The StoneHill Group Inc. is seeing a downtick in errors under the new RESPA rules although the company still has some clients who are struggling with the total implementation of these regulations, which have been in effect since the beginning of January.
The Atlanta-based quality control provider has helped lenders who suffered procedural problems go back and implement changes in the way they process information for proper disclosure with the Good Faith Estimate.
"That has been a help as we begin to audit these loans and report the findings to our clients," said Doug Parker, quality assurance manager.
But the reality is, the time spent in preparing for the proper disclosure has gone from 45 minutes to as much as two hours to be compliant. "It's putting some stress on the closing of the real estate transaction," he said.
When it comes to communication, the company reaches out to clients that include large, medium and small-sized lenders through phone calls, e-mail newsletters, marketing bulletins and Webinars.
"It takes an in-depth individual at each organization who is responsible for getting all of the updates and making sure the implementation has happened. A dedicated person at each shop must make sure they keep up to date on these questions and answers," added Theresa Buenerkemper, director of outsource operations, the Stone Hill Group.
The common theme throughout these regulations is "protection."
Most recently, there has been dialogue about the Fannie Mae Loan Quality Initiative. The LQI started July 1. It was designed to spur more observance of potential fraud prior to the loan closing and not after the fact.
"That was the goal of Fannie Mae-to move it to pre-closing quality control review before the loan closes," Buenerkemper said.
"The LQI protects their bottom line to make sure they have a vehicle by which to put those loans back to whoever originated it if they don't follow their directive to the letter of the law. It's protecting the consumer but it's also protecting the purchaser of the loans as well."
The Fannie Mae LQI has led the mortgage industry toward greater fraud risk awareness.
"Do it right, do it right the first time," she added. "Document your file correctly the first time from start to finish."
In August, the StoneHill Group will review loans that their clients closed in July to determine how "in compliance they are." Buenerkemper and Parker agree it will "be interesting" to see how the lending industry reacts to compliance. And will Freddie Mac mirror what Fannie Mae has done or come up with something different?
Under the Real Estate Settlement Procedures Act, regarding post-closing reviews, clients are struggling with transfer tax and what that charge is going to be. That is not an item that they allow tolerance on, according to Buenerkemper.
"Your closing agent and your lender have to know what those taxes are going to be or they will find themselves in a refund to the borrower because they have over-collected at the closing table vs. their disclosure. It's really a hand in hand [situation]," she said.
"The lender has to work very closely with the closing agent to make sure the closing agent provides the correct information as it [is] related to the different charges they are going to charge."
Dealing with these regulations might call for a different staffing requirement, especially in an environment where closing attorneys tend to have a small staff.
"Most of the closing happens at month-end or mid-month, so it's really jammed to the end. They aren't necessarily given the amount of time they need to fully investigate. I'm sure it is causing some grief to some companies from a staffing requirement [standpoint]."
When the loan does close, "it will be more accurate or you will pay the price in a refund back to the borrower if it was not done correctly," she said.
RESPA and the Good Faith Estimate are "moving the mortgage industry into a phase of really dotting ever 'i' and crossing every 't' before they sign off on the HUD-1, and making sure that before the loan is closed they have everything correct. It is eliminating the ability to close and not do it correctly."
