Is HUD Making This Up As They Go?
By Jerod Moyer
On March 18, 2010, HUD held a webcast on the new RESPA rules. If this is the first you've heard about this webcast don't worry you're not alone. The good news (and maybe bad news) is that the archived presentation and materials can now be accessed by clicking on the following links:
Presentation: http://portal.hud.gov/portal/page/portal/HUD/webcasts/archives
Materials: http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm (right side of page)
After listing to the webcast, I'm still not sure if I am more or less confused. It seems to me this is the general feeling anytime HUD issues additional guidance on RESPA. In fact, some of the information provided seems to directly contradict either the Regulation, the Q & A or both. It makes me think that HUD is making this stuff up as they go! Here are a couple of the key things I jotted down:
GFE Block #1 (slides 26 - 31):
HUD stated several times GFE Block #1 cannot ever be adjusted even in connection with changed circumstances. Changed circumstance adjustments are to be reflected in Block 2 through the 2nd and 3rd checkboxes as applicable. So what about the Q & A-GFE Block #1-#3 & #8 (below)?
3) Q: Can the charge shown on the GFE, Block 1, Our origination charge, increase after the GFE has been issued?
A: No. Block 1, Our origination charge cannot increase unless there is a changed circumstance as defined in 24 CFR § 3500.2.
8) Q: When the interest rate goes from float to rate lock, may Block 1 on the GFE change?
A: No. However, Block 1 can increase due to a changed circumstance if the change affects the loan amount and all, or a portion of, the Origination Charges were calculated as a percentage of the loan amount. Block 1 may also increase if the borrower either requests a different loan product or the borrower is no longer eligible for the loan product contained in the initial GFE, but is eligible for a different loan product.
GFE Block #11 (slide 62):
Homeowner's insurance does not have to be included on a refinance or home equity GFE.
While I like this answer, it seems to contradict the Regulation.
- The GFE is to disclose all settlement services required by the lender;
- The instructions for Block 11 in Appendix C states that the loan originator must estimate in this block the total amount of the premiums for any hazard insurance policy and other similar insurance, such as fire or flood insurance that must be purchased at or before settlement to meet the loan originator's requirements; and,
- The GFE is not to disclose items as paid outside closing (P.O.C.)
Even on a refinance or home equity loan, hazard insurance is a settlement service (it clearly meets the definition in 3500.2), it is required by the lender to be in place prior to or at closing, and it cannot be P.O.C. Seems pretty clear to me!
While you might be jumping up and down with excitement I would suggest you wait until this "guidance" is in black and white (namely the Q & A) before you go changing procedures. It sounds like an update will be coming soon.
We plan to address more of the inconsistencies in our April Newsletter so keep an eye out for it.