issue #2 sticky

Thanks to David Dickinson for the heads up on the new RESPA FAQ.
On Friday August 28, HUD issued an updated FAQ:

http://www.hud.gov/offices/hsg/ramh/res/faqfinalrev4.pdf


Question: With the new GFE is it fair to say that it is possible fees that are NOT APR related will be lumped into Block 1 Origination Charges?

Thanks in advance!

Yes, many fees (such as Document Prep) can be in Block 1 of the GFE that are not FC's.

I'm currently reviewing the new FAQs. Here's what I noticed:
There are 51 new Q&A's from the 8-13 edition. They added them to the end of sections (thanks), but moved several "old" ones (no thanks). They don't make the new FAQs know by telling us which are new, marking them in a new font, etc.

There was no announcement from HUD of which I am aware. They just (secretly) came out. Why? I heard there was to be approximately 200 Q&As, so I guess we should stay tuned for more to come.

For me, personally, this was a pain as I'm preparing to cover these Q&A in a webinar. We had already prepared the materials and was digesting the info. Now we have to start from scratch on the materials. I'm concerned that HUD will do this again before the webinar on 9/24. Oh well - I guess I appreciate them giving us the guidance.

You can find out more about the webinar here:
http://calendar.bollearningconnect.com/main.php?view=event&eventid=1250610623605

Good ole HUD...the one thing you can depend on...is you really can't! BUT...they never change!

I imagine the LOS software programmers are screaming today. I forwarded the new FAQ link to our LOS contact. I know they thought they were well on their way to figuring this out but they obviously have to huddle up (pardon the pun).

OMG as a loan closer I think I am going to go get in the closet and cry, that was so confusing to read!!!

Think about us poor people that don't handle these on a regular basis.

The August 13, 2009 version of HUDs FAQ's included the following Q&A in the GFE General section:
13) Q: Does a prepayment penalty include the requirement of paying interest on a monthly basis on an FHA loan?

A: No. FHA loans accrue interest on a monthly basis. The payment by a borrower of accrued interest upon payoff of an FHA loan is not a prepayment penalty.

This Q&A was deleted from the August 28, 2009 version of the FAQs. Of course, there was no accompanying explanation for this change. Is anyone interpreting this change to mean that we should disclose that FHA loans have a prepayment penalty?

How is the payment of accrued interest a prepayment penalty? It is simply interest earned.

I think the FHA contract includes that if a borrower prepays in full on a date other than a regularly scheduled due date, the borrower can be required to pay interest up to the next installment date. That would be a prepayment penalty under Reg. Z.

I was not aware of that.

For what it's worth, FHA prohibits prepayment penalties.

Yes they do, however this is written into their standard loan contracts. The FHA doesn't view this as a prepayment penalty, but Regulation Z does. As such, I imagine that HUD read the "FHA prohibits prepayment penalties" and after further consideration thought they should withdraw the previous Q&A.

From the Official Staff Interpretations for Regulation Z Section 226.17(a)(i)5: "xi. If a state or Federal law prohibits prepayment penalties and excludes the charging of interest after prepayment from coverage as a penalty, a statement that the borrower may have to pay interest for some period of after prepayment in full. The disclosure given under Section 226.18(k) may state, for example, 'If you prepay your loan on other than the regular installment date, you may be assessed interest charges until the end of the month.'"

We have always included this statement on the TIL for FHA loans. Does this change anyone's mind on whether or not FHA loans have a prepayment penalty?

It is what it is - a prepayment penalty. That is why it has to be disclosed on the TIL disclosure and the commentary directly addresses it.

I'm not sure I follow how the commentary addresses it. The statement, "If a state or Federal law prohibits prepayment penalties and excludes the charging of interest after prepayment from coverage as a penalty,..." seems to open up the possibility that the charging of interest after prepayment is not a penalty.

The RESPA FAQs on HUD's web site now have a 9/1/09 date.

http://www.hud.gov/offices/hsg/ramh/res/faqsept109final.pdf

The only difference I can see from the 8/28 version to the 9/1 version is that they removed question 2 from the 800 series. The question was "If an attorney prepares loan documents for a lender, where does that charge go?"

Reg Z is directly addressing FHA loans in that statement. Federal law prohibits a prepayment penalty on an FHA loan, however it excludes from the definition of a prepayment penalty the charging of interest after prepayment. However, Regulation Z doesn't exclude such a charge as a prepayment penalty and thus gives you an example of the required disclosure in such a case.

Would this alternative statement for FHA loans replace the statement "If you pay off early you may have to pay a penalty" or would it be in addition to that disclosure?

Also, on the new GFE, even though FHA loans don't have a prepayment penalty, would you then answer "yes" to the question, "Does your loan have a prepayment penalty?" And how would you calculate the dollar amount of the maximum prepayment penalty?

Thanks for helping me to be on top of this.

ACtually, there are more changes...additional Q&A's...for example, under Important Dates #3 has been added.

Joker: that was already in the 8/38/09 Q&A's.
I just compared the 9/1/09 Q&A's to the 8/28/09 Q&A's. The only change I can find is the removal of Q&A #6 on page 14 as ReadsRegs stated.

First question: Why did they remove this Q&A?
Second question: Why doesn't HUD announce these changes?
Third question: Why doesn't HUD tell us what they are changing/deleting/moving?

GRRRRRRR!!!!!!!!!!!!!!

ummmm...David, seriously, it's not in my 8/13/09 version, but then...I don't have one dated 8/38/09 Ah, but I see you have a 8/28 date listed...apparently this has been changed at some point that I was not aware of...geesh!

In fact, I just dug it out of the trashcan to verify I had listed the correct section and addition.

My 8/13 verison has 2 question in the Important dates section on page 6. The 9/1 version has 3 questions (#3 being new) on page 7.


as far as you last comment! for REAL! this is why I do NOT miss secondary market FHA lending...but that's not helping me with this...because it's determined to continue haunting me!

I emailed HUD telling them their link doesn't work (from the first announcement) and asking them to announce the changes. I also asked them to let us know what is changing. We'll see.

don't hold your breath! but then, you already know that!