Understanding The Good Faith Estimate, HUD-1 and Short Sales Presented by: First Place Bank and...
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Transcript of Understanding The Good Faith Estimate, HUD-1 and Short Sales Presented by: First Place Bank and...
Understanding The Good Faith Estimate, HUD-1 and Short Sales
Presented by:
First Place Bank and NorthStar Title Services
Definitions of Terms
HUDStandard form used to itemize services and
fees charged to the borrower by the lender or broker
TIL A document provided by the Lender that is
required by The Truth-in-Lending Act and is aimed at promoting the informed use of consumer credit by requiring disclosures about terms and costs
Terms (cont.)
Short Sale A sale of real estate in which the proceeds from the
sale fall short of the balance owed on a loan secured by the property sold
FHA FHA provides mortgage insurance on single-family,
multifamily, manufactured homes and hospital loans made by FHA-approved lenders throughout the United States and its territories. While borrowers must meet certain requirements established by FHA to qualify for the insurance, lenders bear less risk because FHA will pay the lender if a homeowner defaults on his or her loan.
Terms (cont.)
Promissory Note Written legal instrument signed by the borrower for
the benefit of the mortgage lender Mortgage
Conveyance of an interest in real property using a written instrument usually known as a mortgage deed that acts as security for the payment of a debt
The Note created the debt and the Mortgage secures payment of the debt
Terms (cont.)
DefaultNonpayment of the loan or failure to comply
with circumstances thereby invoking the default clause in a mortgage
REOReal Estate Owned – Foreclosed or pre-foreclosed properties taken back by a
lender
Terms (cont.)
Loss Mitigation DepartmentA third party that works to negotiate mortgage
terms for the homeowner that will prevent foreclosure
HardshipBanks have guidelines as to what they
consider a hardship and it varies from Bank to Bank – such as death, divorce, illness etc.
Terms (cont.)
MortgageeLender that lends the money to an individual
in order to purchase a piece of property Mortgagor
Person pledging the real property because of the money he or she has borrowed to purchase the real property
Process of a Short Sale
Two scenarios as a realtor…Reaction to finding out your seller is unable to
make payments and if they are not in foreclosure yet they will be shortly
Full awareness of the fact that you represent a seller who is trying to get rid of the property and the debt associated with it
Short Sale
Seller is upside down and needs to get out from under and is looking to sellForeclosureForeclosure and Bankruptcy
Third party has approached seller and has a buyer interested
Broker may be involved and helping the new buyer
What does the Lender need?
Loss Mitigation Department
Third party (attorney) involved
What the title company CAN and CANNOT do Request a payoff from the creditors; Not allowed to negotiate but is allowed to
inquire as long as they have the seller’s consent in writing and it must be sent to the creditors;
Sometimes it is a fine line between request and negotiate – must not cross
January 1, 2010New GFENew HUD-1New HUD-1A(for all transactions in which the new GFE is used)
The Good Faith Estimate
The GFE gives you an estimate of your settlement charges and loan terms if you are approved for this loan.
New GFE
Loan originator must provide the new (3 page) GFE to a potential borrower
Occurs within three (3) business days of application
No additional cost to buyer outside of credit report cost
New GFE Page 1
Includes Important dates pertaining to the loanSummary of loan termsDisclosure of escrow account informationSummary level view of estimated settlement
charges
New GFE Page 1 Dates: Rate quote Rate lock
Fees quote Loan Amount
Term Rate
Payment Features Escrows
Costs
New GFE Page 2
Looks at estimated settlement charges in detailLoan origination feePoints chargedCredits applied to chargesOverview of other settlement charges
New GFE Page 2 Origination Fees
Lender Fee Points/YSP
3rd Party Loan Fees Credit/Flood Title
Closing/Loan Policy Title-Owner’s
Other Services Recording Fee Transfer Tax
Escrows Interest/Advance
Homeowner’s Insurance
New GFE Page 3
Introduces 3 groups of tolerances for fee variances between GFE and HUD-1 formsZero tolerance10% toleranceUnlimited variance
HUD Settlement Statement
Department of Housing and Urban Development Document
Process of detailing the receipts and disbursements of transaction
Escrow Officer has instructions of the transaction.
HUD-1 Page 1
First page unchangedShow debit from the seller and
credit to the buyer for amount paid on behalf of the buyer by the seller
Settlement agent’s phone number added
HUD-1 Page 2 Added information to align more closely to the
GFERE Broker CommissionLender Charges
Origination Fees Third Party Fees
PrepaidsEscrowsTitle Fees
All title costs Owner’s policy Recording Fees Other
HUD-1 Page 2
Lines 701 & 702 – Full Commission; dollar amount paid to each agent not percentageEarnest monies on deposit retained by realtor
Line 703 – Commission Disbursed at closing
Line 704 – Other charges
New HUD-1 Page 3
Compares charges on the GFE to charges on the HUD-1
Breakdown into categories of tolerance Charges that cannot change Charges that cannot increase more than 10% Charges that can change/increase
Note: “If you have any questions about the settlement charges and loan terms listed on this form, please contact your lender.”
HUD ISSUES
Are the amounts correct – especially in construction transactions
Do we have all of the amendments to the contract that may change the numbers
Prorated taxes for new construction Escrow reserves in construction Refinance – Right of Rescission