On August 13, 2009, the U.S. Department of Housing and Urban Development (HUD) released frequently asked questions (FAQs) concerning HUD’s new rule under the Real Estate Settlement Procedures Act (RESPA). Since that date, HUD has issued several updates to the FAQs to add questions, and further updates are expected in the coming weeks.
The new RESPA rule, announced by HUD on November 12, 2008, contains extensive revisions to Regulation X. The more significant changes include substantial revisions to the good faith estimate (GFE) and the imposition of tolerances to limit increases in certain amounts disclosed on the GFE. The HUD-1 and HUD-1A Uniform Settlement Statements have also been revised to conform to the new GFE requirements to facilitate comparison of the disclosures by consumers. While many of the provisions of the new rule became effective on January 16, 2009, the implementation date for the new GFE and HUD 1 forms is January 1, 2010.
The FAQs are based on questions that HUD received from the mortgage industry since the publication of the rule on November 17, 2008. There are more than 170 FAQs as of the September 9, 2009, update. Most of the FAQs relate to the new GFE and HUD 1 forms, including guidance on the following issues:
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Who must provide the GFE and HUD-1;
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Timing and other requirements for delivery of the GFE and HUD-1;
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Formatting requirements and permissible changes to the GFE and HUD 1;
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How to properly complete the GFE and HUD 1, including guidance on disclosing specific settlement charges and guidance on completing the fields for “Important dates,” “Summary of your loan,” “Escrow account information,” and the tradeoff table in the GFE, and the comparison chart and the “Loan Terms” section of the HUD 1;
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Guidance on the components of various settlement charges, including the origination charge and the charge for title services;
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Requirements related to the written list of providers accompanying the GFE; and
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What constitutes “changed circumstances” for purposes of revising the GFE.
Beyond the GFE and HUD-1 forms, the FAQs address issues related to the use of average charges, violations of the tolerance rules and the right to cure such violations, among other issues. HUD expects to issue as many as 50 or more additional FAQs in periodic updates over the next several weeks. The FAQs are available on HUD’s website at http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm.
With the effective date less than four months away, time is running out for the mortgage industry to prepare for implementation of the new GFE and HUD 1 requirements by the January 1, 2010, deadline. The breadth and complexity of the changes, along with the lack of clarity in the rule, have posed considerable challenges to implementation. The FAQs provide helpful guidance, but this advice has come somewhat late in the implementation process. Despite the industry’s requests to HUD to suspend implementation of the new rule and to coordinate with the Federal Reserve Board to jointly reform the disclosures under RESPA and the Truth in Lending Act, HUD has stated that it will move forward with implementation on January 1, 2010. At this time, it seems unlikely that HUD will reconsider its decision.
Sharon Bangert is a partner in the Washington, D.C., office of Hudson Cook, LLP. Basis Points readers can reach Sharon at 202-327-9703 or sjbangert@hudco.com.