The Department of Housing and Urban Development is taking an enforcement action against what it calls a "large" lender that forced title agents to cover certain settlement costs that exceeded the amounts initially disclosed on the good faith estimate form.
However, HUD officials would not disclose the name of the originator that committed this Real Estate Settlement Procedures Act violation.
HUD RESPA compliance specialist Laura Gipe said title agents who paid the "tolerance cures" will be reimbursed soon by the lender in question.
Under RESPA, lenders are required to provide a GFE to mortgage applicants, giving an estimate of origination and closing costs. If those costs are higher at the settlement table, the lender is required to reimburse borrowers for every dollar that exceeds set tolerances.
"The large lender was sending out demand letters and invoices to title agents for reimbursements for tolerance cures," Gipe told a Washington meeting of the American Land Title Association on Tuesday afternoon.
Agents also were threatened with loss of future business if they did not make the payment to the lender. "I am happy to report that very soon all of those who have been removed from the [lender's approved] list for failure to pay will be restored," Gipe said to the cheers of a few title agents in the room.
HUD's RESPA office also noticed that some lenders are sending out multiple good faith estimates to borrowers. The agency is seeking more information about this practice. (Lenders can amend the GFE due to changed circumstances, which are defined in the RESPA regulations.)
But Gipe noted that lenders appear to be issuing multiple disclosures so that the cost estimates on the revised GFEs match the costs on the HUD-1 settlement sheet. One title agent in the audience said she has seen mortgage brokers issuing several "undated" GFEs.
