NEW HUD RULES AND RESPA REFORM

1. NEW HUD RULES AND RESPA REFORM January 22, 2010 Julie M. Palmaccio, Esquire Cushing & Dolan, P.C. Attorneys At Law 375 Totten Pond Road, Suite 200 Waltham, MA 02451 (P) 617-523-1555 (F) 617-523-5653

2. EFFECTIVE DATE • January 1, 2010 • New GFE and HUD-1

3. NEW GFE • Lender or Mortgage Broker • Must provide New 3 Page GFE • To all Potential Borrowers • Within 3 Days of Application • Without cost to Borrower • Except the cost of the credit report

4. NEW GFE cont’d • To Include • Name • Social Security Number • Loan Amount • Estimated Property Value • Monthly Income • Property Address • Without an address it is simply a pre-qualification

5. NEW GFE cont’d

6. NEW GFE cont’d • Page 1 • Loan Amount • Loan Terms • Rate and Lock Date

7. NEW GFE cont’d • Requirements for • Escrows • Prepayment Penalties • Balloons • Adjustments

8. NEW GFE cont’d • Dates: • Rate Quote • Rate Lock • Fees Quote

9. NEW GFE cont’d • Loan Amount • Term • Rate • Payment • Features • Escrows

10. NEW GFE cont’d

11. NEW GFE cont’d • Page 2 • Origination Fee • 3rd Party Loan Fees • Title Fees • Owners Title Insurance (separate) • Other Services • Recording Fee • Transfer Tax (if on GFE buyer must pay with front page credit) • Escrows • Interest • Homeowners Insurance

12. NEW GFE cont’d • Availability • Prices and terms quoted must be good for 10 business days after issuance of the GFE • If no further action by potential borrower after 10 business days lender/broker no longer bound by GFE

13. NEW GFE cont’d

14. NEW GFE cont’d • Page 3 • Tolerances • Three Categories • Zero Tolerance • 10% Tolerance • Unlimited Tolerance

15. NEW GFE cont’d • Zero Tolerance • Lender Charges for “doing” the loan • Points or Origination Fees • Transfer Tax

16. NEW GFE cont’d • 10% Tolerance • Aggregate of all charges • Lender required settlement services where lender selects or borrower selects from a lender provided list • Title Services and Title Insurance • Recording Fees

17. NEW GFE cont’d • Unlimited Tolerance • Services where borrower selects the provider • Escrows • Per diem • Homeowners Insurance

18. NEW GFE cont’d • Page 3 also contains a chart for comparing different loans

19. NEW HUD-1 • First Page unchanged • Except space added for Settlement Agent’s phone number

20. NEW HUD-1 cont’d

21. NEW HUD-1

22. NEW HUD-1 • Second Page • Made to look like the GFE • Fees divided by “Box” Number • 801 & 802 “Outside the Column” (in text area only) • 803 “In the Column” (what is charged to the borrower) • 804-808 “In the Column” • 901-904 “In the Column” • 1001 “In the Column • 1002-1007 “Outside the Column” • 1100 Series “Title Charges”/Box 4 Charges • Title Exam • Document Preparation • Attorney Fee • Lender’s Title Insurance • Owners Title Insurance Premium Disclosed Separately

23. NEW HUD-1

24. NEW HUD-1 • Page 3 • Completely New • GFE Estimates • Left column • HUD1 Actual • Right column • Grouped by Tolerance • Bottom of the Page • Recap of loan terms

25. GFE/HUD-1 • Inadvertent of Technical Error • Not a violation if revised HUD1/1A is provided to borrower and /or seller with 30 calendar days • Variation on the Tolerances • Not a violation if the lender reimburses the borrower any amount by which the tolerances were exceeded at settlement or within 30 days thereafter. • Change of Circumstances • Acts of God • Inaccurate Info used to prepare GFE • New Information not relied on to prepare GFE • Particular Information regarding the transaction

26. GFE/HUD-1 • Many aspects of the new GFE and HUD-1 remain untested and unclear • HUD offers some guidance via Frequently Asked Questions (FAQs) posted on their website at http://www.hud.gov/utilities/intercept.cfm?/offices/hsg/ramh/res/resparulefaqs.pdf