Appraisal/Waiver Fee GFE Question

One of our secondary market lenders posed this question to me and it's left me scratching my head:

With secondary market loans obviously we have a specific fee for an appraisal. However, sometimes when we run the loans through our automated underwriting program, Fannie Mae will come back and allow us to waive the appraisal. We can exercise what is called a property inspection waiver. It costs $75 and is paid to Fannie Mae.

The Investor is telling me because my GFE had a $300 charge for an appraisal and didn't list the property inspection waiver of $75 we have to refund our borrower $75 because a property inspection waiver falls in the zero tolerance area and not the 10% area. This is a hard one to take especially since I originally disclosed $300 and saved the borrower $225 by not ordering an appraisal. I'm also trying to confirm if what they are telling me is correct, if we should have completed a changed circumstance letter and revised the GFE when we realized we didn't need the appraisal.


While I realize that saving the borrower $225 doesn't really matter on the GFE, does the $75.00 really fall into the 0% tolerance category?

Has anyone come across this?

I haven't come across it, but i think it would have to qualify as a changed circumstance.

I'm thinking what happened is it went from a 10% category (outside appraisal) to an origination fee (inside eval, so-to-speak)...so the only way to accomplish this would have been through a CC.

RESPA is a hard pill to swallow, it's so convuluted and doesn't fit nicely into abnormal situations!

We've only done one or two refi-plus for FNMA and haven't hit this switch yet. Don't ask me how.

I don't see how this would fall into Block 1. The fee is NOT paid to the bank, it's paid to the investor. So it wouldn't qualify as an inside eval as Joker alluded to.

Skittles, can you push a bit and see if FNMA will tell you WHY it goes in Block 1? Is there an FAQ or something they're basing this on? thanks!

Thanks guys. I'll give this to the lender and have her question.

We put the $75 fee into Block 1 but leave the appraisal in. This gives us the tolerance cushion for Block 3 but we're covered for the waiver fee.

Are you saying you state both fees on the original GFE for EVERY FNMA loan???
I understand CYA but....
Anyone see a problem with this as far as padding might be construed?

Randy chimed in on this subject and stated it would be part of origination fee. (He also questioned its validity)

http://www.bankersonline.com/lending/guru2010/gurus_ldng032910a.html

swell.... that makes everything clear as...mud.

yoohoo, Randy! Did you mean to equate the PIW fee you spoke about with FNMA's appraisal waiver fee? How could the government be accused of a Section 8 violation???

Right - we don't keep the fee - I believe it goes to FNMA and not to the investor.

[b]Fannie Mae will come back and allow us to waive the appraisal. We can exercise what is called a property inspection waiver. It costs $75 and is paid to Fannie Mae.[/b]

Sounds like FNMA is the underwriter, I still opine it's a block 1 fee.

Like Randy said tho...how does FNMA justify this fee? What is happening to earn it? IF this is done via DU...a human doesn't even touch it, yes or no?

How can the government be accused of a Section 8 vio? Ask HUD how they can require the closing agent when they are the property seller in a transaction.

Did I mean too - I'm not sure because I was not aware the FNMA did this. But I think that it falls under the same principle. How can you get paid for doing nothing in a RESPA related transaction whether your are FNMA or not. It is the loan that is subject to RESPA, it doesn't matter who is buying it. Most likely no one has ever sued them over it.

I do think under these circumstances that it would be a changed circumstance (investor indicated appraisal is unneccessary) and allow you to re-issue a GFE and adjust the origination fee and get rid of the appraisal fee.

I've got examiners coming. I'll run this past them and let you know what they say.

I'd be looking forward to it. and you're right, as to not removing the appraisal fee, it is padding, but that's the VP's decision, not mine.

Of course, this is the same guy who just failed to issue a GFE in 3 days...

Without taking the time to hunt for it...isn't their something in one of the more recent newsletters that says if you show a fee on the GFE that later is not required, you leave it off the comparison entirely? That way, you are not padding tolerance.

That is correct. You can't use a fee for a service that was not provided for padding. Leaving it on the GFE will do you no good.

But also will not cause harm. If the process is to put both on from the beginning, because you don't know which one you end up with...other than appearing to have higher fees, which could hurt from a competitive standpoint...there really is no harm and no foul. (other than running the risk of considering the unused fee in the comparison chart...which would be wrong.

This was brought up at the ABA Compliance Conference last year (San Diego). I was on a panel with Andrew Faye from HUD when someone asked this exact question. Here's the "HUD Logic":
Appraisal of $300 goes in Block 3.
$75 appraisal waiver fee goes in Block 1 as it it paid to an originator (the 2nd market) not to a 3rd party.
This is NOT a changed circumstance. You should list both in case it goes either way.

If you don't do a $300 appraisal, you don't list it in the tolerance tables.

If you don't list the $75 waiver fee and don't do the appraisal, you end up saving the borrower $225 in a practical sense (in this case) and eating the $75 waiver fee, since you didn't list it. How do you like that?!?

If you have a $300 appraisal done, then the lender could keep the $75 since it's not itemized and part of Block 1. I pointed this out to Andrew and reminded him that HUD said the new RESPA rules were going to save the average borrower over $800.

I'm teaching a webinar on July 13th entitled "RESPA Update". This will be one of the topics we'll discuss in detail. Here's a link for more info:
http://calendar.bollearningconnect.com/main.php?view=event&eventid=1307459600098

David, I think your fingers disconnected from your brain for a second on ' the above. It doesn't fit causing the whole thing to not make sense...at least to me. Could you clarify? Do you mean the bank could keep $75 of the appraisal fee to cover the FNMA waiver?

Opinion: Putting both fees on every GFE is insane. We're a FNMA shop so by Mr. Fay's logic, it would have to go on ALL our GFEs. But we've only done a handful that got the appraisal waived.

[I believe] what he was saying was...if you end up having the $300 appraisal done, you can end up keeping the $75 you plugged into the origination fees (because it's a lump fee and not itemized).

Yep - that's what I meant (what Joker said). Sorry. I was trying to type fast and re-wrote what I said a few times. I have edited the post now.

ok, that's just .........::sputters trying to find the right word::
So I could be making $75 LEGALLY on every loan I do!!!
Even tho only a half dozen or so are Refi Plus?

Holy carp!

That's right and I pointed this out to Andrew Faye. He said that's the way it supposed to be done.

Sure you can. Who's to say what your origination fees are...so long as you can justify you earned the amount you charge! The other option would be to simiply lower the origination fees at closing. The point is...you aren't padding any 10% tolerance field because you can't show what y ou don't charge in the comparison chart.

And just remember that unless origination fees are a percentage of the loan amount, they don't get reported on a 1098 and are not deductible and that might not make the borrower too happy.

We just completed an examination this month from the FDIC and had this exact situation come up. Here is how they wanted us to handle PIW's.

If you know at the time of the initial GFE of the PIW, it should be disclosed in Block One of the GFE. If you choose to show an appraisal fee on the initial GFE it would go in Block 3. If the PIW fee comes up after the initial GFE has been issued the only way you could change the GFE to include the PIW would be if the borrower requests you proceed in this fashion (i.e. borrower requested changed circumstance). A new GFE would be issued with the PIW listed in Block 2.

This question was posed to Andrew Fay during our examination and this is how he and our examiner felt it should be handled. He referred us to the FAQ's, page 31, #8 & #9. He felt it should be handled just as an escrow waiver would be handled.

If this doesn't answer your quesiton, let me know. We talked about this in great detail.

Handling it like the escrow waiver fee DOES make absolute sense. Glad Mr. Fay clarified his position for us all.