RESPA OVERVIEW OF GFE/HUD-1 CHANGES

1. RESPA OVERVIEW OF GFE/HUD-1 CHANGES Presented by: Aaron Blum Bank of the West Date: January 26, 2010

2. What is RESPA? • The Real Estate Procedures Act (RESPA) is a consumer protection statute first passed in 1974. The primary purpose of RESPA is: • Providing customers with timely and accurate disclosures regarding the costs associated with real estate transactions; and • Prohibiting abusive practices such as kickbacks, referral fees, and excessive escrow requirements.

3. What’s Changed with RESPA • In November 2008, the Department of Housing and Urban Development (HUD) approved final rules that overhauled the requirements for RESPA. The following changes became effective January 1, 2010: • Improved and standardized Good Faith Estimate (GFE) that clearly discloses the key loan terms and closing costs • Revised HUD-1 Settlement Statement Note: The new HUD regulation mandates changes concerning when and how loan information is disclosed. These new changes are designed to help customers understand and shop for the lowest cost mortgage loans. HUD estimates the improved disclosures may save the customer an average of $600 to $700.

4. Revised Good Faith Estimate • The new GFE is now a 3-page standardized form that must be provided within 3-business days of receiving a GFE application. • HUD now defines a GFE application as receiving customer information in anticipation a credit decision, which shall include – Name, Monthly Income, Social Security Number, Loan Amount, Estimate Property Value, Property Address and any other information deemed necessary. • With the exception of credit report, no other fees can be charged until the borrower receives the GFE. • New written list of service providers must be disclosed on a separate piece of paper indentifying potential service provides the customer is permitted to shop for.

5. Revised Good Faith Estimate • Information disclosed on the new the new 3-page GFE will now include: • Important dates for loan shopping • Summary of loan • Escrow information • Summary of loan charges and settlement services sub-totaled in “buckets” • Instructions of charges that can change at settlement • Trade-off Table • Shopping cart • With fees now being disclosed in “buckets”, individual itemization of fees are no longer an emphasis. Further, charges previously disclosed that would be paid by a seller or lender in a transaction are not excluded from the settlement charges disclosed to the customer.

6. Revised Good Faith Estimate • HUD also revised RESPA to include a cure provision where charges listed on the GFE are exceeded at settlement by more than a certain tolerance threshold. • 0% tolerance or charges that cannot increase. These include – lender origination charges, credit or charge (points) for a specific interest rate chosen, and transfer taxes. • 10% tolerance or charges that can increase up to 10% in aggregate. These include – Lender required services (e.g., appraisal), lender required title services, title insurance and owner’s title insurance, and government recording fees. • No tolerance or charges that can increase. These include – service provided selected by the borrower, services not required by lender, odd days interest, and homeowners insurance. • Lender’s will be required to cure tolerance violations at or 30 days after loan closing.

7. Revised Good Faith Estimate • Lender’s may be able to avoid curing tolerance violations if a changed circumstance occur after the initial GFE is provided. A changed circumstance GFE must be provided the borrower within 3-business days of the change. A changed circumstance includes: • Act of God, war, disaster or other emergency • Information particular to the borrower or transaction that was previously relied upon that was inaccurate at the time the GFE was created. • New information particular to the borrower or transaction that was previously unknown at the time the GFE was created. • Lender may only change fees related to the particular changed circumstance and documentation of the change and GFE must be retained for 3 years.

8. HUD-1 Settlement Statement • For the most part, the are minimal changes to the HUD-1 settlement statement. References are added to the page 2 of the HUD which refer back the GFE. The bulk of the changes are on page 3, where the customer will be able to easily compare charges disclosed on the GFE to the actual changes incurred with the transaction. • Comparison of the charges are broken down by: • 0% tolerance or charges that cannot increase • 10% tolerance or charges that can increase up to 10% in aggregate. • No tolerance or charges that can increase. • A summary of the final loan terms are also disclosed on page 3.

9. Resources • www.hug.org • Final RESPA rules - http://www.access.gpo.gov/nara/cfr/waisidx_09/24cfr3500_09.html • RESPA rules FAQ’s (latest version 12/30/09) - http://www.hud.gov/offices/hsg/ramh/res/resparulefaqs.pdf • RESPA Plain English presentation (12/09) found on HUD RESPA home page - http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm

10. GFE – Page 1

11. GFE – Page 2

12. GFE – Page 3

13. HUD-1 – Page 1

14. HUD-1 – Page 2

15. HUD-1 – Page 3

16. Contact Information Aaron Blum Bank of the West AVP, Mortgage Compliance Officer 13505 California Street Omaha, NE 68154 Phone – 402-918-7360 Email – aaron.blum@bankofthewest.com