More tips on RESPA law, guidelines and violations for real estate agents and loan originators from former HUD investigator and RESPA expert, Dr. Gary Lacefield.

The latest video continues the discussion of the new HUD/RESPA forms for Good Faith Estimate and Mortgage Package Offer. Dr. Lacefield reviews the rules and tolerances for these new items. Part 2 of 2.

View the RESPANewsUpdate.com video here. This educational video and the RESPANewsUpdate.com website were created by WebCasting.com, based in Dallas, Texas. This video is provided for free, compliments of Premier Mortgage Funding, Inc.

For more about Dr. Lacefield, visit RiskMitigation.net or GoGetRealEstate.com/Get/GLacefield.

New MPO and GFE Forms to Learn and What They Mean to YOU - Part 2

Mortgage Package Offer (MPO)

: Discussing the considered changes, Cunningham said, “In 2004, to qualify for safe harbor from RESPA section 8, a mortgage packager must have provided a guaranteed price for most settlement services necessary to close the loan, and an interest rate that is fixed or would have changed only according to posted pricing.”



He then explained that the MPO was really a re-working of the Guaranteed Mortgage Package Agreement (GMPA) idea that HUD had promulgated in its 2002 reform proposal. The GMPA would not have required itemization of services at the time of application. HUD also stipulated that there would be no upfront fee and that the guaranteed price would remain open for 30 days.

However, after hearing the opposition to that proposal, HUD went back to the drawing board, and reconfigured the GMPA into the MPO. The MPO requires packager to indicate whether the package included certain services, allows for a nominal upfront fee and the guaranteed price must only be open for 10 days instead of 30. 



The first page of the MPO is the same as that of the 2004 GFE. It includes borrower information, directions on how to use the MPO, a summary of loan terms and a summary of the total estimated charges.

Services suggested for inclusion in the MPO were the appraisal, credit report, government charges, title insurance and closing services, mortgage insurance, survey and pest inspection. HUD also stipulated that certain services not be included in the MPO, including reserves or escrow, daily interest charges, homeowner’s insurance and owner’s title insurance.



The third page of the MPO includes the same “teeter-totter” chart describing the effect of higher or lower interest rates on settlement charges as appears in the GFE, and an explanation of how the MPO can be accepted.

Regarding an interest rate guarantee, Cunningham explained that in the 2002 proposal, the GMPA interest rate could only change based on public available index. And in the 2004 changes, the interest rate could change only based on posted pricing. A loan officer would have to publicly display what the interest rates were.



The fourth page of the MPO, like the GFE, includes a shopping page, to allow consumers to easily compare different loan offers.

Nabors asked, “Will brokers be able to participate in MPO’s?” Cunningham said yes. Nabors also inquired if a lender would be required to accept the MPO, to which Cunningham explained that a lender could refuse if the MPO did not meet their underwriting standards.



Cunningham also noted that there would be no affiliated business arrangement disclosure required for the MPO. Cunningham then elaborated on HUD’s thoughts concerning changes to packaging options. He harkened back to the suggestions made in the first days of RESPA reform, noting that certain groups had said that a dual-package approach would be preferable to HUD’s single-package proposal.

Thus, in 2004, HUD developed a new possible offering called the Settlement Services Package (SSP), which would be used in conjunction with the GFE or MPO. “The SSP would include title services, government recording fees and transfer charges, and other lender-required settlement services that the borrower could choose,” said Cunningham. 



Regina Lowrie, president of Gateway Funding Diversified Mortgage Co. and chairwoman of the Mortgage Bankers Association (MBA), asked for clarification on the lender-required settlement services, to which Cunningham responded that they could include things such as surveys and pest inspections, but would not include the appraisal credit.

He added that the SSP could include owner’s title insurance for a separate additional charge.
Cunningham also emphasized that there would be “no restriction on who could offer an SSP,” noting that possible providers included title insurers, lenders, escrow companies, mortgage brokers, real estate firms, affinity groups, title agents, pest inspectors, surveyors and attorneys.



HUD would require that a Settlement Services Packager must provide a guaranteed lump sum price for charges and services within the SSP, and must provide a firm offer that includes an itemized list of the services contained in the SSP. The SSP would then become a part of the GFE or loan package and that the disclosure must give the consumer 30 days to shop. The SSP provider would be responsible to the borrower for providing all the services contained in the SSP.



Regarding how the SSP would work with the MPO, Cunningham said, “The SSP would be marketed to the MPO packager or to the consumer, and that the price of the SSP would be paid by the MPO packager in both cases.” Also, “HUD would not require MPO packagers to use a particular SSP in their mortgage packages, just as lenders today cannot be required to use a particular settlement agent,” he said.

Jim Hamilton of the National Association of Realtors (NAR) did not seem to be happy about what HUD was proposing. He said, “I’m confused. On the MPO, I get one price. But how does it work if the consumer gets their settlement services package from someone else? How does the lender price that?”


Cunningham explained that, in that case, the lender could substitute the services of the consumer’s SSP providers with those of the packager’s own SSP providers, and the lender’s price could change on that.

”An SSP provider is only a certain element of the MPO,” he said.

A HUD official attempted to clarify further by saying, “The SSP gets captured in the MPO price, whereas in the GFE world, the price is broken out.”

In addressing other packaging issues, roundtable participants wondered about what would constitute a material change to the MPO, meaning under what circumstances the MPO could be changed. 



Cunningham said that to allow any alteration to the package, the material change “must be one that disqualifies the borrower from the loan that was originally offered.”

He also added that in calculating finance charges, the entire package price must be included in the interest charge.

After introducing and explaining the new forms to the roundtable participants, Cunningham said that HUD wanted the industry to examine and comment on the forms. 



Jeff Black of the Consumers Union asked if there would be a formal comment process, to which Cunningham replied that there would not be. 

”The forms will be available on our Web site and we invite you to write in at any time,” he said. However, he noted that, at this time, there is NOT a formal comment period on the forms. 



Kathy Smith, national director and past-president for the Idaho Association of Mortgage Brokers (IAMB), asked if the forms would be tested on consumers, but Cunningham and other HUD officials explained that they already have been tested and will continue to be tested.

Kim Kendrick, Jackson’s senior counsel at HUD, also stood up to state, “These forms may or may not be included in a proposed rule,” she said. “Jackson has been very clear on this, so I will be clear with you now, you WILL get to comment on any form included in a rule.”



As HUD has noted on its RESPA reform Web site, the forms are just drafts “that reflect HUD’s position on The Good Faith Estimate and The Mortgage Package Offer in 2004. These forms do not necessarily indicate the Department’s current thinking on these forms and are provided to stimulate a dialogue among those consumer and industry organizations with an interest in RESPA reform.”