It has been almost two months since the RESPA 2010 Rule went into effect. Based on the nature of customer inquiries into DocMagic's Customer Service and Compliance Departments, industry professionals seem to have acquired a greater comfort level regarding the new RESPA requirements. As DocMagic's prior articles have addressed the "basics" of the RESPA 2010 Rule and explained how the DocMagic software operates to handle RESPA's 2010 requirements, it is appropriate now to introduce the various RESPA 2010 audits that DocMagic implemented in January, 2010:
I. Expiration Date of Estimate For All Other Settlement Charges Audit
Under Reg. X Section 3500.7(c),
". . . the estimate of the charges and terms for all settlement services must be available for at least 10 business days from when the GFE is provided, but it may remain available longer, if the loan originator extends the period of availability. The estimate for the following charges are excepted from this requirement: the interest rate, charges and terms dependent upon the interest rate, which includes the charge or credit for the interest rate chosen, the adjusted origination charges, and per diem interest." (Emphasis added.)
Reg. X Section 3500.2(b) defines "business day" as a day on which the offices of the business entity are open to the public for carrying on substantially all of the entity's business functions.
Accordingly, if a date less than 10 business days from the date the GFE is issued is entered in the "Est. Available Through" fields, as shown in the example below:
the following audit will display:
WARNING: DATE THROUGH WHICH ESTIMATE FOR SETTLEMENT CHARGES IS AVAILABLE MUST BE A MINIMUM OF 10 BUSINESS DAYS FROM DATE GFE WAS PROVIDED
II. Line 801 Audit
Charges characterized as "Our Origination Charge" and appearing in Block 1 of the GFE and Line 801 of the HUD-1 Statement cannot increase absent "changed circumstances." If "Our Origination Charge" increases in amount on the HUD-1 as compared with what was disclosed in the Good Faith Estimate ("GFE"), as shown below:
the following audit will display:
WARNING: CHARGE IN HUD-1 (#801) EXCEEDS CHARGE IN GFE; REDUCE CHARGE OR CREDIT BORROWER THE EXCESS AMOUNT ($__)
Below is a screen shot of the audit based on the values shown in the above Comparison Table:
III. Line 802 Audits
According to Appendix C of Reg. X:
The amount stated in Block 2 is subject to zero tolerance while the interest rate is locked, i.e., any credit for the interest rate chosen cannot decrease in absolute value terms and any charge for the interest rate chosen cannot increase. (Note: An increase in the credit is allowed since this increase is a reduction in cost to the borrower. A decrease in the credit is not allowed since it is an increase in cost to the borrower.)
Accordingly, if the credit for the interest rate chosen decreases, as shown in the example below:
the following audit will display:
WARNING: CREDIT IN HUD-1 (#802) IS LESS THAN CREDIT IN GFE; INCREASE CREDIT AMOUNT OR CREDIT BORROWER THE AMOUNT OF THE DIFFERENCE ($-__)
Below is a screen shot of the audit based on the values shown in the above Comparison Table:
On the other hand, if the charge for the interest rate chosen increases, as shown in the example below:
the following audit will display:
WARNING: CHARGE IN HUD-1 (#802) EXCEEDS CHARGE IN GFE; REDUCE CHARGE OR CREDIT BORROWER THE EXCESS AMOUNT ($__)
Below is a screen shot of the audit based on the values shown in the above Comparison Table:
IV. Transfer Taxes Audit
Reg. X Appendix C provides as follows regarding transfer taxes:
Block 8, " Transfer taxes ."-In this block, the loan originator must estimate the sum of all state and local government fees on mortgages and home sales that can be expected to be charged at settlement, based upon the proposed loan amount or sales price and on the property address. A zero tolerance applies to the sum of these estimated fees. (Emphasis added.)
Accordingly, if there is an increase in transfer taxes on the HUD-1 as compared with the amount disclosed in the GFE, as shown in the example below:
the following audit will display:
WARNING: CHARGE AMOUNT (#1203) EXCEEDS GFE AMOUNT; REDUCE CHARGE AMOUNT OR CREDIT BORROWER THE EXCESS AMOUNT ($__)
Below is a screen shot of the audit based on the values shown in the above Comparison Table:
V. 10% Tolerance Audit
According to Reg. X Appendix C:
There is a 10 percent tolerance applied to the sum of the prices of each service listed in Block 3, Block 4, Block 5, Block 6, and Block 7, where the loan originator requires the use of a particular provider or the borrower uses a provider selected or identified by the loan originator.
As shown in the "Charges That in Total Cannot Increase More Than 10%" Comparison Table below, there is a 12.579% increase in the sum of the charges listed in the HUD-1 column as compared with the sum of the charges in the GFE column.
Accordingly, the following audit displays:
WARNING: CHARGES THAT IN TOTAL CANNOT INCREASE MORE THAN 10% EXCEED THE PERMISSIBLE 10% THRESHOLD BY ($__); REDUCE CHARGES OR CREDIT BORROWER FOR THIS AMOUNT
Note that the audit will return the actual amount by which the 10% threshold is exceeded. Below is a screen shot of the audit based on the values shown in the above Comparison Table:
VI. RESPA Impound Audit: GFE Initial Deposit/Lender Required
Note that if a DocMagic user enters impounds and fails to enter a value in the "GFE Initial Deposit" field shown below and fails to indicate whether or not the lender requires impounds:
the following audits will display:
WARNING: NO GFE INITIAL DEPOSIT AMOUNT DETECTED
WARNING: ARE THE IMPOUND ACCOUNT(S) LENDER REQUIRED?
Note that the above audits will display individually depending on whether or not both "GFE Initial Deposit" and "Lender Required" fields are completed.
VII. Title Charges - Policy Details Audit
To assist with completing Lines 1105-1108 on page 2 of the HUD-1, the following link has been added at the bottom of the screen in the HUD-1 tab of DocMagic (see below):
When the link is clicked, the following pop-up screen appears:
If the values in Lines 1107 and 1108 do not total the value of the "Total title insurance premium" field in the above screen, the following audit will display:
WARNING: AGENT'S PORTION PLUS UNDERWRITER'S PORTION OF THE TITLE INSURANCE PREMIUM MUST EQUAL THE TOTAL TITLE INSURANCE PREMIUM AMOUNT
Note that there may be circumstances where a portion of the total title insurance premium is paid to a third party other than the title underwriter or title insurance agent, and therefore the sum of Lines 1107 and 1108 will not equal the total title insurance premium amount. In such a case, the audit may be ignored.
If you have any questions concerning any of the above audits, please contact DocMagic's Customer Service Department, at (800) 649-1362.
If MISMO data is passed, then DocMagic will use the GFE Disclosure Date. If MISMO data is not passed, then DocMagic will default to the Disclosure Send Date (which is the later of the Pre-Z Send Date or Re-Disc Send Date in the MDIA Dates section of DocMagic) and add 10 days to it. If there is no Disclosure Send Date, then DocMagic will default to the Document Date entered into DocMagic.
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