Today we are pleased to announce the release of an updated and enhanced version of DocMagic Online (DMO) into production. Corresponding changes to DocMagic for Windows (DMW) should be released within the next week or so. The updates and enhancements (which in number and scope represent the largest, single software upgrade in DocMagic's twenty plus years of operation) have been implemented to ensure compliance with the new Good Faith Estimate (GFE) disclosure and HUD-1 Settlement Statement requirements that become mandatorily effective for any GFE and HUD-1 issued on or after January 1, 2010. We have incorporated screen shots from DMO, as enhanced, to better illustrate the nature of the changes in conjunction with an explanation as to why those changes are necessary. This article is not designed to answer all or even most questions about the implications of, or the subtleties and ambiguities often associated with, the data entered into particular fields. In addition to this article, we also will be posting additional articles in the very near future describing, for example, documents that have been created, revised and/or rendered obsolete by, and audits that we will be implementing to ensure compliance with, the new RESPA requirements.

The final RESPA Rule, most current RESPA Rule FAQs, and GFE, HUD-1 and HUD-1A model forms can be accessed from HUD's RESPA Home Page here.

A short note about our release. We have decided to release these changes into the production version of DMO solely to permit DocMagic customers to become familiar with the changes we have made for training and testing purposes. Instructions on how to access the new GFE and HUD-1 appear towards the end of this article. While we have made every effort to ensure that the changes we have made comply with the statutory and regulatory requirements under RESPA, the fact of the matter is that HUD continues to update their guidance on how to complete both the GFE and HUD-1 forms. Indeed, we anticipate that HUD will release several more FAQs between now and the end of the year. Accordingly, we have placed a watermark on the GFE and HUD-1 forms indicating that the forms are sample forms to be used for training and testing purposes only; we will remove the watermark prior to the January 1, 2010 effective date. In addition, until January 1, 2010, DocMagic expressly disclaims any warranty, express or implied, with respect to the completion of either of the new GFE, HUD-1 and HUD-1A forms. With that little bit of legalese aside, let us now delve into a description of the software changes we have made to DMO.

Dates: Dates under the "General" tab of DocMagic have been rearranged, supplemented and placed into three separate date categories: Critical, Lock and MDIA.

a. Critical: All of the dates appearing under the "Critical" Dates tab previously appeared in DMO except for the Rate Lock Date, which has been moved under the "Lock" tab. A new field has also been added, the "Est. Available Through" date (circled in red below). This is the date through which the estimate for all other settlement charges is available; the date entered must be a minimum of 10 business days1 from when the GFE is provided and corresponds to the date required to complete line 2 under the "Important Dates" section of the new GFE.

Current dates (Before):	Updated Critical dates (After):

b. Lock: Under the "Lock" tab is located all interest rate lock-related information. In addition to the Rate Lock Date which has been moved under this tab, the other dates are used primarily to complete the remainder of the "Important Dates" section of the GFE: (i) the "Rate Lock Days" field corresponds to line 3 of the "Important dates" section of the GFE - the rate lock period; (ii) the "Rate Available Through and Time" fields correspond to line 1 of the "Important Dates" section of the GFE - the date and time through which the interest rate is available; and (ii) the "Lock Days Prior to Close" field corresponds to line 4 of the "Important Dates" section of the GFE - the number of days prior to settlement that the rate must be locked. Please note that lines 1, 3 and/or 4 of the "Important dates" section of the GFE may reflect either "NA" or "Not Available" if there is no rate lock period, the interest rate is not available for any period of time, or there is no period of time prior to settlement that the rate must be locked, as the case may be. If any of these fields is left blank, "NA" or "Not Available" will default and appear on the GFE form.

c. MDIA: Under the MDIA tab are located the same dates and information that previously appeared under the "Mortgage Disclosure Date Information" link. For additional information on MDIA, please click here.

Terms: Two additional fields have been added under the "Terms" tab: (1) in the "Terms" section, a new field titled "GFE Total Prepaid Interest" has been added for purposes of the HUD-1 page 3 comparison between amounts disclosed on the GFE and the HUD-1; the value entered in this field will populate in the "Good Faith Estimate" column of the "Charges That Can Change" section on Page 3 of the HUD-1; and (2) in the Miscellaneous section, a new field titled "Max Prepay Penalty Amount" has been added in order to complete the maximum prepayment penalty field in the "Summary of Your Loan" section on page 1 of the GFE. Currently, each user must compute and enter a maximum prepayment penalty amount, if applicable; this is not a computed amount.

Charges/Fees: This is perhaps the tab where most of the significant changes have been made. Three new columns have been added: Category, SR? (abbreviation for "Seller Responsible"), and GFE Amt. Following is a screen shot of the Charges/Fees tab; a description of each one of these columns appears below the screen shot.

a. Category: The category in which a fee or charge is placed will determine in which Block on page 2 of the GFE the charge will be included. The category in which a charge is placed is relevant ultimately for tolerance determination purposes. Briefly, there is a limit by which the aggregate amount of certain charges disclosed on the GFE can increase at settlement:

i. the origination charge cannot increase at settlement from the amount disclosed on the GFE;

ii. the aggregate amount of charges for lender-required services, including title services and lender's title insurance and the owner's title policy, in each case, if selected by the lender or by the borrower from a list of providers identified by the lender, together with government recording charges, cannot increase in the aggregate by more than 10% at settlement from the aggregate amount disclosed on the GFE; and

iii. with respect to charges for lender-required services, including title services and lender's title insurance and the owner's title policy (in each case, if selected by the borrower from other than a list of providers identified by the lender), as well as the amount of any initial escrow account deposit, daily interest charges and homeowner's insurance, there is no limitation whatsoever on the amount by which the charge at settlement can change from the amount disclosed on the GFE.

Each charge entered into DocMagic will have a default category assigned. However, the user can change the category based on the facts of the specific loan. The categories and the blocks on the GFE in which the charges will appear or be aggregated are:

• Origination - Block 1: the total of all charges paid to all loan originators (lenders and brokers); typically includes charges such as loan origination fees, processing, application, administration, underwriting, document preparation (including attorney's fees for document preparation), wire, lender inspection, mortgage broker, loan handling and other miscellaneous charges. Note that some charges performed on behalf of the lender but typically paid to third parties (e.g., document preparation or attorney fees) fall into this category.2
• Rate Credit or Charge - Block 2: typically includes yield spread premiums (YSPs), loan discount fees and buydowns. Because YSPs appear in the "Premiums" section, and loan discount points appear in the "fees" section of DMO, these will default to be included in Block 2 of the GFE when appropriate.
• Lender Required - Block 3: charges for services required by a lender from a provider selected by the lender; typically includes appraisal, credit report, tax service, flood certification and flood determination charges. This is also the category in which charges specific to government loan programs (e.g., VA funding fee, HUD UFMIP, USDA rural housing guarantee fee) are included.
• Title Services - Block 4: in addition to the lender's title insurance premium, this Block includes all charges associated with title services and settlement (closing) agent services such as title searches, title examinations, title commitments, and title endorsements associated with the lender's title policy; delivery, notary, and settlement or closing charges. Note that a fee that may typically fall within Block 1 if the service is performed on behalf of the lender (e.g., document preparation or attorney fee) should properly be included in this category if the service is performed on behalf of the title company.
• Title Services Borrower Chosen - Block 4: RESPA FAQ #8 of the "GFE - Written list of providers" section, dated January 28, 2010, acknowledges that law or local custom may require, or consumers may prefer, to have one provider conduct the settlement and another provider perform the remainder of the services included within the "Title Services and Lender‘s Title Insurance" category on the GFE (Block 4 on page 2). In response to this FAQ, the "Title Services Borrower Chosen" category was created if the borrower chooses either the settlement (closing) agent and/or the provider who will conduct the remainder of the services falling under the "Title Services and Lender‘s Title Insurance" category that is not on the lender's written list of providers. Selecting this category ensures that the cost for these services will be included in the total in Block 4 of the GFE; that the settlement or closing fee, if borrower chosen, will populate in Line 1102 on page 2 of the HUD-1; and that the remainder of the title services, if borrower chosen, will be reflected in Line 1101 on page 2 of the HUD-1. Furthermore, selecting this category ensures that title-related charges that are itemized will appear in the 1100 series. Finally, use of this category for either the settlement (closing) fee and/or the remainder of title-related services will dictate that "Title Services Borrower Chosen" charges appear, in the aggregate, in the "Charges That Can Change" table on page 3 of the HUD-1.
• Owners Title Insurance - Block 5: in purchase transactions, the charge for the owner's title policy (including endorsements), regardless of who is selecting or paying for it. For non-purchase transactions, "NA" or "Not Available" may be entered in this Block.
• Owners Title Insurance Borrower Chosen - Block 5: This category was also created in response to RESPA FAQ #8 of the "GFE - Written list of providers" section, dated January 28, 2010. If the borrower chooses a provider for the owner's title policy (including endorsements) that is not on the lender's written list of providers, regardless of who is paying for it, this category should be selected to ensure that the charge will be reflected in Block 5 of the GFE, in Line 1103 on page 2 of the HUD-1, and in the "Charges That Can Change" table on page 3 of the HUD-1.
• From Lender Provided List and Borrower Chosen - Block 6: These are charges for services required by a lender to complete settlement for which the borrower can shop; the service provider selected by the borrower can be either (i) from a list of settlement service providers which must be provided by the lender to the borrower in a separate document at the same time the GFE is provided, or (ii) a provider selected solely by the borrower. The identity of the service provider ultimately selected to provide the service by the borrower in all likelihood will be unknown at the time the GFE is prepared. Accordingly, we suggest that most services for which the borrower can shop be identified as "From Lender Provided List" at the time the GFE is prepared. If, at closing, the service provider is one selected by the borrower other than from the list provided by the lender, then the category should be changed to "Borrower Chosen." The aggregate of charges for services provided by providers appearing in the "From Lender Provided List" cannot increase by more than 10% at settlement from the amounts disclosed in the GFE. There is no limit on the amount by which charges in the "Borrower Chosen" category can increase at settlement.
• Government Recording - Block 7: as the title suggests, includes the aggregate of all estimated state and local government recording charges.
• Transfer Taxes - Block 8: again, as the title suggests, includes the aggregate of all estimated state and local government fees on mortgages and home sales.
• Homeowner Insurance - Block 11: includes estimates of premiums for all types of insurance (other than title insurance) required by the lender to protect the property against loss, such as hazard insurance premiums, flood insurance premiums and earthquake insurance premiums.

Please note that DocMagic's Compliance Department has updated the Finance Charges matrix by adding an additional column that indicates in which category (and Block on page 2 of the GFE) a particular fee or charge will default when selected. For example, the matrix indicates that an attorney's fee will default as an origination charge and appear in Block 1; however, if performed on behalf of the title company, the user can change the categorization of the fee to "Title Services" and the fee will appear instead in Block 4 of the GFE.

b. Seller Responsible: The concept of "responsible party" has been integrated into the new RESPA Rule. The presumption is that the borrower is responsible for paying every charge, regardless of who is actually paying the charge. If the borrower is responsible for paying the charge (that is, the borrower is the responsible party), the charge must be disclosed on the GFE regardless of who is actually paying the charge (this has no impact on how a charge is treated for purposes of the TIL, that is, only borrower-paid items are finance charges). Conversely, if a charge is typically a charge for which a party other than the borrower is responsible for paying (for example, the seller is responsible for paying transfer taxes), then regardless of who actually pays the charge (e.g., the buyer/borrower), the charge should not be disclosed on the GFE. Accordingly, an "SR?" column has been added to the "Charges/Fees" screen. If the "SR" box is checked for a particular charge (other than the premium for the owner's title policy, which must always be displayed on the GFE), then the charge will be treated as one for which the seller is responsible for paying and neither the charge nor the amount will be disclosed on the GFE. A note about this flag: there is some question as to whether only those charges for which a party other the borrower is legally required to pay should be excluded, or whether, in addition, those charges which by custom or tradition are paid by a party other than the borrower may also be excluded. Unless and until HUD provides further clarification, when in doubt, the safest and most conservative approach is to leave the box unchecked so that the fee or charge appears in the GFE.

c. GFE Amount: The information under the "GFE Amt" column is used for purposes of completing the comparison table appearing on page 3 of the HUD-1 (page 2 of the HUD-1A), which table compares the amounts paid at closing with the amounts disclosed on the GFE (the "GFE Amt"). Prior to processing a closing package, there is no reason to complete the GFE Amt column. Only when entering data for the purpose of drawing a closing package does the GFE Amt column become relevant. How this column is completed with the requisite data differs depending on whether or not a GFE was generated using DocMagic, as follows:

i. If the worksheet was used previously to process a pre-disclosure or pre-closing loan package through DocMagic, when the user re-processes the worksheet and selects a closing package type, the charges used from the last previously processed worksheet used to generate a GFE will be accessed automatically. After processing, if the user pulls up the worksheet, the user will note that the GFE Amt column will now reflect the charges that appeared in the previously processed pre-disclosure or pre-closing package. This is illustrated in the following screen shots:

Processed Pre-disclosure or Pre-closing Package Worksheet:

Processed Closing Package Worksheet:

The data appearing in the "Charge Amt" column of the pre-disclosure or pre-closing package worksheet now appears in the "GFE Amt" column of the closing package worksheet, having been automatically uploaded at the point the closing package worksheet was processed. Note that if prior to processing the closing package, a value had been entered in the GFE Amt field for any reason, the DocMagic system will accept the data appearing in the GFE Amt field.

ii. If the worksheet was not used previously to process a pre-disclosure or pre-closing loan package through DocMagic, then the DocMagic user must manually enter the amount of each of the charges disclosed in the GFE that was issued to the borrower prior to processing the closing package.

Regardless of which scenario above is applicable, the data ultimately appearing in the GFE Amt column will also appear under the "Good Faith Estimate" column in the "Comparison of GFE and HUD-1 Charges" section on page 3 of the HUD-1 (page 2 of the HUD-1A).

Impounds: The "Impounds" tab has been modified to add two new data fields: GFE Initial Deposit and Lender Required.

a. "GFE Initial Deposit" field - this information is required for purposes of completing the comparison between the initial escrow deposit amounts disclosed on the GFE and on page 3 of the HUD-1 (page 2 of the HUD-1A). There is no limitation on the amount that the initial escrow deposit can change (note: this is in the "no tolerance" section (that is, charges that can change by an unlimited amount)).

b. "Lender Required" field - if "yes" is indicated, then the DocMagic software will treat the escrow as lender-required. This information is used to complete the appropriate box in the "Escrow Account Information" section on page 1 of the GFE.

HUD-1: the HUD-1 tab has been modified to add three additional links at the bottom of the screen which, when clicked, will display pop-up screens into which data necessary to complete the GFE and HUD-1 is entered.

a. The GFE Tradeoff Table: When this link is clicked, the following image taken from page 3 of the GFE, next to the heading "Using the Tradeoff Table" appears:

The Tradeoff Table can be used to provide information about two alternative loans as compared with the loan terms reflected in the GFE that are available from the originator - one with lower settlement charges, and the other with a lower interest rate. Please note that the originator must complete only the left-hand column (i.e., the loan in this GFE); the originator has the option to complete the remainder of the Tradeoff Table (if the originator has those loans available and would issue a GFE based on the same information provided by the borrower) or to leave the remainder blank. The information in the left-hand column will automatically default using the worksheet data. The DMO user needs only to enter the requisite data (the initial interest rate and total estimated settlement charges) in the fields appearing in white above. Each of the grayed out cells above represents data that is either already present in the worksheet or calculated based on the data entered in the fields appearing in white above.

b. 1100. Title Charges - Policy Details

The new HUD-1 must reflect the split of the title insurance premium between the title underwriter and the title agent. The information in lines 1103 and 1104 above regarding the Owner's and Lender's title insurance premiums will automatically populate from the worksheet. The DMO user will need to enter the Policy Limits for the Owner's and Lender's Title Insurance premiums in each of lines 1103 and 1104. The DMO user should then enter the amount of the aggregate insurance premiums paid to the title agent in line 1107 and the amount paid to the title underwriter in line 1108.

c. Comparison of Good Faith Estimate (GFE) and HUD-1 Charges: The "Good Faith Estimate" column reflects the various GFE Amounts (see discussion above regarding "GFE Amt." Column under "Charges/Fees" tab) and the HUD-1 column contains the actual amount values.

• Line 801 includes all charges with a category of "Origination".
• Line 802 includes all charges with a category of "Rate Credit or Charge".
• Line 803 is the sum of lines 801 and 802.
• Line 1203 is the sum of all charges with a category of "Transfer Taxes."
• The "Charges That in Total Cannot Increase More Than 10%" includes all charges with a category of "Lender Required", "Title Services", "Owner's Title Insurance", "From Lender Provided List", or "Government Recording." All "Government Recording" charges are totaled and display on the first line (line 1201).
• The "Charges That Can Change" includes all Insurance Premium charges that have a Category of "Homeowner's Insurance" and those charges with a Category of "Borrower Chosen."

Processing: The use of the new GFE/HUD-1 is not mandatory until January 1, 2010. Prior to January 1, 2010, if you wish to receive the new GFE and HUD-1 for training or testing purposes only, the process for doing so is quite simple. You may run a virtually unlimited number of sample loan packages at no cost by: (1) entering the word "Sample" as either the first or last name of any of the borrowers in your worksheet, and (2) checking the "Include New GFE/HUD" box in the "Document Processing Options" screen (see below screen shot). We encourage all users who have questions or comments about the new GFE and HUD-1 during the course of the training or testing to contact the DocMagic Customer Service Department. After January 1, 2010, the "Include New GFE/HUD" box will be checked automatically for worksheets with application dates on or after January 1, 2010. Conversely, for worksheets with application dates prior to January 1, 2010, the "Include New GFE/HUD" box will not be checked automatically and the old GFE and HUD-1 forms will be selected; to select the new GFE/HUD forms, the user must check the box. At some point, perhaps 120 days after January 1, 2010, the "Include New GFE/HUD" box will disappear and only the new GFE and HUD-1 forms will be available.

Throughout the coming months, we will no doubt be updating and supplementing the information contained in this article; so, we encourage you to return periodically. In the meantime, please contact DocMagic's Customer Service Department at (800) 649-1362 if you have any questions or comments regarding this article.

1 24 CFR 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."

2 Federal Register Vol. 73, page 68226 (emphasis added): "The final rule requires that in the case of loans originated by mortgage brokers, the amount in Block 1 must include all charges to be paid by the borrower that are to be received by the broker and any other originator for, or as a result of, the mortgage loan origination, including any payments from the lender to the broker for the origination." (Available here).