RESPA Revisions Effective January 2010

In order to make HUD-1 closing statements more transparent for the parties involved, the Department of Housing and Urban Development (HUD) has made a number of changes that will take effect on January 1, 2010. HUD has tried to protect consumers, particularly buyers, during the course of dealing with their lenders and at the closing table. Here are some of the changes:

1) Mortgage brokers will need to calculate their commissions from their lenders (known as yield-spread premiums) as part of the loan origination fee. HUD hopes that by integrating the yield-spread premium into the origination fee, brokers will be less likely to place their customers into loans at the high end of the interest-rate spread.

2) Lenders will have to complete a new good faith estimate form, which will be three pages long as opposed to the current two-page form.

3) Origination fees and transfer taxes on the HUD-1 must be exactly as stated on the lender’s good faith estimate.

4) Some costs from entities unaffiliated with the lender (ie. certain title company and inspection fees) can change between the good faith estimate and the HUD-1, but the change cannot be greater than 10%. Note that deals may still close if the discrepancy is greater than 10%, but all discrepancies will have to be reconciled and corrected within 30 days.