RESPA Review, 801 and 802
It has been nearly two years since the mandatory implementation of HUD’s 2010 RESPA rule. You might think that things would now be quiet along the RESPA front, but there is still uncertainty regarding several of its provisions and the industry continues to grapple with compliance. To make matters worse, the CFPB is actively working on a new version of the rule that will implement combined RESPA/TILA disclosures. So far it looks like the new rule will be somewhat of an improvement over the current rule, but the costs associated with re-implementing in such a short time are daunting. Against this backdrop we will examine one of the new concepts introduced by the 2010 RESPA rule: the introduction of summation lines on the settlement statement, particularly lines 801 and 802.
Prior to the 2010 RESPA rule, lines 801 and 802 were fee lines associated to a single fee. Line 801 was used to “record the fee charged by the Lender for processing or originating the loan.” It was entered either as a fee or as a percentage of the loan amount. Line 802 was used to display the loan discount or “points” charged by the lender. It was also entered as a fee amount or as a percentage of the loan amount.
The 2010 Rule
The 2010 RESPA rule made several changes to the fee lines displayed on the settlement statement. One of the main changes was altering lines 801 and 802 from individual fee lines to summation lines. Line 801 was relabeled as “Our origination charge.” It now includes all charges received by the loan originator except for any specific charge (points) for the interest rate chosen. “The amount shown in line 801 must include any amounts received for origination services, including administrative and processing services, performed by or on behalf of the loan originator.” In essence, the new rule changed line 801 from a specific fee line for origination to a summation of all origination charges.
Line 802 was changed from a single fee for discount points to a summation of all the charges associated with the interest rate on the loan. It can be a discount point charged to the borrower to lower the rate or it can be a credit to the borrower for choosing a higher interest rate to offset settlement charges. The total of these interest rate related charges make up the line 802 displayed on the settlement statement.
Assembling the Summations
In order to ensure compliance with the summation requirements associated with the 2010 RESPA rule, DocuTech made several changes to its ConformX software. The software was modified to accept the individual parts of the fee summations and then assemble the line item totals. For instance, the individual itemized line 801 is still used for the origination charge, but the software will also take all the other 800 series items that are assigned to GFE Block 1 and add them into the total for the summation line 801 “Our origination charge” as displayed on the settlement statement. Likewise, the itemized line 802 is still reserved for discount points only, if a user wants to apply a credit to borrower for interest rate chosen, they will enter it on an 800 series line and assign it to GFE Block 2. This way the software will perform the operations and assemble the line 802 summation amount as displayed on the settlement statement. This allows the fields inside the software to remain consistent on state disclosure documents that only use the itemized line 802 field for discount points. Entering a negative number in the itemized 802 field will cause negative numbers to appear on those forms. It is also important to correctly use the itemized 802 line correctly because many multistate documents such as the Itemization of Amount Financed and the Closing Instructions label the itemized 802 line as Discount Points.
Compliance professionals continue to wrestle with the ambiguities associated with the 2010 RESPA rule and different opinions can be found on many RESPA topics. DocuTech has endeavored to create software solutions that help ensure compliance with the rule while accommodating for differing interpretations and business practices. If you have any questions or concerns related to this or any other compliance related topic, please contact your DocuTech customer support representative.