I am totally baffled on how to properly disclose our home equity loans and whether or not the 10% tolerance is applicable. We do not charge any origination fee and we pay all the closing costs (up to $250 for attorney)on our home equity loans but allow the borrower to choose their closing attorney. According to the instructions it looks we would enter $0 on Line 1, and then an amount equal to the charges that we list on applicable Lines 3-11 on Line 2, so that A ends up being a negative amount representing the amount of closing costs paid for by us. Is that correct?

If so, I have a follow-up question. Doesn't this then make fees that would ordinarily have an overall 10% tolerance (e.g. recording fees to release an unanticipated lien) or be subject to "changed circumstance" (e.g. attorney chosen not on list) and make them zero tolerance since Line A? There is no "lock" on the interest rate on these loans.

Based on what you wrote I am assuming you mean under the new rules. Under the new rules it does not matter who will be paying the fee. You would need to list your "estimate" of the fees the borrower will pay. Even if the borrower will not pay for the item. Then, because you allow them to shop, it would go on line 6 of the GFE. You would then give a list of service providers. Then, upon closing you would list the fee on in the area that the attorney worked on (ie the applicable area).

If the fee was outside of the 10% you would need to pay the difference. Keep in mind you need to show your offset of $250 (which will depend on what HUD you use).

Also, see page 20 question 6. If the attorney fee is to prepare loan documents, then it would go in block 1, and you cannot change the charge. Thus, you really should not permit the applicant to use their own attorney.

I am referring to the new rules. While I understand that we have to provide the estimates regardless of who pays for them, I am questioning how we indicate that the costs of closing will be paid for by us as well as how to handle changes due to circumstance since there is zero tolerance for Line A. In order to be a fair comparison shopping tool, the borrower needs to know what fees they will pay vs. what the insitution will pay. As for letting the borrower choose their own attorney, we are located in a small area and do not want to risk lashback from the legal community.

See Q&A page 21, GFE-Block 2 instructionsAnd remember, you will not be able to use a HUD 1A on a no-cost loan.


I've decided I'm crazy...that was actually an OLDER version...I've digress back to page 21

RR, can you help me understand this better. If a loan is no cost and the adjustments are made before close, and there is no seller, I don't see why you could not make the loan on a HUD-1A.

If there is no seller, you can use the HUD-1A.

It's stated in the Q&A somewhere...they didn't design the 1A to show a credit, thus you are stuck with a HUD1. I'll try and find that discussion, but I'm in the middle of working out all the programing changes right now, so my time is, well...limited?

Ok, found it...page 29, Question 11

Dang your right.

I'm sorry to open this discussion again but I cannot find the Q on page 29 - is there a new citation given the number of revised FAQs? Why would the HUD-1A not simply reflect the charges paid by us as POC?

I also have a question about disclosing high on government recording fees on a no closing cost loan (i.e. we pay all of the fees). The loan department wants to make it easy so that if a LO misses putting in the fee for discharging a lien, we would be covered. If it turns out there was no other mortgage to discharge, then the higher amount we included as a credit in Block 2 would make it appear on the HUD-1 that we owe the borrower money at closing. Is that accurate - that a borrower could end up making money on a new loan?

Try page 41, #11 related to the HUD-1/ HUD-1A issue.