The Pest & Survey are disclosed in block 6 of the GFE, but no mention in sales contract-leading me to believe the pest and survey were required by the bank. The bank's service provider list does not include pest or survey companies, so am I right in thinking these fees should not be in the 10% category on the settlement statement?

If you required it, but didn't give a list of providers, then it's the same as requiring the one used and IS a 10% tolerance item.

Ok, does it seem likely that in some purchases pest & survey are required, but not in others? Seems like it should be all or none? Is there a problem with requiring it on some but not on all?

But wait, in block 6 is says:

Required services that you can shop for

These charges are for other services that are required to complete your settlement. We can identify providers of these services or you can shop for them yourself. Our estimates for providing these services are below

So it seems if a list wasn't provided the customer shopped for themself and we wouldn't be held to the 10% tolerance?

No, if you don't provide a list, then all companies are presumed to be on your list and the fees go in the 10% tolerance. That's why it's so important to give a list and, imho, limit the list to just one or two companies. Then if the borrower choses someone not on your list, tolerance falls away.

As for the pest and survey particularly, yes, it would make sense for it to be required on loans in a particular area or circumstance and not in others. But your file should document whether or not it's a bank requirement or a condition of the OTP.

But if the GFE gives a fee for, say, termite inspection, and then none is performed, couldn't that be looked at as if the 10% category is being padded?

But if the GFE gives a fee for, say, termite inspection, and then none is performed, couldn't that be looked at as if the 10% category is being padded?

Any service that is disclosed on the GFE that is not purchased the fee disclosed for that service is not to be shown on the comparison chart.

ami, you might want to review the HUD RESPA Roundups where this is discussed (and as Dan has answered).

The Q&A would have answered your original questions.

So if we don't require the Termite Inspection for a VA loan we are selling secondary market, we don't disclose it, right?

Used to, it was required for a VA loan...has that changed?

Depends on where the property is located. Some areas do not have termites. Many years ago I was in OK and termite letters/inspections were not required. There were few trees and fewer termites. Not sure what the situation with termite inspections are now.

HA! In termite-ridden South GA, that point never occured to me!

SO, if it's not required in your area, but the customer wants one anyway, it is not disclosed, but can appear on the HUD in the 1300's section at closing.

I guess not. I saw this chain and thought I had better ask. I could have sworn someone adamantly told us we did not have to disclose the inspection fee since we are not the servicers and are not the ones requiring the inspection that we are not required to disclose the fee.

We handle these loans as correspondent loans. They close in our name but we sell them right away, usually withing 3 weeks.

I'm not sure I'm following you, deh. Who is requiring the inspection. The borrower, or the lender (ie, investor)?

If the former, it's not disclosed on the GFE as the 'lender' is not requiring it. If it's the latter, it's required to be disclosed.

Then your choice is whether they can choose a servicer (need shopping list/Block 6) or if you require a specific company (no list/Block 3)

Now this statement is correct.
Remember, only costs OF GETTING THE LOAN go on the GFE.
So, in Joker's termite infested region, an inspection could be a condition of getting the loan. But it's way too cold up here for one to ever be shown on one of my GFEs.
Inspections, surveys, etc., that the buyer elects to get or are a condition of the Offer to Puchase can be shown on the HUD but do not belong on the GFE.

TR, read the last sentence above. It sounds to me like it IS a condition of getting the loan. If the investor requires it to purchase the loan, they know this, and should be disclosing it. No way is it considered a 'secondary market fee'.

I don't see that deh is saying that. Further, none of the investors I work with require things like surveys or inspections. Those would only pop up as a condition/recommendation after an appraisal is done. That would be a valid CC which would allow for redisclosure to capture and yes, you'd have to provide a servicer list at that time.

Then we are reading/interpreting differently, and only deh knows for sure. I didn't want to put words in their mouth, therefore I was offering responses to either situation.

Just because they are selling servicing, doesn't mean the requirement didn't exist for them to obtain an inspection on the loans they are selling.

It's funny how lending has changed, though. Used to surveys and termite inspections and water, if on a well, was a requirement regardless of FHA, VA or FMNA financing.

For our in-house loans, even though we are a termite infested area...we never require any of the above. Obviously, they haven't asked my opinion on this.

You're showingyour age, Joker. Back in the day, surveys, etc, were investor requirements All I'm saying is none of the investors I work with now require them so they don' t go on the GFE as a matter of course.

I have more questions. We are located in the midwest and do not normally require Pest Inspections on any loans. My question above is strictly in relation to VA loans. I asked a local third party consultant and below is their response. I have never heard of a Shopping Provider list. What is this and is it something we would only provide on a separate list for VA loans?

"Pest inspections are required for purchases. Therefore they would need to be on the GFE and a provider name(s) would be required on the shopping/provider list (not a preferred provider list)."

local third party consultant

Since I suspect you are paying this person for advice, I would suggest that you go back to them and have them provide you with the basis for their recommendations. I have little patience for consultants that provide advice to clients without also providing them with the basis of any recommendations.

The provision of the preferred provider list would be an option under RESPA if you wanted to limit the tolerance on the quote for the survey you would be required to provide. I have not been involved in VA lending for years, so I am unaware if the VA has any other specific requirements.

I have read this thread and was hoping someone could clarify for me if the following fees would appear in block 6 of the GFE and us need to provide at least on provider on a separate list for:

1. pest, well or septic inspections that are required by the investor
2. pest, well or septic inspections that are not required by the investor/bank but are are a part of the sales contract.

I am certain it is required for #1 but just wanted to throw both scenarios out there.

Happy New Year!!

1. Yes, unless you pick the provider.
2. Contract items not required by the bank to obtain the loan are not disclosed. They may show on the HUD in the 1300's.

Thanks, Joker!

Rule of thumb we adhere to: Don't even LOOK at the OTP prior to completing and delivering the GFE. The OTP is a verification document and has no bearing on the GFE...ever. The GFE should list the estimated costs of getting the loan without total disregard to who may end up paying for something on the HUD. Perfect example: Owners Title must be on every GFE even tho we all know the seller is going to end up paying for it.

Our banks Good Faith Estimate includes services in Block 6 Required Services That You Can Shop For that are not required including a pest inspection, survey fee, well inspection, etc., but no fee is disclosed. The estimate for that block is $0.

Should these services be disclosed on the GFE at all if they are not required? Does it hurt anything to have them listed with no charge?

That block is the tell the applicant what other fees are going to be required and that they can pick the service provider. I would not be disclosing things that the bank does not require and putting a $0 in the column.

I was thinking the same as you Randy. It seemed like these services should not be included here if they are not going to be required. I confirmed with the head Underwriter that none of these fees are charged routinely. On rare occasions the appraisal may prompt a further inspection such as a pest inspection before closing.

In these scenarios, I imagine it would constitute a changed circumstance that would allow a revised GFE to be issued with the required service for which the customer could shop and a charge disclosed.

Would we need to provide a service provider list identifying someone who can perform that service at the time of re-disclosure?

Provide a list with the revised GFE- yes.

This appears to be happening now and you are not already re-disclosing???

The strange thing is that we provide the list of service providers with the initial Good Faith Estimate for these non-required services (at least 1 for each). I'm guessing because they are improperly disclosed under the required services that the borrower can shop for section of the GFE.

Does having these services listed (pest inspection, etc.) on our Good Faith Estimate in Block 6 cause any tolerance issues in cases where customers DO purchase a service identified in that section and do use a service provider on the list provided subjecting it to a 10% tolerance as compared to $0, even though they were not actually required?

Probably not, but you would have to go through each loan to determine whether or not it was the "rare occasion" mentioned earlier.

When we do require that one of those fees be paid prior to closing in those rare instances, we would re-disclose and include the fee next to the appropriate service. This would be in a case, for instance, where an appraisal indicated that there is termite damage. A pest inspection would then be required before the loan could close. The fee would be included in Block 6 and the Good Faith Estimate re-disclosed within three business days a knowledge of the infestation. A new provider list would not be sent, but they would have received one with the initial disclosure of the GFE.

From our conversation, it appears we need to exclude these services from our Good Faith Estimate if they are not required at the time the initial estimate is being issued. If new information indicates that we will need one of the services conducted prior to closing, we need to disclose that service along with an estimate of the fee at re-disclosure and give the customer at least one provider who can perform that service.

I'm confused.
If you list the pest inspection as $0 on your original GFE, how could you go back and charge for it later if the UW decides one is necessary?
Additionally, if you gave a list, you're going to be curing for anything over the 10% tolerance if the borrower choses someone on your list.
imho, you shouldn't be showing anything on the GFE that is not a normal cost UNLESS you know at the time of application that a particular loan is going to need an additional service. The appraisal would be your valid CC for adding the fee later.

I agree Truffle, and that is a little of what I am afraid of. There is not a $0 beside the pest inspection or any other service in that section. However, the total for the box is $0. I'm not sure if this effectively makes the charge for all services in that section $0, but it seems like it could certainly be looked at that way.

The reason we re-disclose a fee if a pest inspection is later deemed necessary for reasons not known at the time of application is that it is not a required service and we are later requiring it based on new information, although it is listed in block 6...

What is strange is I'm actually in the process of buying my first home and I'm getting financing through a different bank. They included a home inspection and survey in this section on their GFE and quoted $0 for each, but they are not required. They also did not include anyone on their service provider list to perform these services, but we do.

Yikes!

As you mentioned, if they choose a provider on the list, it seems we may be subject to the 10% tolerance... Isn't it also 10% tolerance though if you do not provide a list of service providers and the service is listed on Block 6 with a fee quote of $0, regardless of who the consumer uses (in the case of my lender)?

Thought just occurred to me. Do your employer and your bank use the same loan platform system? Could this be a fluke of the system that no one has yet to call into question?

Your second paragraph does not constitute a valid cc to me. You stated on your original GFE that there would be no charge for a pest inspection. There was no caveat about 'because it's not required at this time'. imo, you may have cures to do for any items you showed as $0 and later charged for.

Thank you both for your commentary on the subject. Regards, Justin.