Required Level Of Detail On the GFE/HUD-1A
by: Lucy Griffin, BOL Guru BIO AND CONTACT INFO
Question: My bank charges an application fee for closed-end home equity loans, which covers all closing costs, including credit report, flood determination, title search, appraisal, and mortgage recording fees. Currently we disclose each of these third-party fees as P.O.C. and the applicable amount on the GFE and HUD-1A. Another local bank uses a similar method of one fee to cover all closing costs. However, they only disclose the one fee on the GFE and HUD-1A, with no references to fees paid to third-party service providers. Needless to say, our loan operations would prefer to follow this local bank's example. I believe we should continue our current practice, but I'm having some trouble finding clear regulatory wording to support my opinion. Section 3500.7(a)(2) refers to "no cost" loans, but our loans do have an application fee. Could I have your opinion on how our situation should be disclosed and also a regulatory reference to back that up?
Answer: You are doing it the right way. The other lender is headed for trouble. For authority, look to two documents. First is the instructions in Appendix A to RESPA regulations. Those instructions specify identifying the service provider.
There is also recent guidance from HUD in the form of a letter to the Massachusetts Bankers Association. This letter explains in more detail how these disclosures should be made. You can find the letter on HUD's website (if you are skilled and determined.) The easier way to get a copy is to downloan FIL 45-2000 from the FDIC's website. They distributed the letter as the FIL to their banks.
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