Written By: Jane Harford
Today’s blog post will deal with more details on the new GFE and the issues that are being raised. Due to the numerous laws and system changes the lenders, brokers and correspondents have to complete to remain in compliance with the new RESPA laws.
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In this post, we will cover the details of “changed circumstances” and how lenders are allowed to make fee changes to the initial GFE provided. To recap, loan officers are required to provide a detailed and accurate cost estimate to their client within three days of taking a loan application. Many changes have been made to the GFE form; several areas of cost estimates are subject to absolutely no tolerance if changed. Loan officers or the brokers must absorb these cost changes. If a revised GFE is issued, HUD detailed the reasons that a change would be allowed. This is the term known as “changed circumstances”.
A “changed circumstance” is defined by HUD as follows: 1) Acts of God, war, disaster or other emergency 2) changed situation or inaccurate information provided by borrowers after issuance of the GFE. Only those fees impacted by the changed circumstances can be changed (note-this is just for increases in fees). Any decreased changes in fees are acceptable and not subject to the RESPA regs.
If pricing changes due to a changed circumstance or a borrower requested pricing change, only the interest rate related charges and terms may change. Lenders are requesting very strictly signed and dated disclosures from the borrowers stating that they have requested and accept these changes. If the loan is locked from a float status, only the rate related charges and terms can change. In either case, Block #1 fees cannot be changed-even with a documented “changed circumstance”. Also, the important dates section must be updated to reflect final lock dates, etc.
The auditors and investors are following the HUD guidelines very strictly, even though HUD stated that there would be a 120 day grace period. There are several documented stories from the various industry blogs, websites and industry forums that report stories similar to this one……
“A loan closed initiated on the new GFE. Seller’s county transfer taxes were not disclosed to buyer on the GFE. Seller typically pays the transfer tax. The subject property was located in a city with no city transfer tax. GFE issued did not have these Costs disclosed to buyer. Prelim HUD1 also did not show these costs.
The closing was scheduled on the loan. Lender docs and title work done for closing. The investor is not accepting the 120 day leniency policy. $737 was the cost for a tolerance cure. This credit went back to seller, not the buyer. There was no opportunity to redisclose (had no affect on borrower’s bottom line cash to close). The lender had to cough up the tolerance cure and the seller got the benefit of that credit.”
Other stories talk about investors not allowing for a third party credit report to be charged or for guarantee of an appraisal fee (when the appraisal was not yet ordered-due to the four day rule)…….
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My initial reaction is –how does this strict enforcement benefit the borrower if these charges are unknown or if the seller is benefiting from the tolerance cure…..these are just some of the many pondering questions that will be dealt with as the industry gets further and further into understanding HUD’s full intent of these changes and investor’s policies in following them.
The following is a list of the “Top Errors of GFE’s” which came out in a recent posting from the Mortgage Daily News-this list was provided by U. S. Bank’s wholesale division….some food for thought….
1) Adjusted origination charges need to be completed correctly-Page #2 and box #1 should reflect all income broker/lender expects to receive, except for discount points. This includes origination fees, broker fees, broker comp(typically earned from YSP) and investor commitment fee.
Only 1 box may be checked and only 1 dollar amount may appear in block #2.
2) Block #11-hazard insurance must be completed-purchases require it.
3) The important dates section must be completed correctly. Many times this is not completed.
4) Owner title insurance must be completed.
5) Trade off table must be completed. Many times it is left blank.
6) Lender information must be completed.
7) Escrow account information must be completed accurately.
8) Upfront MIP/VA FF must be listed correctly.
9) GFE completion date must appear on the disclosure.
10) Originator’s email address must be completely provided.
These are basic items, but do require completion. Consider them when you are reviewing a GFE and need to determine if the GFE is truly compliant. In my next blog, we will review the transition of the GFE to the new HUD1 and the HUD1A. Also, we will cover some of the ways that lenders are dealing with the fact that the GFE does not disclose total cash needed to close-like the old GFE did.
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Please stay warm and dry wherever you are. All areas of the country are having some funky weather this winter.
About The Author
Jane Harford - As an NAMP® staff writer, Jane brings 30+ years of mortgage business experience in FHA, VA, LAPP and is also an FHA DE Underwriter. If you would like to become a writer for NAMP® , please email us at: contact@mortgageprocessor.org.
