Home Builders Association of Chester and Delaware Counties

RESPA

Newly finalized RESPA rules are still concerning to NAHB
although they do contain some improvements from what was previously proposed. Specifically, HUD did make some changes to the proposed rule to address NAHB concerns on the required use definition, and the clarifications do clearly permit a home building company to offer incentives through the financing process for use of the company's finance or title affiliate, including reduced fees and interest costs. However, the revised language would prohibit a home building company from offering price reductions and upgrades on the home as an incentive for the buyer to use an affiliated company. Going forward, NAHB will continue to work with the mortgage finance affiliates of our member companies to develop strategies on this concerning issue.

Other significant changes resulting from the new RESPA language are as follows:

1) For the first time ever, HUD will require mortgage lenders and brokers to provide
 borrowers with an easy-to-read standard Good Faith Estimate (GFE) that will clearly
 answer key questions such as what the term of the loan is, whether the interest rate
 is fixed or may change; whether there is a pre-payment penalty; whether there is a 
 balloon payment and what are the total closing costs.

2) HUD has withdrawn a proposed requirement that closing agents read and provide a "closing script." Instead, there will be a new page on the HUD-1 Settlement Statement that allows consumers to easily compare their final closing costs and loan terms with those listed on the GFE.

3) HUD's new Good Faith Estimate has been reduced from 4 down to 3 pages, including an instructional page to help borrowers better understand their loan offer. The GFE will also consolidate closing costs into major categories to prevent junk fees and display total estimated settlement charges prominently to allow for easy comparison of loan offers. HUD will specify the closing costs that can and cannot change at settlement, and will limit the amount that certain costs may change.

HUD estimates that by improving upfront disclosures on the GFE and limiting the amount that estimated charges can change, it will save consumers nearly $700 in closing costs. For more information, contact Bill Renner at x8597.