OK, now I'm really confused. We were told that if you provide your borrower with a list of recommended providers, it was the same as the lender selecting the provider and therefore is subject to the 10% tolerance rule (if we select them or you use companies we identify). We are specifically questioning the Title Companies on the list.

My confusion/question is, if we must give them a list, then we have identified them, therefore they are subject to the tolerance?

The current document that we give applicants states:

ABC Bank has repeatedly used the services of any of the following providers within the last twelve months. The charges on the Good Faith Estimate are based upon the corresponding charges of the providers listed below.

Can we continue to provide the applicant with this list for them to choose from and not be subject to the 10% rule?

Old School is right. There are 14 new Q&A's. At least they are putting the new Q&A's in bold print.

Two questions came up today in discussing the new GFE:

1. With the new changes, how do you test the APR when the charges are not broken down on the GFE? Our system does not produce an itemization of amount financed.

2. LOs at my Bank are having trouble with the New GFE not stating total cash to close and not providing a breakdown of total payment including escrows. Is it acceptable to provide that info in a cover letter with the GFE?

1. Don't mix TIL and RESPA. The APR should be tested by a list of finance charges - not found on the GFE. Even today's GFE and HUD-1/1A don't list FC's.

2. I agree. The new GFE doesn't tell the borrower what to bring to closing since nothing is listed POC. I see most bankers providing some type of extra info to tell the borrower what they'll need at closing. Gee, thanks HUD.

"Even today's GFE and HUD-1/1A don't list FC's."

How do you not list a pre-paid finance charge on the GFE or HUD-1/1A?

Let me try again: They are listed, but not identified as finance charges. For instance, a documentation fee could be a finance charge or could not be - depending on how the bank treats it. Flood insurance determinations might be a FC, might not. Depends on if it includes LofL coverage.

My point is don't look to the GFE & Settlement Statement to identify FC's. That's not the point of RESPA.

I think that what ComplyFunatic was driving at was that when auditing, they (as do I) most likely rely on the GFE and the HUD-1/1A to identify the charges associated with the loan in order to determine whether or not the charges are FCs to compute the APR. With fees and charges lumped together, I can understand the question. The bank is going to have to maintain the breakdown of these lump sum charges some where separately in order to show what the bank is estimating that they consist of to determine the accuracy of the ETIL.

If they choose a provider on the list then you are subject to the tolerance. If they choose a provider not on the list (which they can do if you give them the option to choose the provider) then you are not subject to the tolerance.

Yep - that is what I meant, rlclarey. I am not mixing RESPA with REG Z, I think this is all part of the GFE discussion as we are, not only from an audit standpoint, but also from the procedural standpoint of the person putting the numbers in the system to calculate the initial TIL. They are used to looking at the numbers off of the GFE and plugging them in the system to generate the TIL. So how are y'all going to document the breakdown of these lump sum charges? My LOs are asking me if they can just keep the old GFE form which breaks down the fees and give the customer the old one AND the new one. :-0

Under one of the criteria for a complete application is an estimate of value of the property. What exactly does everyone thinks constitutes as an estimate? Buy-Sell or Camas report?

for home equity products, if the interest rate is never technically locked in, if changed circumstances would change interest rate or term of the loan would a revised gfe have to be issued. My fear is that if we do not offer a revised gfe then it could look like misleading.

I am not an expert GURU but will provide my opinion and how we are handling this.

We are not reading too much into this statement and interpret it to mean the purchase price or the borrower's estimated value. We are NOT planning to do any pre-disclosure valuations such as an AVM.

Regards

I would appreciate opinions concerning one of the FAQs that appears to apply to providing a GFE for a prequal. Question: Are the following sufficient to establish “changed circumstances” consistent with 24 CFR 3500.7(f) – If a GFE is issued without a property address, the later identification of a property address. Answer: “If a loan originator issues a GFE without a property address, the subsequent identification of the property address is not considered a changed circumstance.” Does this mean that we are held to the original GFE unless there are other changed circumstances? Or can it be stretched to mean that since we didn't have an application in the first place, changed circumstance does not apply. We issue GFEs for prequals and the lenders here are not ready to give it up. Thanks!

HUD has posted updated RESPA FAQs with a date of 9/18. They are now 43 pages and include a table of contents. Also, HUD has changed the look of its home page.

If you charge for the flood determination does that get listed as a Origination Fee on the new GFE?

If you issue a GFE, you are bound by it. If there is a changed circumstance, you can change the fees ONLY affected by the change.

I think your lenders will want to stop issuing GFE's on prequals. They could issue another type of info sheet, but if they issue a GFE, they are "stuck" with it.

This would be listed in B3 - Services that we select, if you order the SFHDF (most likely). If you allow the borrower to shop for the SFHDF (unlikely), it goes in B6.

I'll be conducting a Webinar for BOL covering the new FAQs on Thursday. You can find more info here:
http://calendar.bollearningconnect.com/main.php?view=event&eventid=1250610623605

I'm also conducting a webinar on how to fill out the new GFE and HUD-1/1A on November 10th. More info can be found here:
http://calendar.bollearningconnect.com/main.php?view=event&eventid=1253206816535

How will credit life on a note be disclosed once changes come into effect?

The GFE has no place for it. It states in the HUD FAQ(under "Summary of your loan" Q3 that you don't even consider it in the balance)

What about on the HUD statement?

We currently disclose the cost of it on both and it becomes part of the loan balance.

Sage

Flood certs are part of Block 3 on the GFE. This is confirmed on the FAQ 9/09 page 16. It is not part of the Origination Charge. Be sure your LOS can still code it as an APR item however. Just because it is not part of the Origination Charge does not exempt it from APR (if it is Life of Loan).

I too find these two items very contradictory. I hope someone answers your post.

Sorry - I forgot to quote the post. Does anyone have any thoughts on how to interpret these two statements?

I agree these appear to be contradictory. I've been studying these FAQs for the last several weeks and can't come to a conclusion where these two makes sense. There are several Q&As that indicate the GFE should only provide what is "typical", but then #5 says we still have to list the the title insurance, no matter if the seller pays for it.

Hopefully, we'll get more clarification from HUD.

How about some clarification on the GFE - Written list of providers. Page 10 and 11 of new FAQ.

1) Q: When do loan originators have to provide the borrower with a written list of identified providers?
A: When a loan originator permits a borrower to shop for third-party settlement services, the loan originator must provide the borrower with a written list of settlement services providers at the time of the GFE, on a separate sheet of paper.

7) Q: Must the loan originator provide names only of those settlement service providers known to do business in the locality of the mortgage property or may the loan originator provide a list of national settlement service providers who may or may not do business in the locality of the mortgaged property?
A: The requirements for the new GFE form provide that ―[w]here the loan originator permits a borrower to shop for third party settlement services, the loan originator must provide the borrower with a written list of settlement services providers.‖ The list should contain settlement service providers that are likely available to provide the settlement service for the borrower.

According to #7, last sentence, we are required to provide a list of providers that are likely available to provide the settlement service for the borrower. However, I have not been able to find out how many providers we are required to list on our "written list". Is it permissible to only list our title company affiliate as a title provider? If the borrower doesn't want to use our title company, do we just tell them to research companies themselves and that they are required to contact us with a company name within three business days since we are required to provide them with a properly disclosed GFE within three days? What about surveyors, we only have three in our area.

I also can not find anywhere where the borrower is allowed to change their mind. Such as we give them the written list, they say “I don’t know just use them” (pointing to a name on the list) then they go home, talk it over with their spouse and they decide they don’t want to use someone on our list. Can the borrower give us a letter stating they changed their mind and they want to choose their own provider? Would this be considered a “changed circumstance”? If not how does this requirement protect the borrower? Or do we tell them to withdraw their loan application and reapply for another loan so we can disclose to them some estimated charges for the company they have chosen (which we'll have to estimate since there are hundreds of title companies out there and we can not possibly know the charges for all of them). And btw since you're choosing the provider, you'll be SOL if they charge you more at the closing than we estimated on the GFE (some companies charge fees for items such as copy fees, fax fees, email fees, whereas other companies may not have these charges).

I hope I am not the only one that is confused on this topic.

Regarding the list of providers, is this list designed to include pest control firms, surveyors and homeowners insurance? If so, it really complicates the situation for national lenders who lend in all 50 states. We are a national lender and are struggling at the thought of having to list local providers in any locale. We have title and appraisals covered but I cannot imagine having to find local surveyors.

Waiter, I'll have what he's having!