A couple of questions on the new GFE. In the Important Dates section, it was mentioned in a seminar (not BOL's) that we would also need to include the time zone (i.e. EST) in addition to the date and time for Lines 1 and 2. I'm not seeing this addressed in the Q&A. Has anyone seen the requirement for the time zone and I've overlooked it?

A second question, HUD's Q&A page 33 #10 discusses how to show points. We have situations where we would just charge a flat origination fee and some where we charge an Admin Fee and a percentage as an origination fee. Would we need to show the flat OF (i.e. $250) as described in the answer or just if it is a percentage OF?

Thank you for your help.

1. Only dates are needed. Time and time zone is never mentioned in the regulation or Q&As.

2. You must show the flat fee or admin fee on line 801. Points need to be shown either way for IRS purposes. You can designate how much the points are if it's part of the flat fee.

David - thank you. Our bank has never considered the percentage OF as "points" as it is not related to a change for the interest rate. The GFE on page 1 under Your Adjusted Origination Charges, line 2 reads "Your credit or charge (points) for the specific interest rate chosen". If that's not what our fee is for, do we really have "points"?

Good question. I don't really know the answer. Sounds like an IRS question.

Jan I think I may have an answer for you. Points are a buydown price needed to obtain an interest rate. What it sounds like you are doing is charging an origination fee which goes in line 1, not line 2. The "points" feature is typically found on secondary market loans. It is a junk fee (which is why it is where it is) meant to make up for the buy price (payment from the investor for the loan of your interest rate) that you will be losing for charging a lower rate.

I will try to illustrate for those who really care. But this gets a little bit too deep into secondary market activity.

When you sell a loan to an investor you get income from three sources. The three sources are the junk fees you charge, the buy price and the SRP. The junk fees you charge are really self explanitory. The buy price, is the price the investor is willing to pay for your loan.

For example, say your applicant is applying for a loan of $250,000 but wants 4.5%. When you check with your investors they only offer 4.75% for 250k loans for borrowers with similar credit. The buy price on the 4.75% is 1.2% but at 4.5% the investor will not give you a buy price, thus they will buy it for par. So to make up for the loss in buy price you charge 25 points or .25% of the loan amount for the borrower to buy down the price. It is in the borrowers best interst to buy down the loan (in the long run) so you charge them $625 (250k*.0025). Now you get $650 in other income for your bank, in addition to the SRP and buy price.

The SRP is the price for servicing the loan. It is typically paid a price that correlates directly to loan amount, program and duration of the loan. All in all, the lender makes a lot of money on these loans. SRP and Buy price normally add up to ~2% of a loan amount and the junk fees are probably around $1,000. Thus, a lender on a loan similar to the loan in our example would make about $6,000. That is why commissions are so high and there has been some much criticism of the lenders.

Edited to add: I have this lender getting back a lot of money and it is an unrealistic example, however they do make a lot of money. As you can see, as SRP goes up, buy price goes down. This is because most lenders only want to make a set amount on each loan. So the more you make in SRP (loan amount) the better the interest rate you can look forward to. Which is why those who can afford less home have higher rates.

I have some questions about the new GFE. I posted these in the Newbie Nook but haven't gotten an answer yet. Can someone help me out? I'm still new to compliance.

1.Can a FI require the use of a specific title company even if it is an affiliate?
2.Can we just say that we do not let the borrower shop for any service and not prepare a list?
3.Also since we do not list the specific provider on the GFE should we be giving an Affiliated Business Disclosure every time?

Another GFE question . . .

In the tradeoff table, if we have a set interest rate and settlement charges, and the consumer isn't offered any other rate/charges, would the sections with the lower settlement charges and lower initial rate be left blank? Or, would we be required to enter "NA" and/or "0"?

Bump...

Nevermind... just saw where David answered this on another thread. Thanks David!!