With RESPA Around the Corner, Real Estate Webinar Clears the Clouds

1,100 housing professionals gathered round their computers today to watch and listen to real estate lawyers from K&L Gates answer questions and offer interpretations during a Webinar Tuesday afternoon on the new Department of Housing and Urban Development (HUD)-mandated good faith estimate (GFE) and HUD-1 forms. These forms are an origination requirement, beginning next year, as part of changes to the Real Estate Settlement Procedures Act (RESPA). K&L Gates partner Phillip Schulman said despite numerous attempts by the mortgage industry to delay or repeal the new RESPA rules, it is generally believed the rules will take affect on January 1, 2010, as scheduled. Either the lender or the mortgage broker can issue the new GFE form, but if a lender allows a broker to issue the estimate to the borrower, it is contractually bound by the estimate, Schulman said. He added all borrower costs must be disclosed on the GFE, even if the seller or another party is paying the costs. The new rules mandate that the entity that issues the GFE is also required to supply the borrower with a written list of third-party providers for any settlement services that the borrower has the option to shop around. While services like appraisals and credit reports don’t generally fall into this category, services like homeowners insurance, title insurance, and pest inspection are eligible to be on the list. Furthermore, the list has to include estimates for the providers costs within a 10% accuracy tolerance. This can become tricky for the lender or broker providing the list because they are responsible for the list’s accuracy, Schulman said. He recommended contacting potential companies before adding them to the list to ensure an open line of communication on fees as a condition for inclusion. While the RESPA legislation does not include penalties for non-compliance, Schulman said violating the rules potentially exposes lenders to liability with unfair and deceptive trade practice claims. During the Webinar K&L Gates associate Holly Bunting explained the two new forms to the program’s participants, detailing what was new and how the forms should be filled out. One nuance to the new HUD-1 form is that title-related fees won’t be detailed individually, but rather bundled. One outstanding question on the new rules is their impact on reverse mortgages. Schulman said he expects HUD to release an updated frequently asked questions (FAQ) document addressing the topic. Write to Austin Kilgore.

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