RESPA comment by Diane Cipa....can I have some cheese with that please?

May 19, 2008

Regulations Division
Office of General Counsel
Department of Housing and Urban Development
451 Seventh St., SW., Room 10276
Washington, D.C. 20410-0001


Re: Real Estate Settlement Procedures Act (RESPA):
Proposed Rule to Simplify and Improve the Process of Obtaining Mortgages and Reduce Consumer Settlement Costs, 08-01015 [FR-5180-P-01; RIN2502-AI61]

To Our Friends at HUD:

I know that sounds cheesy, but I want to express in the strongest possible terms how very much I appreciate the obvious hard work that went into this proposal. I appreciate the lengths to which you tried to balance the impact on our collective industry with the overriding need to create new regulatory consumer protection.

GENERAL COMMENT

A fully informed consumer, having in hand reliable data in user-friendly form, is empowered to make choices that serve his own self-interest and general welfare. I trust the ability of a fully informed consumer to make his own choice. I trust the mechanics of a fair and free marketplace, which is the likely outcome of such full disclosure. To this end, I support the jewel of this proposal; the Uniform Good Faith Estimate tied to HUD-1 enhanced by the addition of the Closing Script.

CLOSING SCRIPT

I have experimented with the forms using real life transactions and found them easy to use and explain. I’ve had members of my staff use the first part of the Closing Script in real closings. [We did not think it fair to use the GFE/HUD comparison, as those rules are not in effect.] Without exception consumers said they found the information easy to understand and helpful. That part of the script took no more than two minutes to read verbatim. We created Word documents and so the completion was quick. Our software includes the flexibility to use merge fields with Word and so if we had desired, even without programmer assistance, we could have made the job even easier.

The script was prepared at the same time as the HUD-1 form. The closers said the script simply replaced similar verbiage they might have used when reviewing the Note and so it added no time to the closing itself. The hardest part seemed to be really reading it verbatim. I insisted that no one ad lib and so we practiced by reading it to one another a couple of times so that it wasn’t awkward at the closing table.

As a manager, I like the script as a training tool and as a safe procedure. I know that the correct words are being used to describe the mortgage terms.

There are some who object to the Closing Script as somehow crossing the line into the unauthorized practice of law. I just don’t see it. The script is meant to be prepared by the Settlement Agent with information provided by the Lender. This is no different than the HUD-1 form that is prepared by the Settlement Agent with information provided by the Lender. The script is designed to be read verbatim which means the reader is not advising or offering an opinion. The script is part of the HUD-1 and unless reading the HUD-1 could be construed as the unauthorized practice of law, I just don’t buy that argument.

There are many who would like the public to believe that notaries who are not employees of the Settlement Agent do not explain documents at a signing. Though there are some who religiously limit their role to obtaining signatures, most offer some explanation. Consumers deserve an explanation that is correct and easy to understand. Frankly, they deserve at least a small explanation and in those cases in which a notary is not saying anything, reading a mandatory script containing reliable information is preferable. So, acknowledging that customs do vary from state to state and region to region, I cannot see any problem having the person who is obtaining the signatures and is sitting in front of the borrower read the script.

Infact, the Mortgage Bankers Association has been working hard with the American Land Title Association to create Uniform Closing Instructions [UCI]. The UCI contain a definition for the party who obtains the signatures and creates certain duties for that individual including the monitoring and reporting of mortgage fraud. The person in the current draft is known as the Closing Employee.

I am encouraged that both the UCI and this RESPA reform proposal create a duty for the closer to the consumer and to the mortgage lender. Afterall, the closer is typically an extension of the title insurance transaction and in that role, with the proposed insured interests being both that of the mortgage lender and the consumer, it makes sense that there exists some sort of fiduciary duties.

The proposed rule is weak in its guidance as to what the parties should do if there is a problem with the terms when the script is read. Do we close or not? Is the consumer given the choice and if they choose to close, what, if any, are the remedies? It seems to me that the burden is on the lender to comply and that it is in their power to review all terms and make corrections prior to the closing. In this case, then the reading of the script is merely the final safety net and NOT the preferred time for lenders to talk with their borrowers. With that in mind, the objections of some, that the burden of the script should rest on the shoulders of the lender and not the closer seems to ignore the reality that mortgage lenders today already carefully monitor the APR and high cost loan calculations and make last minute adjustments to avoid closing a loan that is out of compliance. Why? Because they fear the remedies.

GOOD FAITH ESTIMATE

I have suggestions for improving the Good Faith Estimate [GFE] but first I must say that I applaud the manner in which you have handled the discount versus yield spread and the impact on rate from the perspective of the consumer. I believe consumers will understand the seesaw effect on the rate and make their choices easily. I am pleased that you underplay the matter in the loan origination fee section and focus the attention of the consumer on the bottom line.

I do suggest that you add a summary section for cash to close. This final summary is missing and unless you define its form, the uniformity you hope to give the consumer will be lost. A summary would encapsulate what we might normally see on page one of the HUD-1. Something like sale price less mortgage less hand money less seller assist, etc. equals cash to close.

On the issue of seller assists, if it’s within HUD’s power to instruct, I would suggest that mortgage lenders use a flat credit for a seller assist rather than move buyer fees to the seller side of the HUD-1. I think having buyer fees on the seller side of the HUD-1 under this new system would be too confusing.

I would strongly prefer that the settlement costs in the shopping chart be adjusted so that they do not include estimated escrows, hazard insurance, transfer taxes and recording fees. These items are unique to the property and the date of closing and not the loan originator. It has been my experience that unscrupulous loan originators will lowball escrows to make a GFE more attractive. Perhaps you could call those costs “comparable costs” or something like that.

Finally, on the GFE, recording fees are a moving target that most settlement agents have a hard time figuring even with documents in hand. Setting any kind of tolerance is simply creating a predictable failure on virtually every GFE. There may be some places in this great country wherein a loan originator easily predicts the recording costs but they have to be few and far between.




VOLUME DISCOUNT AND AVERAGE COST PRICING

I will limit my comments on this subject by saying that I laud your intentions as I believe you are hoping for some cost savings for consumers, however, these provisions of the rule are ripe with multiple configurations of unintended consequences. It’s just too obscure. Too much can be read into these parameters and the possibility for harm far outweighs any conceivable benefit for the consuming public. With as much intensity as I can express within this format, I implore you to just strike the ideas, please.

CONCLUSION

As a final note, I must say that should you successfully implement refined versions of the proposed GFE and HUD-1 enhanced by the Closing Script, honest professionals can and will adapt and eventually find them ordinary and comfortable. Predators and those who depend upon obscure and unreliable disclosure to make their credit kill, will be forced to shape up or ship out and you will therefore, whether you planned to or not, help us restore the public trust.

Sincerely,

Diane Cipa
General Manager
The Closing Specialists
204 West Main Street
Ligonier, PA 15658

I don't mean to sound like I'm out to lunch or anything, but I was having dinner

and did I miss something??

Fifteen million people are Googling Radical Title Talk.

What goes?

What you need to know about the past is that...

... no matter what has happened, it has all worked together to bring you to this very moment. And this is the moment you can choose to make everything new. Right now. ~Author Unknown

a three year old has control of the camera for the first time without supervision and unknown to his mom

produces these Radical images and yes, he is tall. it runs in the Radical family........ ;)

the absolute audacity of this headline just slays me

Realtors storm Capitol Hill seeking repeal of RESPA rule

I'm catching whispers on the wind that

seem to be saying...........












Financial Title...

The case for having the HUD-1 available for consumer review 3 days prior to closing.

I do hope HUD will find legislative success when and if they pursue a 3 day HUD-1 pre-closing review for consumers.

Reading through the four complaints linked in the previous post just solidifies in my mind how very urgent is the need for consumer relief. Consumers engaged in perhaps the biggest and most complicated financial transaction of their lives are forced into a time compression chamber and are expected to understand and deal with dollars flying out of their pocket and the "professionals" handling the transaction have a virtual gun set at their temple. Pay or you don't close.

I understand the problem because we are often the party holding the gun. The system stinks. We need a better way. The MBA and ALTA sponsored effort at Uniform Closing Instructions is a step in the right direction, but it's voluntary. If HUD were able to impose upon the lending community a cooling off period, like they were able to do with the right to cancel in a refinance, and give consumers a HUD-1 3 days PRIOR to closing, we'd not have to hold that gun.

Sometimes we're sitting at a closing table with a consumer who didn't call us directly for a quote and the loan originator misquoted our fees or missed a government related charge like transfer taxes. These are issues that the proposed RESPA reform, namely the GFE combined with the script and tagged HUD-1, could resolve.

As I pondered this issue this morning I remembered that sellers in a REO transaction, property being sold by a lender who foreclosed, mandate early receipt of their HUD-1. These sellers and Fannie Mae and Freddie Mac DEMAND that they have sufficient time to have their attorney review the HUD-1 and they have ample time to digest data and make changes as necessary. If we don't get the HUD-1 to them on time, the closing is postponed. Conversely, they have the buyer under the gun with a $100 per day penalty looming if they miss the closing day deadline.

It's all so anti-consumer. Laymen are vulnerable and hope to heaven they are in the hands of honest professionals.

So, anyway, I have given myself the old boot in the behind and I will compose and release my comments on RESPA this weekend. I've pondered the issue long enough.

Bottom line - I love the GFE/Script/HUD-1 with tweaking to fix some issues because it blows away the smoke and mirrors used by so many to harm consumers, purposefully or not. I hate the volume discount and average cost pricing because it's obscure and leaves too much to the imagination that it will likely create a whole new world of corruption and bad dealings.

on the subject of escrow accounts continued......

"the corp. didn't make any money on title ops, but by utilizing sweep accounts had made something on the order of $60mm that year"

Now, that's darn interesting.

after THAT pregnant pause and finally figuring out how to upload FTP stuffola

I decided just for the heck of it to Google the freaking thing and there it is already out there and you've probably already read it, huh? ;)

Fidelity complaint

First American complaint

Chicago Title complaint

Old Republic complaint

time for a musical interlude BOOM chukalukaluka BOOM

any watusi dancers out there know how to post a pdf to a web page

tell me.......I've got good stuff you want to read and no way to get it to you. ;)

JF's out til Tuesday and she's the IT brainiac around here.

perhaps I'm just jaded but

why should an industry that has so demonstrably operated without holding high the greater good or welfare of the consuming public have any say so concerning reforms such as those proposed by HUD which serve to guard the interests of the consuming public?

on the subject of escrow accounts continued

Here's a link to a legislative attempt in Colorado to fix this problem but it wasn't successful. Thought you might find it interesting reading. ;)

on the subject of escrow accounts

Here's a link to Colorado Title Insurance Trust/Escrow Account Interest Survey – Preliminary Results.

this is extraordinarily interesting

The lawsuits also claim that Fidelity National and First American illegally pocketed interest and gained discounted banking services and large lines of credit from money they hold temporarily as part of their transaction coordination.

"Without proper disclosures, these monies belong to the escrow customers, not the title and escrow companies," the lawyers said.

The lawyers will not know just how much money the companies made from this arrangement until they get into the discovery phase of the cases, Berman said. "But we believe it will be in the hundreds of millions of dollars."

The First American lawsuit claims the company charges high wire fees for sending payments to and from banks, despite the fact that banks wait or substantially discount these fees. It gives details about the wire fees only in the case of the Jakanishes, who paid a $70.72 "Wire/Express" fee, "when in truth and fact its bank waived, offset or significantly discounted any such fees."

The lawsuits seek class-action status and potentially could take in millions of homeowners nationwide. They are part of a series of suits buyers have filed against companies involved in real estate transactions over the past two years.