2009-10 IMA President
Kathy Klahn

There will continue to be educational classes offered through the IMA as well as the spring conference right around the corner. Hopefully you all will be able to attend, as I am sure RESPA will continue to be a hot topic.

Please let us know if there are topics you would like the education committee to consider by contacting the IMA's Darcy Burnett or myself and we will be sure and pass them on.

In the meantime, stay strong, think positive and may 2010 be a prosperous year for all concerned.

Sincerely,

The Iowa Mortgage Association looks for candidates who understand the mortgage industry and its importance to the local, state and national economy. Only as a group can our individual contributions be significant enough to make a difference in the political process.In many ways, a political action committee (PAC) is like a business -- it is only as successful as the level of support it receives from the people whose interests it has been established to protect. And like a business, building and maintaining a successful PAC depends on individuals.

This year's IMA PAC goal is $10,000 -- your personal investment will help us reach that goal and strengthen our political voice. Click here for more details about the IMA PAC. All contributions must be voluntary and must be in the form of a personal check which can be returned to:

• Valley Bank (statewide) - 155 loans totaling $17,120,775

• Residential Mortgage Network, Inc. (statewide) - 122 loans totaling $14,342,388

• Mortgage Services III (statewide) - 116 loans totaling $10,728,884

• United Bank of Iowa (branches in Carroll, Denison, Glidden, Ida Grove, Lake City, Rockwell City, Schleswig and Storm Lake) - 104 loans totaling $7,276,591

• Mortgage Services III (statewide) - 223 loans totaling $21,349,135

• JP Morgan Chase Bank (statewide) - 195 loans totaling $16,759,050

• Wells Fargo Bank N.A. (statewide) - 189 loans totaling $18,973,169

• Valley Bank (statewide) - 155 loans totaling $17,120,775

• Iowa Bankers Mortgage Corporation (statewide) - 149 loans totaling $10,919,771

By Ronette Schlatter, CRCM

It’s here. The day mortgage loan originators and closing agents across the United States have been awaiting with anticipation (and dread).“D-Day” or possibly more appropriately, “Reg. X Day.” Jan. 1, 2010 — the day the revised RESPA rules (implemented by Reg. X) become effective. While the mandatory compliance date has arrived, certainly many answers to loan originator’s implementation questions have not. Calls and e-mails continue to pour into IBA’s Compliance Hotline. This article will address some of the most frequently asked questions posed on the Compliance Hotline.

Revised Settlement Information Booklet

HUD announced the release of its revised Settlement Information Booklet in mid-December. Institutions must provide the booklet to all applicants applying for a federally-related mortgage loan on or after Jan. 1, 2010.

The 49-page booklet is available in PDF format (click here to downloaded the booklet from HUD's website). Lenders can download the booklet and reprint it internally if they wish.

Lenders may order the booklets from HUD:

• By phone: (800) 767-7468
• E-mail: on_demand_mail@hud.gov

As a result, HUD added a question and answer to its FAQ to address this issue. See Question #6, Page 48 of HUD’s Dec. 30, 2009 FAQ:

In one of its many conference calls, a HUD representative reiterated if state law requires transfer taxes to be paid by the seller, the cost should NOT be included on the GFE and thus listed as a seller expense on the HUD.

Disclosure of “Title Services”

Another area of major confusion is Block 4 on the GFE, “Title services and lender’s title insurance.” Iowa is unique in the mortgage industry in that it is the only state with the abstract/title opinion process. Because of this unique situation, the GFE and HUD settlement statement instructions were not written in a manner to directly address disclosure of abstracting and title opinion costs.

Iowa lenders will include, in the Block 4 total on the GFE, all borrower costs for abstracting, title opinion, issuance of title guaranty from IFA, and other fees directly related to the transfer of title (title search, document preparation), as well as third party fees for conducting the closing. It should also include any notary or delivery fees related to the title services covered. The fees are NOT separately itemized on the GFE, but disclosed as one total in Block 4.

Initially, there was some confusion as to whether the disclosed abstracting fees should include both borrower and seller abstract costs. HUD issued a FAQ that addresses what items should be included on the GFE. It states only charges “the borrower is likely to incur” should be included. In Iowa, costs to bring the abstract current to the time of sale are not typically charged to the borrower, thus should not be included on the GFE.

See Question #2, Page 10, GFE – Seller paid items of HUD’s Dec. 30, 2009 FAQ:

Title services are disclosed in the 1100 series on the HUD settlement statement. The instructions for completing this section indicate Line 1101 is used to record the total for the category of “Title services and lender’s title insurance.” This amount must be listed in the borrower’s column. Disbursements to third parties must be broken out in the appropriate lines or in blank lines in the series, and amounts paid to these third parties must be shown outside of the columns when included in the Line 1101 total. Thus, amounts paid to abstract companies and attorneys issuing title opinions would be detailed in the blank lines provided at the end of the series and added into the series total.

Owner’s Title Insurance

The instructions for completing Block 5, “Owner’s title insurance,” on the GFE indicate for all purchase transactions the loan originator must provide an estimate of the charge for the owner’s title insurance and related endorsements, regardless of whether the providers are selected or paid for by the borrower, seller, or loan originator.

Neither the instructions or FAQ provide an exception or condition disclosure of owner’s title insurance on whether or not the loan originator purchases lender’s policy or requires the owner to purchase a policy. The IBA has requested from clarification from HUD on this issue explaining:

• The sale of “title insurance” is not authorized under state law and instead the State of Iowa offers Title Guaranty;
• State law does not require lenders or property owners to purchase Title Guaranty;
• Typically Iowa lenders do not require Title Guaranty on their portfolio mortgage loans;
• Many Iowa home owners are not familiar with the Title Guaranty product;
• Since Iowa law and many Iowa lenders do not require the purchase of Title Guaranty, including the cost of the policy on the GFE will inflate closing cost estimates which in turn, may discourage some home buyers.

Tolerance Issues

One question brought to light during a series of HUD conference calls was how to handle the 10 percent tolerance threshold if a lender allows a borrower to shop for some, but not all, title services. HUD updated its FAQ on Dec. 30, 2009 with the following Q&A to provide guidance on this issue. This question is relevant to Iowa lenders that permit borrowers to shop for an attorney to do the title opinion but require the use of a select abstract company to update the abstract or require Title Guaranty which is only offered by one provider - the Iowa Finance Authority.

Q: In some cases, law or local custom may require, or consumers may prefer, to have one provider conduct the settlement and another provider perform the remainder of the services included within the “Title Services and Lender’s Title Insurance” category on the GFE (Block 4 on page 2). How should the fees and providers for these services be listed on the GFE, the Written List of Service Providers, and the comparison table on page 3 of the HUD-1 (page 2 of the HUD-1A)?

A: The preferred method of disclosing the GFE Block 4 charges on the Written List of Service Providers is to list a set of single providers where each is capable of coordinating or performing all of the services provided within the “Title Services and lender’s title insurance” category. Due to a wide variety of practices across the country, an alternate option is explained below that allows for the separate identification of providers to conduct settlement (or closing) and providers of lender’s title insurance and the related services on the Written List of Providers and the HUD-1/1A.

GFE

• In all cases, the GFE shall be completed with the total estimated fees for “Title Services and Lender’s Title Insurance” combined in Block 4. Provider names are not listed on the GFE.

• For Block 4, the loan originator may separate the services in the Written List of Providers to show providers that conduct settlements (or closings) separately from providers of lender’s title insurance and the related services.
• If Block 4 services are separated on the Written List of Providers, the associated estimated fee for the component service must be listed next to the header for the list of providers of that service.
• The sum of the estimated fees for the two services must equal the amount in Block 4.
• Only two (2) categories of service providers may be listed: providers that conduct settlements (or closings) and providers of lender’s title insurance and the related services.

• If the consumer chooses neither service provider from the list - The lump sum of Block 4 would be placed in “Charges that Can Change.” Both service providers should be listed in the blank for service provider names, for example: XYZ Settlement Services/ABC Title Agency.
• If the consumer chooses a provider of one of the services from the list, the service provider that was chosen from the Written List would be included in “Charges That in Total Cannot Increase More than 10%” with the associated estimated fee from the Written List of Providers in the GFE column and the actual fees for that service from that provider in the HUD-1 column. The service performed by the provider not chosen from the Written List of Providers would be listed in the “Charges that can Change Section” with the associated estimated and actual fees. The total of the estimated fees in the GFE column (from both tolerance sections) must equal the amount in Block 4 of the GFE. The total of the actual fees in the HUD-1 column (from both tolerance sections) must equal the total of all “Title services and lender’s title insurance” actual charges.
• If the consumer chooses the providers of both services from the Written List, the Block 4 total is listed in the “Charges That in Total Cannot Increase More than 10%” column. Both service providers should be listed in the blank for service provider names, for example: XYZ Settlement Services/ABC Title Agency. The total estimated and actual fees for both providers would be listed in the respective GFE and HUD-1 columns.

As the new RESPA rules are put into practice, more and more questions are likely to evolve. Questions posed by the IBA and other lenders to which to which HUD has not yet responded include:

• How should loan originators handle settlement costs incurred for first lien loans when services are also used for piggy-back second loans used for closing costs or down payment amounts? For example, when the lender refers to the same appraisal and abstract/title opinion work on the first mortgage loan as well as a piggyback second. Under the old RESPA rules, these costs are shown as POC items on the GFE and HUD for the piggy-back second loan but RESPA’s revised GFE does not permit costs to be shown POC.
• HUD’s FAQ detail how to disclose origination fees for IRS tax reporting purposes, however, home buyers often pay origination fees and discount points to buy down the interest (both of which are reportable for IRS purposes). In such instances should these amounts be combined and shown in parenthesis on line 801 (which could result in the amount shown in parenthesis on line 801 actually exceeding the disclosed Origination Charge) or must it be disclosed in some other manner?
• Must lenders who do not pass on certain costs to borrowers that are “typically” associated with home loans, such as credit report fees or flood determination fees, disclose the fee on the GFE and then show an offsetting credit in Block 2?