Are there allowable variances for the Good Faith Estimate? If we disclose a fee on the initial GFE, and that fee is different at closing do we need to worry about any variance issues?

Good question. There are no set acceptable variances. The GFE should be your best guess as to what the final costs will be. I see this as a customer service issue more than a regulatory issue. A GFE is a "Shopping disclosure." Be sure that you are as accurate as possible.

When I audit GFE's, I look for variances between the GFE and the HUD-1. If I see differences, I make note of them and look for a pattern. Is there a fee that is always being left off? Is there one loan officer or department that seems to under cutting fees? Or, is there simply some honest mistakes because of info that wasn't available at the time of preparation?

Obviously, this is a judgment call. Try not to let examiners question your bank's ethics in this area.

I would agree w/Mr. D.
However, as a matter of practice, if we switch loan programs after an application is made, we will typically redisclose. For example, a secondary mkt loan that is switched to a portfolio loan; the closing costs or terms may be significantly different. So we disclose again anything that differs: GFE, Reg Z, Servicing, etc. This may not be "required" but is a good practice to prevent confusion.

Typically, you disclose the fees you anticipate and normally charge on a GFE. When there are significant variances between what is shown on the GFE and the HUD- I request that the loan officer place a memo in the file explaining those differences. Perhaps there was significant title work that need to occur or a survey that needed to be ordered to determine flood elevation status that you would not normally obtain. If your GFE is not being consistently underdisclosed and you have good documentation in the instances where it is, I've found that the examiners don't really have any questions in that area.

The discussion we always had with bankers was what was "significant" variation. As a very rough rule of thumb, we used 100% or $100. That was definitely not an endorsed guideline, but it helped give some perspective. And sometimes there are extenuating circumstances that explain a variance; we did try to always take those into consideration.

Under the current regulation and the act itself, there is no tolerance or test beyond "good faith" -- whatever that is. Using a rule of thumb and/or a documentation requirement inside the bank is a very good practice. But, in theory anyway, it isn't required. HUD, of course, would change all that with its proposed GFE idea.

Requesting the loan officer make a note to the file when there is a variation is an excellent practice. (That is the old examiner in me speaking.) As an examiner, if one GFE had a variance while most did not, I would chalk it up to an extenuating circumstance, and not write it up, as it was not a pattern/practice problem. If all GFEs are off, then there could be a concern. Again, FDIC used to use $100 as the "significant" amount.

Thanks very much for your well informed responses. This is a great forum!!!!