1. © Copyright 2009 RamQuest Software, Inc. A Proactive Approach to RESPA Reform Mary Schuster RamQuest Software, Inc. Director of Operations

2. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. RESPA Reform November 17, 2008 Dept of HUD Releases RESPA Regulation What Does It Mean?

3. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. What is RESPA anyway? Real Estate Sales Procedures Act Introduced in 1974 1996 Reform Additional Reform Process began in 2002 Proposed New Rule released March 14, 2008 Final New Rule published November 17, 2008 RESPA reform impacts all principals to a real estate transaction including: lenders, title providers, settlement agents, mortgage brokers, Realtors, builders, buyers and sellers.

4. A Proactive Approach to RESPA Reform Intentions of RESPA Reform Intended as a Consumer Protection act Requires Greater Disclosure of Loan Terms and Settlement Fees Encourages consumers to shop for loan and settlement providers Establishes fee variance tolerances between fees quoted on GFE and Hud-1 forms (loan app and closing) © Copyright 2009 RamQuest Software, Inc.

5. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. Key Features of RESPA Main components of final RESPA rule 3-page Good Faith Estimate (GFE) Disclosure of Yield Spread Premiums as a credit to borrower Tolerance limitations on settlement charges 3-page HUD-1 Settlement Statement Average charges Required use

6. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. Other Important Features Agent and Underwriter Split disclosed on Hud-1 Lender is responsible for transmitting GFE data to settlement agent Lender has 30 days to cure intolerances New definition of Title Services

7. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. New Definition of Title Services RESPA defines Title Services as Any Service involved in the provision of title insurance including but not limited to: Title Exam and Evaluation Prep & Issuance of Commitment Prep & Issuance of Policies …AND All Administrative & Processing Services required to perform these functions (e.g. document delivery, preparation & copying, wiring fees, notary fees, etc)

8. A Proactive Approach to RESPA Reform New GFE Form Page 1 © Copyright 2009 RamQuest Software, Inc.

9. A Proactive Approach to RESPA Reform New GFE Form Page 2 © Copyright 2009 RamQuest Software, Inc.

10. A Proactive Approach to RESPA Reform New GFE Form Page 3 © Copyright 2009 RamQuest Software, Inc.

11. A Proactive Approach to RESPA Reform Key Changes to HUD-1 Roll Up Lines Outside the Column Charges Grouping of Fees Page 3 HUD-1 to GFE Comparison Key Loan Terms © Copyright 2009 RamQuest Software, Inc.

12. A Proactive Approach to RESPA Reform New HUD-1 Page 1 © Copyright 2009 RamQuest Software, Inc.

13. A Proactive Approach to RESPA Reform New HUD-1 Page 2 © Copyright 2009 RamQuest Software, Inc.

14. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. New HUD-1 Page 3

15. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. Tolerances 3 Categories of Tolerances from GFE to Hud-1 Fees that cannot change Fees that cannot increase more than 10% (aggregate) Fees that can increase * Language from GFE Document

16. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. Tolerances Zero Tolerance GFE to Hud-1 Origination Fee Points (or credited YSP to offset Orig Fee) Adjusted Origination Charges Transfer Taxes * Language from GFE Document

17. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. Tolerances Total of charges can increase up to 10% at settlement (we = lender and you = borrower) Required services we select Title services and lender’s title insurance (if we select them or you use companies we identify) Owner’s title insurance (if you use companies we identify) Government recording charges

18. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. Tolerances Charges can change at settlement Required services that you can shop for (if you do not use companies we identify) Title services and lender’s title insurance (if you do not use companies we identify) Owner’s title insurance (if you do not use companies we identify) Initial deposit for your escrow account Daily interest charges Homeowner’s insurance

19. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. New Documents Document Changes Everyone must be compliant by Jan 1, 2010 Some lenders may be early adopters Forms will be phased in by Jan 1, 2010 If new GFE is used then new HUD-1 must be used

20. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. What Do We Know? Beyond Document Changes Sweeping Industry Wide Changes Procedural Operational Legal

21. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. Beyond the New Forms Provisions in Effect Jan 16, 2009 Average Pricing Required Use New Servicing Disclosure Statement (Lender)

22. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. Average Pricing Ineligible Fees Fees based on loan amount or property values Transfer Tax Interest Escrow Reserves Insurance Premiums (including title) Provider’s Own Internal Charges Eligible Fees All other fees including 3rd party fees

23. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. Average Pricing Calculations based on specific class of transactions During a specific time period not less than 30 days not more than 6 months For a specific geographical area

24. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. Average Pricing Charge may not exceed average calculation Charge may not exceed TOTAL price paid to 3rd party provider Originator must retain all documentation determining accuracy of pricing method for at least 3 years

25. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. Required Use Intent is to allow bona fide discounts and disallow any discounts predicated on preferred service providers Declares illegal any economic incentives or disincentives used to improperly influence a consumer’s choices A discount of fees or services shouldn’t be predicated on the selection of a specific provider.

26. A Proactive Approach to RESPA Reform Required Use Provision There is an exemption to the Required Use provision for AfBAs if: 1.The combination of services is optional AND 2.The lower price is not made up elsewhere in the transaction However …. © Copyright 2009 RamQuest Software, Inc.

27. A Proactive Approach to RESPA Reform Required Use Provision Homebuilders and their Affiliates are excluded from the AfBA exemption They filed suit in Jan 2009 claiming this was unfair Hud has delayed the effective date of Required Use until July 16 2009 and reopened public comment on this issue © Copyright 2009 RamQuest Software, Inc.

28. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. Miscellaneous Provisions & Issues Removes 1% Cap on FHA Origination Fees Provides for E-sign of these new documents Extends protection to Sellers under Required Use Provisions RESPA Reg is in conflict with some current state Regs RESPA Reg needs further clarification on some implementation issues – HUD willing to work with us Some early adopting lenders may not understand full scope of changes

29. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. Miscellaneous Provisions & Issues Many provisions require clarification from HUD Functional implementation is evolving Makes it more difficult for mortgage brokers to compete The Reg. openly encourages lenders to put downward pressure on settlement charges

30. A Proactive Approach to RESPA Reform © Copyright 2009 RamQuest Software, Inc. The Costs of Compliance Our Profitability and RESPA HUD Estimates for settlement services providers, up to $169 million in one-time costs for switching to the new HUD-1 forms. Those costs include $62 million for software and training, $37 million for legal advice and training; and, $71 million additional training. The total cost of compliance for the lending and settlement industry combined is estimated at $571 million. Total recurring costs are expected to be $918 million annually. The Reg Assumes that Compliance Costs will be Passed On To Consumers. *See Section 6 of Reg for full discussion pg 142-143

31. A Proactive Approach to RESPA Reform Start Down Your RESPA Ready Path Seek Information Go To: www.alta.orgwww.alta.org Click on RESPA Reform ALTA’s RESPA Presentations RESPA Reg. Full Text Hud-1 Instructions pgs: 163-202 GFE Form & HUD-1 Forms Updates from ALTA © Copyright 2009 RamQuest Software, Inc.

32. A Proactive Approach to RESPA Reform Start Down Your RESPA Ready Path Become Involved ALTA Involvement Submit questions to respacomments@alta.org State Land Title Associations Community Professional Organizations Educate and Invigorate Your Staff © Copyright 2009 RamQuest Software, Inc.

33. A Proactive Approach to RESPA Reform Start Down Your RESPA Ready Path Dialogue with Others Coming Soon an Electronic Town Hall for RESPA Reform Business Discussions www.respaready.com Discussion of evolving RESPA matters Downloadable White Papers Blogs & Discussion Groups © Copyright 2009 RamQuest Software, Inc.