02.05.2009:

RANDALL | SEGREST prepared for changes required by RESPA reform.

On November 17, 2008, the Department of Housing and Urban Development (“HUD”) issued a Final Rule amending its regulations to further the purposes of the Real Estate Settlement Procedures Act (“RESPA”).  Some amendments are effective January 16, 2009.   The remaining amendments, including the revised HUD-1 and HUD-1A settlement statements, are not effective until January 1, 2010.  However, prior to January 1, 2010, settlement agents like RANDALL | SEGREST are required to comply with the amendment’s changes, including use of the new HUD-1 and HUD-1A, when closing transactions where the lender elects to use the new Good Faith Estimate promulgated under the Final Rule prior to January 1, 2010.

On February 5, 2009, RANDALL | SEGREST completed testing of its systems to insure the firm’s ability to meet the requirements of the Final Rule as it relates to settlement statements.

The first page of the HUD settlement statement is essentially unchanged, the second page has added information to make the form closely track the lender’s Good Faith Estimate (“GFE”) and the new page compares actual charges with those disclosed in the GFE and sets forth key terms on the loan.

Noteworthy changes to the settlement statements include the following:

Total Real Estate Brokers Fees (700 Series)

The percentage amount has been removed from the real estate broker fees.

Items Payable in Connection with Loan (800 Series)

The loan originator will no longer itemize its charges but will now lump each charge together with the exception of loan discount points.

Reserves Deposited with Lender (1000 Series)

The initial deposit for the escrow account will be shown inside the borrower’s column on line 1001 while the amounts which comprise this total will be shown on lines 1002 through 1007 outside the borrower’s column.

Title Charges (1100 Series)

Line 1101 is used to record the title services and lender’s title insurance.  Title service is now defined as “. . . any service involved in the provision of title insurance (lender’s or owner’s policy), including but not limited to:  title examination and evaluation; preparation and issuance of title commitment; clearance of underwriting objections; preparation and issuance of a title insurance policy or policies; and the processing and

administrative services required to perform these functions.  The term also includes the service of conducting a settlement.”   This provision will have one of the biggest impacts on the title industry.  Since our inception, RANDALL | SEGREST’s settlement and title charges have remained competitive and easily discernable.  However, many in our industry have and continue to charge “junk fees”.  Junk fees are fees closing agents utilize to disguise the actual costs of their services.  When closing agents utilize junk fees, they can advertise low or below market prices for key services while charging additional fees for services typically included in the common definition of settlement services.

With the use of new settlement statements, HUD prohibits closing agents from itemizing their fees.  While the settlement charge or closing fee will be included in the total on line 1101, the amount will be recorded on line 1102 outside the borrower’s column.  If the borrower and seller are splitting the closing fee, then the borrower’s portion will show outside the borrower’s column and the seller’s portion will be shown inside the seller’s column.

The premium for the owner’s title policy and all related endorsements are recorded on line 1103 inside the borrower’s or seller’s column depending on who’s paying the premium.  Any portion of the premium for the lender’s title policy and related endorsements paid for by the borrower has already been included in line 1101 so it is shown outside the borrower’s column on line 1104.  Lines 1105 and Lines 1106 are used to record, outside the columns, the amount of the lender’s and the owner’s title policy limits respectively.  Line 1107 is used to record, outside the column, the amount of the total title insurance premium, including endorsements, retained by the title agent; and line 1108 is used to record, outside the column, the amount of the total title insurance premium, including endorsements, retained by the title underwriter.

Comparison of Good Faith Estimate (GFE) and Actual Settlement Statement Charges (New Page)

The new additional page of the HUD-1 or HUD-1A contains a comparison chart where the estimated charges from the GFE are compared with the actual charges from the settlement statement to determine if the applicable tolerances have been met.  The amounts estimated on the GFE are set forth in the left column and the actual amounts charged at settlement are set forth in the right column, grouped by the allowed tolerances.  The lower portion of the additional page contains a list of key loan terms which the lender must provide to the closing agent with a notation that, “If you have any questions about the settlement charges and loan terms listed on this form, please contact your lender.”

Additional information about the Final Rule may be found at http://www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm

RANDALL | SEGREST is a full service real estate and business law firm servicing client's needs in the areas of residential closings, commercial real estate transactions, real estate title matters, commercial lender representation, foreclosures and collections, business entity selection, formation and representation and related matters.  Located in metropolitan Jackson, Mississippi, RANDALL | SEGREST represents clients in the Jackson area and throughout Mississippi.  For more information about RANDALL | SEGREST, visit www.randallsegrest.com or contact us at (601 956-2615).

Click here for an example of the new HUD-1.

Click here for an example of the new HUD-1A.

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