WASHINGTON (12/30/09)--As the Credit Union National Association (CUNA) reminded credit unions in yesterday’s News Now
, the changes to the U.S. Department of Housing and Urban Development’s (HUD’s) implementing rules for the Real Estate Settlement Procedures Act (RESPA) go into effect Friday, Jan. 1. “CUNA would like to clarify compliance requirements regarding home equity lines of credit (HELOCs) that have not changed in RESPA,” said Kathy Thompson, CUNA’s senior vice president for compliance. Addressing questions recently posed to CUNA, Thompson offered the following guidance:
* Have the RESPA rules changed on when credit unions need to supply HUD’s “Shopping for Your Home Loan: HUD’s Settlement Cost Booklet”?
Answer: No. As we reported yesterday, HUD has updated its settlement cost booklet that has to be provided to consumers within three days of applying for certain mortgage loans. HUD has not made any changes to the section of the RESPA regulations that dictate when the booklet must be given (Section 3500.6). Therefore, for a HELOC, credit unions should continue to provide the Federal Reserve Board’s “When Your Home Is On the Line: What You Should Know About Home Equity Lines of Credit” to be in compliance with the RESPA rules. And the exceptions to providing the booklet for refinancings, closed-end subordinated loans and reverse mortgages continue to apply. While HUD's booklet makes mention of home equity loans and refinancings--and cautions consumers about taking out such loans--the booklet is clearly oriented to a person buying a house, and it would undoubtedly be confusing to give the booklet out for all types of mortgage loans.
* Do the RESPA amended rules now require the use of any new HUD forms for home equity lines of credit (HELOCs)?
No. While HELOC loans are “covered” under the general RESPA definitions, there are specific exceptions that HUD did not change when it revised its RESPA rules in November 2008. HUD did not change the language of current Section 3500.7(f) [but did re-designate (f) as a new (h)], which states that if a lender provides the disclosures required by the Truth in Lending Act’s Regulation Z at the time the person applies for a home equity line of credit, then the lender isn’t subject to the general rule of providing a Good Faith Estimate (GFE). Moreover, the revised Section 3500.8 on settlement statements continues to state: “The use of the HUD-1 or HUD-1A is exempted for open-end lines of credit (home equity plans) covered by the Truth in Lending Act and Regulation Z.”
Thompson said therefore, at this point credit unions do not have to change their compliance procedures for closing HELOCs. She admonished, however, “Remember that the Fed has under consideration changes to its Regulation Z’s rules on both closed-end mortgage loans and HELOCs (the comment periods for both proposals closed on Dec. 24), and it has indicated its interest in trying to better coordinate disclosures under Truth and Lending and RESPA. So we will have to see what 2010 holds in store for further changes in lending disclosures.”