Topic: Real Estate Settlement Procedures Act (RESPA)
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What is the correct way to pay out an escrow account when a borrower terminates a mortgage loan? Is it taken off of the loan principal or is it refunded directly to the borrower?
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We believe that, until January 2014, at the termination of a mortgage loan, the remaining escrow account must be refunded directly to the borrower (unless the total amount of surplus is less than $50, in which case the amount may be applied to the loan principal). 12 CFR 1024.17. The Department of Housing and Urban…
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When are construction loans exempt from RESPA disclosures, and how is the term “first user” defined? Are bridge loans to first users exempt from RESPA?
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Construction loans are generally exempt from RESPA disclosures except if the loan is for construction or rehabilitation of a 1-4 family residence and: May be converted to permanent financing by the same lender; or Is being used to finance a sale or transfer of title to the first user (12 CFR 1024.5(b)(3). There is not…
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For purposes of filling out the GFE and HUD-1 forms for a refinance, can we assume that the borrower has adequate homeowners insurance in place (and therefore list $0 on Block 11 of the GFE), even if we do not have confirmation of the placement of insurance from the bank that made the original loan before the end of the three business day deadline?
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We believe it would be a best practice to estimate the cost of homeowners insurance on the GFE for a refinance, unless the bank has confirmed that the borrower already has a homeowners insurance policy in place. The GFE instructions simply require you to estimate the “total amount of the premiums for any hazard insurance…
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We are making an unsecured loan to purchase a primary residence. Would this be subject to RESPA, Regulation Z, or the HPML requirements?
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We believe that an unsecured loan would be exempt from the higher-priced loan requirements, the RESPA rules, and the HMDA requirements (which are contained in Section X of Fannie Mae’s Uniform Residential Loan Application form). All three regulations apply only to loans that are secured by certain types of properties, as explained below, and therefore…
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We are considering using escrow accounts for commercial real estate loans. Do you have forms, procedures, or advice for us on this topic?
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We are not aware of any federal regulations that apply to escrow accounts for commercial loans. RESPA excludes from coverage any loan made “primarily for a business, commercial, or agricultural purpose,” as Regulation Z defines the term (in 12 CFR 1026.3(a)(1) and the accompanying official staff commentary). 12 CFR 1024.5(b)(2). There are at least three…
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On our list of “preferred providers,” we list a national title company, but use only one specific office location. Does the 10% tolerance limit apply if a customer selects a different office that is connected with the same national title company?
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Whether the 10% tolerance will apply to the charges of a title insurance company depends on whether the customer-selected title insurance company should be treated as the same company as the “settlement service provider identified by the loan originator.” 12 CFR 1024.7(e)(2)(ii). We presented this question to the CFPB, and their guidance was as follows:…
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Do we need customer signatures on GFEs that we redisclose due to changed circumstances? What about commitment letters and rate lock acknowledgments?
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Without the specific facts of each situation, we cannot give a specific answer to your question about obtaining a signature on redisclosed GFEs. We are not aware of any explicit legal requirement to have an applicant sign the GFE, though some investors may impose additional requirements on the loans they purchase. (Also note that an…
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Is a signature required on the HUD-1 Settlement Statement?
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We do not believe that a signature is required on a HUD-1 Settlement Statement, although the RESPA regulations do permit you to add a signature line to the HUD-1 form. 12 CFR 1024.9(a)(7). However, we are aware that some bank policies require customers to sign acknowledgments of HUD-1 (and GFE) forms.
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Are bridge loans that the borrower does not intend to convert into permanent financing subject to RESPA or HMDA?
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Both the RESPA and HMDA regulations exempt “temporary financing” (“such as bridge or construction loans” or “such as a construction loan,” respectively). 24 CFR 3500.5(b)(3) (RESPA); 12 CFR 1003.4(d)(3) (HMDA). But, if a short-term loan is not designed to “bridge” a borrower to a longer-term, permanent loan, it is not considered temporary financing. As explained…
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Can we charge a lien release fee on mortgage loans, and how much can we charge?
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The Illinois Mortgage Act provides lenders with three alternative methods of releasing a mortgage (765 ILCS 905/2): Delivering the release to the county recorder. *If the bank will be delivering the release to the county recorder, we recommend including the following statement on payoff statements: “Notice to All Persons: ___________(“Lender”) objects to the filing of…