Stearns will require you
  to lock your loan at market rates for the
  interest rate quoted to proceed with us. If you
  show a rate lock on the GFE, then the lender is
  bound to the GFE as well. If we cannot support
  the interest rate and terms quoted as locked on
  your GFE, we will return the registration package
  to you.
• If your lock expires, please contact the lock
  desk right away so we can work together to
  determine the best solution for all.

85
Compliance Specialist - Resources

• For information regarding completion of the Good
  Faith Estimate, please refer to the previous
  slides in this presentation.
• Thank you.
• If you have additional questions, please email
  your branch RESPA help desk
• Modesto, CA RESPA44_at_Stearns.com
• San Jose, CA RESPA63_at_Stearns.com
• Santa Ana, CA RESPA51_at_Stearns.com
• Santa Rosa, CA RESPA62_at_Stearns.com
• Roselle, IL RESPA49_at_Stearns.com
• Las Vegas, NV RESPA41_at_Stearns.com
• Cranford, NJ RESPA48_at_Stearns.com
• Tigard, OR RESPA40_at_Stearns.com
• Sandy, UT RESPA42_at_Stearns.com
• We are here to help you!

86
Additional Resources

• Estimating your Appraisal Fee
• On our wholesale website, there is a link to the
  appraisal request system.
• Please enter the property information requested
  and a quote will be returned to you. Typically a
  quote can be given the same day.
• If for unique properties, additional information
  may be required prior to a quote being given, you
  will be asked for any additional information at
  the time of the fee estimate request.

87
Additional Resources

• Broker RESPA Fee Sheet
• The fee sheet is created so that individual fees
  listed subtotal into the various fee categories
  shown on the GFE.
• This should make your audit of the initial GFE as
  well as preparation of any redisclosures easier
  and more accurate.
• A copy of this form individualized by branch is
  posted on our website, www.stearnswholesale.com.

88
Additional Resources

• Changed Circumstance Chart
• Stearns has created a chart which lists possible
  situations where a GFE may need to be reissued.
  The chart lists the type of situation as well as
  the fee categories that may be affected.
• This chart is posted on our wholesale website
  www.stearnswholesale.com.