HUD updates advice to borrowers
Booklet updated for Jan. 1 RESPA implementation
By Inman News, Thursday, December 17, 2009.
The Department of Housing and Urban Development (HUD) has released an updated version of a booklet that's intended to help consumers comparison-shop for a mortgage.
Much of the 49-page publication, "Shopping for Your Home Loan: HUD's Settlement Cost Booklet," is devoted to the new standardized Good Faith Estimate and HUD-1 settlement statement forms that lenders must begin using on Jan. 1.
The forms and other changes to implementation of the Real Estate Settlement Procedures Act (RESPA) are intended to help consumers comparison shop. HUD believes the new RESPA rules, which encourage lenders to package settlement services like title insurance with loans, will save consumers an average of nearly $700 in costs and fees per mortgage.
The new RESPA rules place restrictions on changes to estimated loan origination and settlement service charges as disclosed on the GFE. The RESPA rule changes also require that mortgage brokers disclose "yield spread premiums" -- rebates paid by lenders when borrowers take out loans at higher interest rates than they could qualify for -- and credit them against a borrower's closing costs.
A judge dismissed a legal challenge of the rule changes by the National Association of Mortgage Brokers in July (see story). HUD says it will "exercise restraint" for the first four months of 2010 in enforcing the new regulations.
HUD has posted a RESPA "FAQ" -- answers to "frequently asked questions" -- and other information on a dedicated RESPA page to help lenders, settlement services providers and consumers understand the new rules.
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Submitted by M C on December 17, 2009 - 1:59pm.
Is this yet another scam on consumers? To say YSP will cause consumer to pay a higher interest rate than they could qualify for is either ignorance or scam.
A 6% interest rate with zero points is the same for the consumer regardless of of YSP (brokerage originated) or SRP (banker originated).
So what does HUD do about a mortgage banker originated loan at 6.25% zero points versus a mortgage banker originated loan at 6% with zero points? If this difference is acceptable, meaning borrower is paying a higher interest rate than they could qualify for on a banker to banker comparison; how does HUD allow such a predatory banker to remain in business?
I shall await anyone's ability to explain how YSP has anything to do with consumer shopping interest rate and closing cost between a broker and a banker.
We can start with the unnamed author of this unprofessional hack article.
Submitted by Francene Grewe on December 17, 2009 - 4:40pm.
In the HUD booklet is a “Purchasing Timeline” that clearly encourages consumers to enter into a real estate contract before they have determined if they can qualify for a loan. We all know that buyers have stars in the eyes, and ensuring that our buyers are educated about their ability to qualify for a loan prior to entering into a real estate contract is paramount.
This is only one example of problems we will see with the new RESPA guides.
According to National Mortgage News, brokered residential laons set a new low in the 3rd quarter, with only 12.9% of the market. With all the new regulations being heaped on the brokers, brokers will move to correspondent lending, allowing them to compete with the banks. And all the effort to create transparency folds.
MC - not sure what your issue is with the announcement by Inman. We know there are problems, or we would have an staggering 51 pages of FAQ for the new RESPA.
I nearly got out of the business when RESPA was orginally rolled out, but after 37 years in the business, I can hardly wait to see how this one plays out.
Submitted by Benjamin Clark on December 17, 2009 - 5:07pm.
The importance of hiring an agent who will represent your own best interest as a Buyer cannot be stressed enough.
An Exclusive Buyer's Agent can help a consumer confidently navigate through the many challenges that can occur during the process of purchasing real estate.
Submitted by Matt Carter on December 23, 2009 - 10:15am.
M C:
The article does not state that yield spread premiums (YSPs) cause consumers to pay a higher interest rate than they could qualify for.
The article says lenders pay YSPs when borrowers take out loans at higher interest rates than they could qualify for, which is a statement of fact.
The Federal Reserve, under its authority to enforce the Truth In Lending Act (TILA), is proposing to ban YSPs altogether. HUD, on the other hand, has acknowledged that YSPs can be a useful tool to help borrowers cover their closing costs if they are credited to borrowers.
All other things being equal, the adjusted origination charges of a mortgage broker crediting YSP to the borrower will be identical to a bank loan officer's on box A, page 2 of the GFE.
Which does not mean that mortgage brokers are happy about the changes, as we have detailed in previous stories (see below).
http://www.inman.com/news/2009/07/31/judge-throws-out-respa-rule-challen...