- June 23, 2010
- All Affiliate Offices
- Flagstar Bank Loan Instructions for TILA and HUD-1
Loan Closing Instructions for residential loans issued by Flagstar Bank, FSB ("Flagstar"), a nationwide mortgage lender with headquarters in Troy, Michigan, contain the following provisions:
"HUD-1 Settlement Statement - A standard final HUD-1 Settlement Statement or HUD-1A Settlement Statement (if applicable) must be completed and signed by the Borrowers, Sellers (if applicable), and Closing Agent representative.
- Refer to the Preliminary HUD-1 Settlement Statement included in the closing package for the pertinent fee information.
YOU MUST NOT CHANGE OR RENAME ANY FEE, LINE ITEM, OR SERVICE PROVIDER LISTED ON THE PRELIMINARY HUD-1 SETTLEMENT STATEMENT PROVIDED IN THE CLOSED LOAN PACKAGE. IF YOU CHANGE ANY OF THE FEES LISTED ON THE PRELIMINARY HUD-1 SETTLEMENT STATEMENT, YOU WILL BE HELD RESPONSIBLE FOR ANY RESTITUTION THAT MUST BE MADE TO THE BORROWER AND ANY REDISCLOSURE THAT MAY BE REQUIRED.
- When fees are paid by the buyer or seller outside of closing, or paid to third parties by the Lender or Loan Originator, the name of the entity to whom the fee was paid and the name of the party that paid the fee must be disclosed, and the fee must be noted as POC. If it is not clear on the Settlement Statement who the fee was paid by, the fee will be treated as if paid by the borrower for disclosure purposes. (i.e. POCB is NOT acceptable. However, POC Borrower or POC Lender or POC Broker is acceptable.)
INCLUDE THE FINAL SIGNED HUD-1 SETTLEMENT STATEMENT IN THE CLOSED LOAN PACKAGE.
Truth-in-Lending Disclosure - The final Truth-in-Lending Disclosure must reflect the fees that are listed on the final HUD-1 or HUD-1A Settlement Statement. If there is a change in the fees from what was provided by the Lender, please contact the Closer/Loan Originator, because a new Truth-in-Lending Disclosure and Itemization of Amount Financed will be required.
ALL FEES AND CHARGES MUST BE ACCURATELY DISCLOSED AS PART OF THE TRUTH-IN-LENDING REQUIREMENTS. IF YOU ADD OR MODIFY ANY FEES LISTED ON THE HUD-1 OR HUD-1A SETTLEMENT STATEMENT INCLUDED IN THIS CLOSING PACKAGE YOU MUST NOTIFY THE CLOSER/ORIGINATOR TO REQUEST A NEW CLOSING PACKAGE WITH THE UPDATED FEES.
The final TIL must also be within 125% of the previously Redisclosed TIL. Verifying will require collecting the Redisclosed TIL."
(end of referenced Flagstar provisions).
RESULT: If Flagstar reimburses a borrower under either TILA or RESPA, Flagstar will rely upon its above quoted instructions to seek reimbursement from the settlement agent for the amount Flagstar paid the borrower. Flagstar will not contact you first before paying the borrower. Flagstar will send an invoice to you in the amount it has paid to the borrower together with a letter summarizing the reason for the debt, giving you thirty days to pay, and notifying you that failure to "reconcile this issue" within the thirty days "will result in being removed as an approved agent to close loans for Flagstar Bank". Flagstar may follow-up with another demand but if the demand remains unpaid, Flagstar will stop sending loans to your office.
CAUTION: This will occur EVEN IF your closing file includes written approval of the final HUD1 by Flagstar's loan processor.
STEWART SUGGESTED PROCEDURES
This Bulletin's primary purpose is to alert each Affiliate of Flagstar's instructions and actions. We suggest the following procedures be considered:
- If there are ANY changes (including additional charges) between the HUD1 you prepare and the Preliminary HUD1 Closing Statement provided by Flagstar with the loan closing package, point out and describe each such change/addition made AND request from Flagstar "amended written instructions, together with any revised TILA disclosure that Flagstar determines is necessary, approving each change identified." Do so in writing (by email or in separate Word document) "TO FLAGSTAR'S ATTENTION" and send to Flagstar with the HUD1 you prepared.
- If any "POC" items are used by you on the HUD1, specifically define each on an Addendum to the HUD1. For example, specify on the Addendum that "POCB" on your HUD1 means "POC Borrower" and point out on what line(s) it is used. If you have a POC Broker item, the Addendum needs to clearly define the abbreviation used and specify on what line(s) it is used on the HUD1. Point out to Flagstar in writing when transmitting the HUD1 that the Addendum to the HUD1 contains specific definitions for each "POC" item used.
- Get approval of each change in writing from Flagstar in addition to the more usual general approval of the final HUD1 itself.
- Maintain copies of the written correspondence, including emails,to and from Flagstar in your closing file.
If you have questions related to this bulletin, please contact Stewart Legal Services or your local underwriting personnel.
For on-line viewing of this and other bulletins, please log onto www.vuwriter.com.
THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.