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                                              FHA Clarifies Fees and Charges

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Overview

On December 30, 2009, the Federal Housing Administration (FHA) issued Mortgagee Letter 2009-53, clarifying how fees and charges for (FHA)-insured loans must be disclosed on the new Good Faith Estimate (GFE) and HUD-1 Settlement Statement (HUD-1), consistent with changes to the Real Estate Settlement Procedures Act (RESPA).

This Mortgagee Letter covers the following subjects:
  • Disclosure of Origination Charges
  • Good Faith Estimate (Case Binder Procedures)
  • Seller Credits on the HUD-1
Effective: January 1, 2010

Highlights

Disclosure of Origination Charges

As a result of regulatory changes to 24 CR 203.27, FHA no longer limits the origination fee to 1 percent of the mortgage amount for its standard mortgage insurance programs. This change is required by RESPA's Final Rule (See 73 F.R. at page 68239) amending 203.27(a)(2).

The Home Equity Conversion Mortgage (HECM) and the Section 203(k) Rehabilitation Mortgage Insurance Program retain their statutory origination fee caps.

FHA expects "fair and reasonable fees" for all origination services and will monitor to ensure that FHA borrowers are not overcharged. The FHA Commissioner retains the authority to set limits on the amount of any fees that mortgagees charge borrowers for obtaining an FHA loan. It is likely that the agency will issue additional guidance on this subject in early 2010.

GFE: The sum of all fees and charges from origination-related services must be included in Box 1 on Page 2 of the new Good Faith Estimate (GFE). (The figure in Box 1 represents all compensation to the lender and/or broker for originating the loan and will most often exceed the specific origination fee caps set for government programs.)

HUD-1: If a government program or state law requires that lenders provide more detailed information to specify distinct origination fees and charges, lenders may itemize these charges in the empty 800 lines of the HUD-1 (to the left of the column).


Highlights

Seller Credits on the HUD-1

GFE: The new regulations, similar to previous practices, do not require or permit the presentation or disclosure of seller-paid credits on the GFE.

HUD-1: The charge will be displayed in the borrower's column on the HUD-1 and a credit to offset charges will be listed in Section J, Summary of Borrower's Transaction on lines 204-209 with a reduction to the seller's proceeds in Section K, Summary of Seller's Transaction on lines 506-509. When the seller contributes to more than one expense, the seller credit shown on the HUD-1 must reflect the lump sum payment.


Issuances

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The following Issuance is available in our Library:
  • Mortgagee Letter 09-53: RESPA and FHA Related Policies
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