CM-I thought I had read that if the lender recognizes an error at time of settlment, you can poc the the amount and only charge the disclosed amount to the borrower, so the entire cost is shown but the borrower only pays what was disclosed to them on the GFE. I am trying to find the specific reference to it (I think it was in the most recent FAQ)

It appears they still use the term revised even if it's done at closing. So..you'd have the HUD that reflects the GFE, then a revised one POC curing the tolerance violation...at least that's how it's described as far as I can tell.

So..each party would receive the first HUD and a corrected HUD clearing the tolerance...seems unncessary but I guess it's on account of the comparison on page 3 being done per the original GFE.

If at the time the HUD is completed and the section that shows the Tolerance variance. If the aggregate is out of tolerance by 2% = to $65 over the 10% tolerance allowed, you only need to credit back to the customer the $65 to get your tolerance back into 10%.

Do I have that right?

Makes a lot of sense.. I guess I need to go back to that section...

DD, keep in mind that the tolerance is calculated from the original GFE you gave. If you gave an updated GFE you need to go back to the original and calculate your tolerance.

Truf...how do you figure. If you updated a GFE due to 1) expiration prior to Intent to proceed, or 2) an allowable changed circumstance...that is the GFE you use. Keep in mind only the section that CHANGED can be changed upon revision.

I was parotting something I heard in the OTS call yesterday, or so I thought. She said you had to go back to the original GFE to calculate the tolerance. Did anyone else hear that or did I misunderstand? Trust me, I can take the hit if I got it wrong especially because everyone here needs to get it right!

If that were true..there would be no need for revisions!

RR is right-if a new GFE is issued due to "changed circumstance" then only the fees directly related to the change can be revised. Other fees originally quoted can not change. As an example, if a loan amount is changed, only fees related to loan amount can change (title insurance, per diem, points, etc). Other static fees (processing, doc prep, etc) that are not determined based on loan amount must stay the same. I would think the final tolerances would be based on the last GFE and the lender would need to document the reasons for the redisclosure.

which would be documented and kept for 3 years!

In construction loans in which our transaction transfers title, where would you put the fee for construction inspections? Lender requires it, it's paid to a third party, the borrower is not allowed to shop. Included in 801 or in section 3?

3

Thanks RR!

Regarding item 1104 - Lender's Title Insurance. In our state, the listing agent (seller) selects the title insurance company that facilitates the purchase transaction and issues the owner's title insurance policy. Lenders typically use the same title insurance company to issue the lender's title insurance policy.

My issue is that while we technically allow the borrower to "shop" for the lender's policy (we are not selecting the title ins company), providing the borrower a list of title companies is fallacious as the borrower will not be able to select the title company (because the listing agent does it).

So, the conversation will go -

L: "Here's your list of title insurance companies for the lender's policy we require."

B: "Great, my brother works for Smith Title. Let's go with that one."

L: "Sorry, but you don't really get to choose, because that is up to the seller's real estate agent."

L: "Oh, and by the way, block 4 on that GFE we just gave you can change at settlement because you went off the list."

L: "Have a nice day."

This seems very wrong. Am I off base? I would really appreciate any thoughts.

Thanks.

It's still a choice in your state, right Geek? If so, the buyer can make it a part of the purchase contract that they go with their brother's title company, even after the fact with an amendment to the contract.

What criteria is the seller's agent using? I've worked for national title companies and most often, the title company is selected based on who currently insures the property. It's usually cheaper to stay with XYZ Title than try to move it to ABC Title. Now if the agent doesn't care about his seller's cost....???

Actually, if they go off your list...it can't change, or at least has to stay within the 10% aggregate.

Around here, and probably lots of places, it's typical that closing costs are "paid" by the seller...usually by increasing the price to cover.

That said, and knowing you have to disclose these items as if the borrower was going to pay them...and since you don't get to show a credit until time for the HUD...do you all plan to just explain this to the customer?

Like "yeah, well...you really won't be needing but approximately $XX.XX to close the loan because the seller is actually going to pay all these fees we're showing you paying".

That will pretty much be it, RR.

I think it is time for a career change.

I suppose it is technically a choice, but in practice it doesn't happen. BTW - Sellers pay for and select the owner's policy as well. So, the same issues apply with that.

I think the seller's agent use title companies that they are comfortable with. I'm not convinced that the seller's cost is much of a factor.

Joker - I'm confused by your statement. I thought that if the borrower does not use a company that we identify for title services that the charges can then change at settlement. Sorry to be clueless on this, but the more I think I know about the new RESPA, the less I actually do.

Geek-you are right regarding your final statement-if they choose a vendor not on your list, there is no limit to the change in fee.

As for your first question above, how is it a borrower choice if the seller selects and pays for the service?

2 questions. It appears that you do not have to put estimated taxes on the GFE except if you escrow those. Is this correct?

Also, you are required to give a list of settlement service providers for anything you let the customer shop for. Those would go in line 6 of the GFE. What about hazard insurance? That is a service that the customer will shop for, however it is in line 11.

Taxes (other than escrow) don't go on the GFE. Hazard goes on line 11 because it is a charge that can change.

cOMPLIANCE Geek...I may have misinterpreted. When you said "went off the list", I understood that to mean they choose someone on the list. Perhaps you meant they didn't choose someone on your list so yes, it can change.

If our Legal department only approves of certain title agencies (and have those we will not deal with),

1. If we Don't allow the customer to shop for a title company, but provide a list of those they are permitted to use, are we still held to a 10% tolerance and Would we list them in block 3? or is this still permitted?

2. Can we still have "Unacceptable" list?

We do early disclosures on temporary construction loans where we are also going to be doing the permanent financing. My question is, interest is due monthly, so on the payment amount do I show the first month's interest calculated assuming the entire balance is advanced? Or is it similar to the Pre Til where you assume half of the balance is advanced at origination?