We have opted to continue doing preapprovals, thus we issue a GFE w/o a property address so we can obtain verfication documents.

When would the applicant have to demonstrate intent to proceed?

Because this is the scenario I am running into, and not sure how to deal with: Preapproval applied for, GFE issued, preapproval underwritten and approved with conditions, applicant finds property and locks rate, intent is normally singed at rate lock.

Often the time between application and locating a property is more than 10 days, so we have a case to redo our GFE to show the lock, and adjust charges as needed, including and changres that my be a result of defining a property.

Something in this scenario is not sitting right with me, and I cannot quite put my finger on it, but I am afraid Iam not getting/documenting true intent early enough... thoughts?

I got two responses from HUD on this one, one said yes, one said no

Its scary that HUD conflicts themselves. I really don't see how the can enforce us to be in compliance. I think we may need longer than the 120 days.

I've been under the impression Jay that if you give a GFE on a preapproval without a property address, you are assumed to have that property address, so your post about adjusting charges as needed including "changes that may be a result of defining a property" doesn't sound like it will work to me.

1) No waiting period under RESPA, but you may need to redisclose under Reg Z and adhere to the appropriate waiting period under MDIA that went into effect last July;

2) Only if there is a "change of circumstance" as defined by HUD. For example, if the customer indicated that the property was a single family home and you disclosed your appraisal fee based on that info but later find out it is a multi unit leading to a higher appraisal fee, you could redisclose reflecting the higher fee.

1. There is no delay between delivering the GFE and closing the loan. If a change affects the APR, MDIA requires a 3 day wait, but not RESPA.

2. A change in fees by themselves is not a changed circumstance. Why did the fee change? Maybe the cause of it is a changed circumstance.

The "Recommend Provider" list has no instructions. I would list the contact info and a disclaimer that indicates you don't warranty the service of the providers.

I forwarded my question to HUD regarding appraisal recertifications.

Here is the response from HUD:
If an appraisal recretification is performed by a third party and the lender selects the provider it is part of Block 3 of the GFE.

no

Thanks everyone.

I think this has been beaten to death, but we're still struggling. We pay all fees for a no closing cost mortgage, and for that the customer pays a slightly higher rate of interest. Included in Block 2 are charges that are subject to 10% tolerance. I have read and re-read Q&A page 27, question 4. It makes absolutely no sense to me that if the closing costs are less at settlement we cannot reduce the amount of the credit to reflect exactly what the bank is paying. We are still paying it, the customer is not effected in any way.

But I do have a question - included in the total credit in Block 2 of the GFE are fees that are subject to the 10% tolerance. Does that mean that we can still use the tolerances when calculating what we owe the customer? OR, since the $ in Block 2 can never change must we give the customer back the exact difference between the NCC fees disclosured on the GFE and what we actually paid.

And AARRGGHH!!!!!!!!! This is NUTS!!!!!!!!!!

This is the question about pre-approvals I posed and was answered by HUD. The first time I posed the preapproval question, they just copied question 33 and answer, so I asked for further clarifiction:

Q)Thank you very much for responding. However it is the response to question 33 that we are seeking clarification on. Is HUD saying that a pre-approval application, which normally requires verified information but not a GFE since no property has been identified, is the same application once a property is eventually identified and would then have a GFE provided? Are we violating RESPA by treating them as 2 unrelated applications?

The clarification is needed by the industry. Some are continuing with this practice, others are taking the strict interpretation. Real estate brokers and first time homebuyer counselors are still telling potential applicants that they need the formal preapproval.

A) (from HUD) Pre-approvals necessitate the verfication of information that is not permitted prior to issuing the GFE, the borrower receiving the GFE and the borrower indicating the intent to proceed. There are a few caveats: the borrower may voluntarily provide certain documentation or the loan originator may use its own systems to verify.

As a pre-approval typically would precede a GFE depending on the process involved it may work or may not work as far as Rule compliance is concerned.

I guess that HUD's viewpoint is that the customer IS affected since you are charging a higher rate as compensation for covering the closing costs.

So this would be a time when you may want to Good-Faith-Guestimate on the low side of the charges so that you will not have an overage due to the customer.

The two areas where HUD has not done ANYONE (especially consumers) any favors are:
1. The craziness over Pre-Approvals since folks WANT to be pre-approved and not simply pre-qualed
2. The craziness on No-Cost Loans.

I think the issues could be cleared up if HUD would simply approve two qualifying statements to be added to the GFE or provided with a supplementary disclosure:

1. This Good Faith Estimate is being provided to accomodate your request to be pre-approved for a loan prior to your finding a property. Please be advised that the charges may increase or decrease depending on the value and location of the property you find. A new Good Faith Estimate will be issued once you have identified the property since we will be able to more accurately disclose your costs.

2. We are offering a "no-cost" loan which means that we are absorbing the costs normally associated with providing a mortgage loan. These costs include items such as Appraisal, Title Insurance, recording fees, documentation, notary, and courier. We are required to disclose our ESTIMATE of what these charges cost us, however if the actual cost of these items are lower than our estimate, we will not owe a refund to you. Your other choice would be to pay all of these costs separately.


Of course, these disclosure might actually be MEANINGFUL to a consumer and that seems to be something beyond HUD's comprehension.

Stepping down from soapbox...

Thanks for letting me vent. Just to clarify, the interest rate is the same whether the closing costs that we pay are $100.00 or $4,000.00. I know that makes no difference to HUD.

But how do we calculate the amount we owe the customer? Can we use the 10% tolerance?

But that is just it... if they have not indicated any intent to proceed (we required signed), which generally in the terms of a preapproval they are not doing so until several days have passed, usually well over the 10 business days. Generally the intent is obtained once they locate a property and lock the rate.

Something is still bugging me about this though.

ME TOO! I sent the question in last month and got one answer, then sent it in on Monday and got the opposite answer.

Here is my response copied and pasted from the thread about NCC Mortgages:

The two areas where HUD has not done ANYONE (especially consumers) any favors are:
1. The craziness over Pre-Approvals since folks WANT to be pre-approved and not simply pre-qualed
2. The craziness on No-Cost Loans.

I think the issues could be cleared up if HUD would simply approve two qualifying statements to be added to the GFE or provided with a supplementary disclosure:

1. This Good Faith Estimate is being provided to accomodate your request to be pre-approved for a loan prior to your finding a property. Please be advised that the charges may increase or decrease depending on the value and location of the property you find. A new Good Faith Estimate will be issued once you have identified the property since we will be able to more accurately disclose your costs.

2. We are offering a "no-cost" loan which means that we are absorbing the costs normally associated with providing a mortgage loan. These costs include items such as Appraisal, Title Insurance, recording fees, documentation, notary, and courier. We are required to disclose our ESTIMATE of what these charges cost us, however if the actual cost of these items are lower than our estimate, we will not owe a refund to you. Your other choice would be to pay all of these costs separately.


Of course, these disclosure might actually be MEANINGFUL to a consumer and that seems to be something beyond HUD's comprehension.

Stepping down from soapbox...

What I am asking is if you charge a flat fee, lets say $1,000.00, does a person applying for a 50K loan and a person applying for a 500K loan both pay $1,000.00.
Currenty we charge 1% plus $300.00 so the 50K person would be charged $800.00 and the 500K person would be chrged 5,300.00. There is a big difference between 800 and 5300 so I was trying to figure out how the flat fee system works.

How do we disclose lender paid PMI? Do we show it in the borrower's column, and then give a lender credit on page 1?

Or do we even have to disclose it at all?

Here is the response I got from HUD regarding where to put a survey that the lender did not require.

"If the survey was not required by the lender or the title services provider, the blank line in the 1300s, the way you have it disclosed, looks perfect.

Line 1102 should not be itemized unless required by state law or a governmental loan program as it is not conducted by a third party."

Thanks,

Laura Gipe

I have a loan that is closing and we are paying off 9 credit cards at closing. The title company is telling me they can't put the total payoff amount for the credit cards on page 1 of the HUD (which is where the payoff for the 1st mortgage goes) and then attach a page 4 "supplemental summary". They are telling me they have to put the total of credit card payouts on line 808.

That does not seem right to me...the TC is saying they can't put anything from page 1 of the HUD on the supplemental summary....

Thoughts anyone?

FlamingoGal and 80's Lady,

Did you ever receive a response on your questions concerning ARM loans and the Summary of Your Loan section of GFE?

Thanks, I saw your post. But still wonder if we can use the tolerance rules in calculating what we owe the borrower when NCC are less at the time of closing than what is disclosred on the GFE.

Section L (including the 800s) is for settlement services. The CC's should be listed in the 100s.

I preface this by stating that I got the following answer from HUD, but another bank got a different answer (what else is new), and I've read varying opinions here and elsewhere, so take it for what it's worth....

Although stated previously, just so you can look at this one item and see both the question and the answer together, I've reposted the question we presented to HUD:

Question:
Our question relates to how to properly complete the "Summary Of Your Loan" section of the new GFE for an ARM loan - specifically, the payment fields that come at first adjustment and the maximum the payment can rise to over the life of the loan.

On Page 1 of the GFE, in the "Summary of your loan" section, the 7th box down asks: "Even if you make your payment on time, can your monthly amount owed for P & I , and any mortgage insurance rise?" On an adjustable rate loan, this will be answered "yes, the first increase can be in __(#1)___ months and the monthly amount owed can rise to $ (#2) . The maximum it can ever rise to is $ (#3)." My questions are relating to the blanks listed as 1, 2 & 3.

Let's say it's a 5 year adjustable on a 30 year note, with caps of 1% each adjustment, 5% cap over life of loan. Rate starting at 6.00% .

Obviously #1 will show 60 months. (side bar - should have said 61 mos.)

#2 will have a payment amount that it will be what it adjusts to at the 5 year point at the 1% adjustment. I need to know what balance this payment is to be calculated from: the current balance at the 5 year point (amortized balance), or the original loan amount? The original loan amount doesn't make sense to me, but we are getting three different figures from 3 different mortgage systems and can't tell what that payment is to be calculated from. I have not been able to find guidance on this in the regulation, instructions to the GFE, or in the FAQ.

#3 is to show what the maximum monthly amount it can ever rise to. Again...what balance is to be used to calculate this payment? On that loan scenario above, the max rate is could go up to would be 11.00% over the life of the loan...what balance is used to calculate that payment?



HUD's Answer: