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#1235 - 04/06/01 05:07 PM HUD-1 Statement
Gaby Offline
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Gaby
Joined: Apr 2001
Posts: 3
Laredo, TX
We are refinancing a loan that we did back in 1997. In the first loan, the customer paid for the appraisal, and that fact was properly discloses in both the GFE and the HUD statement. Now that we are refinancing, we did not require the customer to get another appraisal, we simply made a copy of the 1997 appraisal and put it in the file.

Do we need to list the cost of the appraisal on the GFE and HUD as a POC? From reading the recent Q&A by HUD, it looks like we do, but I'm getting a lot of resistance at my bank. I'd like to see what other banks are doing.


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General Discussion
#1236 - 04/06/01 05:39 PM Re: HUD-1 Statement
Lucy Griffin Offline

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Lucy Griffin
Joined: Nov 2000
Posts: 1,544
My view is that you don't have to show the cost of the appraisal. I realize that devious regulatory minds can come up with a variety of conclusions, so here's my reasoning.

We know that HUD requires disclosure of already-been-paid costs such as hazard insurance and taxes on the theory that you wouldn't make the loan unless those costs unless those items were paid. Never mind that if you are making both a first and a second trust loan at the same time you would disclose those costs twice.

The re-used appraisal is a slightly different sort of cost. Of course, you wouldn't make the loan without some sort of valuation of the property. But you are allowed to economize to the benefit of the customer if doing so is safe and sound. In your example, the appraisal meets appraisal standards and you can reuse it without requiring a new service and a new cost. Insurance and taxes are different -- they are recurring and cannot be re-used.

The distinction is a fine one, but I think it is defensible.


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#1237 - 04/06/01 07:46 PM Re: HUD-1 Statement
Princess Romeo Offline

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Princess Romeo
Joined: Jun 2001
Posts: 8,272
Where the heart is
Lucy,
I think the disclosures for RESPA have gone from the sublime to the ridiculous. My main question concerns junior lien loans.

Our bank will not make a junior lien loan if any of the following are in arrears: 1) Senior Lien(s) loan payments; 2) taxes; 3) insurance; 4) repairs/maintenance necessary for the property to be habitable/saleable.

Now we aren't asking that these items be PAID in full at the time of the loan - they just can't be delinquent. But - if I take HUD's reasoning to its logical(?) conclusion - will I need to disclose as POC all future payments on the Senior Lien, all future taxes, all future insurance premiums, all future repairs?

While we are at it, we won't fund a loan if the credit report shows any other loan payments are behind. The borrower would have to current on those loan payments. Do we need to show those on our GFE/HUD-1a as well?

Where do I stop? Or can I take the reasoning that I am not requiring these items to be PAID IN FULL before I fund my loan, but that the items simply be in a current status? And if that's my line of reasoning, does "current status" need to shown as POC?

I am envisioning a GFE/HUD-1A with so many POC entires that it will become not only meaningless for the consumer, but dangerously confusing as well.

I wish HUD would say that for refinances and junior lien loans, a statement to the effect: "BEFORE LENDER WILL MAKE THIS LOAN, YOU MUST BE CURRENT FOR THE PAYMENT OF ANY SENIOR LIEN LOANS, YOU MUST BE CURRENT IN THE PAYMENT OF ANY PROPERTY TAXES FOR THIS PROPERTY, YOU MUST BE CURRENT IN THE PAYMENT OF THE FIRE/HAZARD (FLOOD) INSURANCE FOR THIS PROPERTY, AND AN APPRAISAL OR INSPECTION OF YOUR PROPERTY MUST SHOW NOT INDICATE ANY DEFICIENCIES THAT REQUIRE REPAIR. Since you have been paying any senior loans, property taxes, and insurance, you know what those payments cost."

Whad'ya think?

_________________________
CRCM,CAMS
Regulations are a poor substitute for ethics.
Just sayin'

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#1238 - 04/06/01 08:58 PM Re: HUD-1 Statement
Anonymous
Unregistered

If the examiners cite you for not including these items in GFE, then they would seem to be unreasonable. We should look to the intent of the law, which is to provide the consumer meaningful and accurate (as reasonably possible) disclosure. If we start putting the cost of five-year old appraisals on the GFE, then we may as well include the cost of a room addition to the home done five years ago.

Our examiners have not had a problem with us "not putting" past appraisal costs on current GFE's because "it is not a cost of the current credit".


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#1239 - 04/06/01 09:22 PM Re: HUD-1 Statement
Lucy Griffin Offline

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Lucy Griffin
Joined: Nov 2000
Posts: 1,544
Unfortunately, logic is not the driving force here. Taken to the extreem, HUD's reasoning would also require you to disclose the costs of other credit since you wouldn't make a loan if they weren't current on other credit. We have long lost sight of the real purpose of the disclosures: to prevent settlement shock and help the customer understand the costs of settlement. I think we should either drop all the baggage and revert to the original rules (a la 1977) or redo RESPA from top to bottom.

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