TopMortgage Compliance Update (1)
November 18, 2010
HUD: Solicits Comments
on Warehouse Lending

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The Department of Housing and Urban Development (HUD)is seeking information on how funding mechanisms have evolved in recent years, and especially on how warehouse lending currently operates within residential real estate mortgage transactions.

Based on information received in response to this solicitation, HUD intends to decide what, if any, additional guidance is needed on the scope of RESPA as applied to current mortgage funding practices.

HUD is requesting comments from:

  • warehouse lenders,
  • retail lenders,
  • mortgage bankers,
  • wholesale lenders,
  • correspondent lenders,
  • mortgage brokers,
  • and others in the mortgage lending industry,
  • federal, state, and local consumer protection and enforcement agencies;
  • consumer groups;
  • and other members of the public.

  • On November 16, 2010, HUD announced the solicitation of comments from the public regarding the Real Estate Settlement Procedures Act (RESPA) with respect to Warehouse Lending and Other Loan Funding Mechanisms. HUD last issued regulations in this area in 1992 and 1994.

    Comments can be submitted electronically through the Federal eRulemaking Portal or to the office of General Counsel.

    The announcement has not yet been published in the Federal Register.

    The comment period will expire 30 days after publication of HUD's announcement in the Federal Register.


10 Broad Questions
  1. What are the general characteristics of warehouse lending in the context of mortgage loan financing?
  2. What particular characteristics distinguish warehouse lending from retail lending? What is the role of warehouse lending within the primary mortgage market versus the secondary market?
  3. What distinguishes the funding of a mortgage loan from a sale of the mortgage loan in the secondary market? For example, what characteristics indicate a bona fide transfer of the loan obligation, such that the transaction would be a secondary market transaction that is not covered by HUD's RESPA regulations?
  4. What role does a warehouse lender play in a table funded transaction?
  5. What, if any, characteristics distinguish a table funded transaction completed by a mortgage broker from a loan made by a mortgage banker who has an advance commitment to sell the loan after settlement?
  6. Does a warehouse lender fund mortgage loans within the meaning of "settlement service" as that term is defined in section 2 of RESPA and 24 CFR 3500.2?
  7. What factors determine who is identified as the payee on the mortgage loan note?
  8. Have concerns about protection under bankruptcy laws influenced changes in how warehouse lenders operate in relation to loan originators?
  9. What do warehouse lenders regard as being their obligations for providing the disclosures required under RESPA?
  10. Do consumers or others have concerns with regard to mortgage industry participants' current interpretation of HUD's secondary market exemption, including the impact that such interpretations may have on consumers regarding coverage of RESPA disclosures and Section 8 protections against kickbacks and referral fees?
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Real Estate Settlement Procedures Act (RESPA): "Solicitation of Information on Changes in Warehouse Lending and Other Loan Funding Mechanisms" - Notice pending publication in the Federal Register

November 16, 2010

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