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ePackaging and Other Applications of Technology to the Mortgage Process

ePackaging and Other Applications of Technology to the Mortgage Process. Richard Andreano, Jr. Thursday, December 1 10:45 pm to 12:00 pm. WBSK Weiner Brodsky Sidman Kider PC 1300 19 th Street, NW Washington, DC 20036 Your Company Logo Here. RESPA.

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ePackaging and Other Applications of Technology to the Mortgage Process

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  1. ePackaging and Other Applications of Technology to the Mortgage Process Richard Andreano, Jr. Thursday, December 1 10:45 pm to 12:00 pm WBSK Weiner Brodsky Sidman Kider PC 1300 19th Street, NW Washington, DC 20036 Your Company Logo Here

  2. RESPA • Scope—Federally related mortgage loans • Internet—No special status • Two key elements: • Disclosures • Prohibited Payments • Section 8 • Referral fee prohibition • Fee split prohibition • Exception for payments that reflect the reasonable value of services, goods and facilities provided Weiner Brodsky Sidman Kider PC

  3. RESPA • HUD’s takes a broad view of the fee splitting prohibition • Based on its belief that the prohibition is intended to prohibit unearned fees, HUD concludes that the following practices violate the fee splitting prohibition: • Splitting a settlement service fee with a third party when the third party does not provide supporting services • Marking-up a third party’s settlement service fee without providing supporting services • Overcharging for your own services Weiner Brodsky Sidman Kider PC

  4. RESPA • HUD’s position on overcharges has been rejected by United States Circuit Courts of Appeals • Mixed results with HUD’s position on mark-ups: • 2nd and 3rd Circuits agree with HUD’s position • 4th, 7th and 8th Circuits reject HUD’s position • 11th Circuit indicated that a single party may violate the fee splitting prohibition by marking up a settlement service fee • 7th Circuit found that an impermissible fee split could exist when the lender and closing agent both charged a release fee Weiner Brodsky Sidman Kider PC

  5. RESPA • HUD’s 2002 RESPA Reform Proposal • Included an optional Guaranteed Mortgage Package Agreement (GMPA): • Would include most services • One, fixed price • Referral fee and fee splitting exemption for packaging arrangements • Use in lieu of Good Faith Estimate • No itemization of charges • Open for acceptance by consumer for at least 30 days • No fee could be imposed to issue a GMPA • Minimal fee could be imposed upon acceptance of GMPA Weiner Brodsky Sidman Kider PC

  6. RESPA • Proposal withdrawn March 2004 • June 2005 HUD announces RESPA Reform Part Deux • Series of roundtables held over the summer to obtain input from the industry, consumers and other interested parties • Four goals cited by HUD: • Simplicity • Clarity • Transparency • Greater certainty of costs Weiner Brodsky Sidman Kider PC

  7. RESPA • HUD identified the following packaging issues on which it sought input: • What may be the impact on consumers of a mortgage package that includes an interest rate guarantee and a fixed price for settlement costs? • How can subpackaging be designed to maximize competition without creating undue complexity for consumers? • Should HOEPA loans be eligible for packaging? • Should there be an opportunity to cure and/or remedies for packaging errors or violations? Weiner Brodsky Sidman Kider PC

  8. RESPA • HUD published an internal version of the Guaranteed Mortgage Package Agreement under consideration at that time that HUD withdrew the proposal in March 2004 • The single Guaranteed Mortgage Package Agreement was replaced with a Mortgage Package Offer and an optional Settlement Service Package • The Settlement Service Package could be used with a mortgage package offer or Good Faith Estimate • Attachment to outline has detailed information Weiner Brodsky Sidman Kider PC

  9. RESPA • General theme from the roundtables: • In terms of RESPA reform, packaging does not have the support that it did back in 2002 • There is a general consensus that HUD should focus on improving the Good Faith Estimate • Timetable for new proposal: • Not today • Not tomorrow • Beyond that, HUD will not give a specific timeframe Weiner Brodsky Sidman Kider PC

  10. RESPA • Packaging without RESPA reform: • Disclosure requirements • Good Faith Estimate • Settlement Statement • Referral fee and fee splitting prohibitions • Arrangements between packagers and participants in package arrangements • Mark-up issue regarding total price for the package • Fixed price arrangements • Differ from package arrangements Weiner Brodsky Sidman Kider PC

  11. STATE LAW • Fees • Allowable fees • Mark-ups • Disclosures • Borrower right to select the provider • Unauthorized practice of law • Insurance restrictions • Affiliate restrictions • Express restrictions • Predatory lending law issue Weiner Brodsky Sidman Kider PC

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