Thursday, January 14, 2010

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?

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