tax service fee for FHA and VA transactions

Our take is that you place the tax service fee on the buyer side of the HUD and put a credit on the first page from the seller.  Depending on the lender, they may allow the credit to be lumped in with a seller assist or they may want the tax service fee credit on a separate line. Either way works.

query: RESPA 2010 can you stop a closing due to a 10% tolerance issue

I'd sure be surprised if a lender permitted a HUD to go to closing without a cure, however they do have the option of closing and curing the tolerance violation within 30 days after closing.  In my non-attorney opinion a consumer must make a decision to close or not.  If it were me and I felt strongly that there was a tolerance violation, I would not close unless I had in hand a signed letter from the mortgage lender agreeing to the tolerance cure post closing.

You won't believe it, but....

I had to do an old HUD today and I hated it!  It's SO not 2010.  LOL

I'm not kidding.  We're in a groove now and I'm grooving the new HUD!

Signatures on the HUD-1 form? Keith raises a good point.

Hi Diane,

I came across your blog while doing some research.  I was thinking that a good topic for an upcoming entry would be regarding signature requirements for the HUD-1 settlement statement.  In my case, my copy of the HUD-1 has the signature of the Settlement Agent (I'm assuming that was someone at the title company I closed at), but not the signature of the sellers.  A call to someone at my title insurance company said that they don't require signatures on HUD-1s they process.

I mention this because the IRS is wanting signed copies of this form for filers claiming the homebuyers' tax credit.  There are comments on other blogs from people who say their tax credit request was delayed or rejected because the HUD-1 they submitted didn't have signatures on it.  I know you're not a tax expert, but I'd be interested to hear your take on the matter.  For instance, what other documents could be used basically as proof of purchase on a real estate transaction?

Thanks,
Keith


Keith:  Thanks for suggesting this timely topic.  The title agent is correct that signatures are not required on the HUD-1 Settlement Statement but most title agents do have the HUD-1 signed just because it creates a fully documented record for all parties and most mortgage lenders want a signed copy.

Moving forward I would suggest that homebuyers participating in the tax program make a call ahead of time and make certain the title agent will provide a fully executed HUD-1 so they don't find themselves in your position.

For your concerns, I would try to get a fully executed HUD-1.  From what I have heard that's what the government is looking for and I don't know that they will accept other forms of documentation.  I would contact the seller directly or your mortgage lender to see if they will provide a seller signed copy.


Good luck!


 Diane

 

query: where do you put the FHA 203k escrow on the 2010 HUD-1?

Good question.  I haven't closed a renovation on the new HUD form yet, but have a few files pending.  My guess at this point is that the renovation escrow would be in the same section as the appraisal fee and FHA MIP.  What are your thoughts?

tax service fee - consumer shops for???

How exactly would consumers shop for this service?  Do tax service companies give individual quotes to consumers?  Just curious.  ;)

query: where can I get a copy of my HUD-1 statement

Hopefully it is in your filing cabinet because that's where it should be.  Every consumer should make certain they get a copy of their HUD-1 at closing.  Depending on some other party to maintain a copy and provide a back up when you need it is risky.

Okay, so maybe you lost your copy or you never got one, what do you do now?  Call everybody else in the transaction.  Hope they are still in business, that they have a copy and are willing to share it with you.  Start with your title agent, then your real estate agent and finally your mortgage lender.  If you strike out there, you could try the seller or the seller's attorney.

If you are one of my customers, I will ask for a written request and upon receipt, I will e-mail or fax the HUD-1 to you within one business day.

Can a loan officer casually give the borrower a name of a provider...

without including that provider on the "list"?  I say no.  What do YOU think?  I am not certain that folks have their compliance arms all around this issue.  I believe we have lenders with lists that contain names of providers and an expectation that loan officers will not give the consumer any other names.

Be safe.  If you mention a provider's name to your consumer, write the provider on your list.

dare I say it....

I LOVE THE NEW HUD-1 !!

query: what does a HUD-1 look like?

Here's the new HUD-1 form.

Here's the new Good Faith Estimate form.

introducing GFE SOS for loan officers in our service market

Check it out.  The form is also linked from our web site just under the title insurance rate calculator.

had our first closing today with the new HUD-1

All in all, I'd call it uneventful. We were prepared, the lender was prepared, the consumer didn't notice.  ;)

POC origination fee on new HUD?

We had a request from a mortgage lender today to do a small portion of the origination fee as POC. We weren't sure, so we checked.  No can do.  See the RESPA FAQ, page 41. 

Interestingly this lender has already closed at least one other transaction in which the title agent complied and did the POC.

We're all in this together and we're all on a learning curve.  Every day is interesting and every day it gets easier.  Give us two months and the whole thing will be old hat.  I'm telling ya, it's the truth!  It won't be too long before we have young people in the business who'll think the old system was insane.  LOL

query: new respa requirements if a portion of the fees will be paid by the seller do tolerance levels still apply

Yes.  Costs that are typically buyer costs must be disclosed on the GFE even if the seller has agreed to pay a portion of the buyer costs.  The credit from the seller will be placed on page one of the HUD and will not be included as part of the tolerance calculations.  That means costs that DO fall within the tolerance rules must be accurate even if the seller is paying a portion. 

still curious about this RESPRO model indemnification agreement

Here's another blurb on it:

"HUD's new RESPA disclosures will, for the first time, subject mortgage originators to liability if certain final closing costs exceed those estimated on the Good Faith Estimate (GFE), which is provided three days after the loan application.  When a loan originator permits a borrower to shop for third-party settlement services, HUD requires the loan originator to provide the borrower with a written list of settlement service providers along with the GFE.  If the borrower uses a settlement service provider on this list, the final cost for that service cannot exceed 10% of the estimated cost on the GFE.

RESPRO's Model GFE Cost Indemnification Agreement identifies the responsibilities of both the loan originator and the third-party settlement service provider if the final cost of a settlement service subject to HUD's new 10% tolerance requirement exceeds the new limit.  Its Model Services Agreement is an alternative form that can be used in states with laws and/or regulations that restrict indemnifications"  Read more here. 

First, if you don't know RESPRO is an organization that supports and lobbies for real estate broker owned affiliated mortgage and title companies.  They firmly believe that consumers are better served by one stop shopping.  Their business plan depends upon capturing the consumer at the point of sale in the real estate brokerage office.

To date the rules have allowed them to steer so long as they have the consumer sign a disclosure which says the consumer is not required to use their affiliated business. 

Under new GFE rules, the real estate agent can give a name to a consumer but if the mortgage broker/lender gives a name to a consumer, the final costs must be within the 10% tolerance.  HUD clearly says the responsibility for compliance with the tolerance and potential cure falls on the lender, so what do you think this indemnification agreement is all about?

haven't talked about title for awhile..let's chat about getting a survey

Back in 2005 I insured a conveyance for a couple who purchased a lot that abutted a vacated alley.  The alley is the borderline between a township and a borough.  For tax assessment purposes the alley was deemed to be in the borough.  The neighboring lot sitting across the alley is in the township.  To keep things clear we'll call them BOROUGH  LOT and TOWNSHIP LOT.  These two lots are in two entirely different development plans.

The alley was unopened which is why it was vacated.  The ordinance vacating the alley was a borough ordinance and it gave the ownership of the entire section of the alley abutting the lots to the BOROUGH LOT.  The ordinance was passed prior to 1998 and all deeds in the chain of title since that time included an updated metes and bounds description which included the alley area.

When we processed the transaction back in 2005 we didn't pay any attention to the TOWNSHIP LOT.  We searched and insured the BOROUGH LOT.  As is our usual practice, we recommended in writing that the couple purchasing the land get a survey prior to closing.  They opted not to and we had them sign our usual hold harmless disclosure.

In 2007 the couple decided to have the property surveyed.  They chose a competent surveyor who correctly researched the deeds for adjoining parcels. [I make this distinction because in Pennsylvania we have no survey standards and there are surveyors out there who charge just as much but don't really do the work.]  The surveyor discovered a deed in the chain for the TOWNSHIP LOT which included a release signed by a former owner of the BOROUGH LOT giving up rights to one half of the alley.

The couple ignored the lot line defined by the surveyor and decided that they would rely upon the description in their deed which said they owned the entire alley.  They built a shed.  They built the shed not on the disputed land but near the disputed line - near enough to be in violation of the rear setback line if the local zoning official should choose to recognize the lot line defined by the surveyor.  Well, the folks are all nice.  Nobody wants to make a fuss.   TOWNSHIP LOT folks are okay so long as BOROUGH LOT folks don't use their half of the alley.  They don't mind the shed near the line so long as everyone agrees to the line.

All of this, BTW, was occurring without my knowledge until 2009 when I got a visit from our insured couple, survey in hand asking me to explain it all and figure out who was right and where the line really was.

Thankfully that surveyor made note of the source document and I was able to pull it online.  Viola!  There's the problem.

Let's back track.  In 1998 the BOROUGH LOT was acquired by a couple we'll call GREEN.  GREEN purchased  the BOROUGH LOT from the estate of an elderly lady.  At that time the TOWNSHIP LOT was owned by a couple we'll call RED.  RED heard the GREEN was buying the lot and since RED had been using the alley land for some time and hadn't been able to resolve the issue with the elderly lady, RED contacted GREEN and they worked out a deal because GREEN really didn't care about the back end of the lot.

RED hired an attorney.  I cannot tell if RED's attorney ever talked with GREEN's attorney.  This is where the whole thing got screwed up.  The executor of the estate of the elderly signed a deed conveying the BOROUGH LOT to GREEN.  Two days later RED signed a deed conveying the TOWNSHIP LOT to themselves and added GREEN as a grantor for the purpose of releasing any rights they had in a portion of the alley.

Nowhere in the RED deed was our lot described, referenced or recited.  I just don't get what RED's attorney was thinking.  How in the world would a title searcher connect this deed for a parcel in the township to the one in the borough.  They are on different streets and different tax maps.  The ONLY way this would have been discoverable is with a search of adjoining lots which is what you get when you buy a survey from a competent surveyor.

It would have been helpful if GREEN had remembered the release when they sold the BOROUGH LOT to the next couple who likely didn't get a survey and may never have measured out the length of the land or didn't care and therefore did not mention it to the couple who bought the land in 2005.

A survey seems like too much money or trouble prior to closing but it always amazes me how many people will eventually spend the dime.  You already own the land but at least now you know WHAT you bought, right?  Well, some folks don't mind paying hundreds of thousands of dollars for a pig in a poke.  Not me, man.  I want a survey.

cash needed to close....how do you estimate using the new Good Faith Estimate?

Well, the good news is that you, the consumer, will get a more reliable disclosure of costs from all the lenders you shop - PLUS the disclosure will be on a uniform piece of paper.  That's great news for consumers.

There's one little tip you really need to think about and that's CASH TO CLOSE.

First, because lenders are on the hook for the estimates you can be assured the estimates will be a bit higher than they used to be.  Is that bad?  Not in my mind.  I'd far rather you prepare for a higher number and have some cash left over for all those unexpected costs that all homeowners face.

Will that make homebuying less affordable for some?  Yes, BUT the some who can't show enough money maybe aren't really ready to buy.  Afterall, we're trying to recapture responsible homeownership, not cliffhanger overbuying hoping to get bailed out by a market boom, eh?

Now, the other thing you need to know is that the Good Faith Estimate form does NOT have a place that discloses CASH TO CLOSE.  So, that means you should ask your mortgage lender for a summary which includes the total costs as disclosed on the GFE and your down payment less other credits like a seller assist and mortgage.

Most lenders have not yet created this kind of document.  They are using the "Details of Purchase" section of the mortgage application also known as the 1003 form.  You'll find this on page three.

Real estate agents on the other hand might want to SEE your CASH TO CLOSE figure but if the only place it appears is on the 1003 form, then you'd be sharing your personal data with your agent.  For this reason, I highly recommend that lenders create a separate CASH TO CLOSE summary.  Keep it simple but make it easy to find and a form that the consumer can feel comfortable reviewing with a relative, friend or real estate agent.

new GFE - interesting questions out the door....

It's January 5th and already I have had THREE circumstances cross my path that make me wonder.

1. A GFE shows the TAX SERVICE FEE and FLOOD LIFE OF LOAN FEE in the category designated for consumers to shop for services.  The "provider list" has providers for these two fees.  I know from prior transactions that this lender directs the business to their affiliated companies and hey - just how would a consumer shop for these services?
2. Provider lists do not contain my company name, yet the title is being directed to my office by the loan officer.  Lots of consumers shop for our services and come to us directly but these transactions fit the "lender referred" MO.  I'm not trying to look a gift horse in the mouth.  I'm happy for the business but I don't want folks to get into trouble if they are directing the business and not putting our name on the list.
3. A loan origination office manager sent word that he wants to chat with me about WHO PAYS if his staff misquotes my fees and they go out of tolerance.  Yoi.  It ain't gonna be me, baby.
   

The Wilkersons take action, pronto!

Read this article:

OWINGS MILLS, Md. -- A local family who refinanced their home said they found out their original mortgage was never paid, and before they could get the problem resolved, the title company that did the leg work went out of business.According to state records, Maple Leaf Title Company had been in business since March 1999. But after August 2009, the company could not legally operate in Maryland because it did not renew its license."We get closer and closer to foreclosure, so it's stressful for us, because in a month we may have our house going up for auction," said Owings Mills resident Jim Wilkerson.  Read more....

I tried to comment on the site but their system didn't work, so....

Mr. & Mrs. Wilkerson:  Take a look at the HUD-1 Settlement Statement to see who the title insurance underwriter for your transaction was.  You would have paid for a title insurance policy to protect your new lender.  Send a certified letter to this title insurance underwriter demanding that they back their licensed agent.  I would hope that the state has requirements in place for bonding.  Find out through the underwriter who bonded the title agency.  Contact your state attorney general and see if they can take action on your behalf against the title underwriter whose responsibility it was to monitor their agent.

Also, contact your new mortgage lender and make certain that they know their lien position in in jeopardy.  They may wish to contact the title underwriter for a fix before it is too late.

I do hope you are consulting with an attorney.  The underwriter may or may not be Fidelity.  You need to confirm who overwrote the actions of the agent.  Your new mortgage lender has a loan policy in their file which identifies the title underwriter if the HUD-1 does not.

Good luck.

so, what is RESPRO up to? identifies responsibilities?

 hmmmm......


RESPRO's Model GFE Cost Indemnification Agreement identifies the responsibilities of both the loan originator and the third-party settlement service provider if the final cost of a settlement service subject to HUD's new 10% tolerance requirement exceeds the new limit.   Read more here.

new RESPA GFE/HUD tip

If you see an OLD GFE, you will see an OLD HUD.

If you see a NEW GFE, you will see a NEW HUD.

Some lenders, namely Wells Fargo, are already using the new GFE.  We choose our HUD on a case by case basis depending on the type of GFE used.

The NEW GFE will be mandatory for RESPA covered transactions on January 1st.



We'll still be using the old style HUD for cash transactions and other transactions not subject to these RESPA guidelines.

playing with the new RESPA HUD

I've been taking lender GFEs and testing them to new RESPA standards for about two months.  So far, I have only found TWO that would have been outside of the 10% tolerance.

THAT'S FANTASTIC!

What this tells me is that a loan officer who gives a reasonable effort in the numbers is usually safe.

What this also tells me is that loan officers must take their skills to a higher level and be aware of those odd circumstances that ARE discoverable with reasonable due diligence at the point of GFE prep and make certain they account for these oddities as needed.  In the circumstances where the figures went outside of the 10% tolerance, it was due to either an extra chain or additional documents which were BOTH circumstances the loan officers could have discovered if they had asked the right questions.

Asking the questions up front - even if it feels irritating to the real estate agents or consumers is the ONLY way to ferret out the oddball deals that will put the lender outside of tolerance with no changing circumstances on which to hang their hat.

Questions to ask?

Well, let's start with "May I have a copy of the deed?"  Confirm you know how many parcels are to be mortgaged and just how many deeds there really are behind this transaction.  If you have multiple parcels and deeds, you know there may be extra chains, lien letters charges, or recording costs.  Having that deed in hand gives you the REAL municipality so you can get that deed transfer tax spot on.

Also, think through whether your transaction will call for additional document prep.  In  refinance settling a divorce for instance, there is often a deed prep and recording fee that you might not have thought to quote in the past.  THAT was the past and this is the NOW and you've got to make that quote.

Got it?

HUD's new settlement cost booklet is now available.

HERE'S A LINK.

ha-ha

I wondered how long it would take before the marketing - JV stuff started back up again.  YOI Here's a blurb from a solicitation:

"Marketing agreements certainly have their place in the real estate industry. They are one way to test whether or not you want to enter into a deeper business relationship with another company. They are also a way to generate leads to possible customers. However, it is often difficult to get these agreements established in a compliant, yet profitable manner."

My question:  why can't people just engage in the title business and market to the consumer?

well, playing with RESPA

We've been running comparisons of GFEs done the old way and our prelim HUD as we do title.  We're just playing to see if loan officers are adjusting as they get closer and how close are people anyway?

Most are within 10%.  Some aren't.

Shouldn't be too darn hard to make the adjustment though.  I'm relieved.