You are correct. The reason it was split (I'm assuming) is to properly calculate the FC - but they would be "lumped" together in Block 3 of the new GFE

I was told in a recent seminar that attorney's fees for preparing loan docs for the lender go in block 1. (fees that all loan originators will receive) A closing fee charged by the attorney to conduct the closing (service fee) goes in block 4.

I have the same questions asked above about no closing coast loans as we also pay the closing costs on home equity loans. It seems as though having to put the credit so that it ends up on Line A eliminates the 10% variance and changed circumstance rules that apply would otherwise apply to the fees that comprise that credit. We sometimes encounter situations in which recording and attorney fees are higher due to an undisclosed lien.

I have already signed up for the webinar on 11/10 and hope that one of the gurus can weigh in with their interpretation.

Is it possible to hold the mortgage broker responsible for fees that are understated on the GFE which then fall outside the 10% tolerance on the HUD-1? If the broker is just plain wrong about the fee, the lender accepts the GFE and there is no subsequent changed circumstances that allow reissuance of the GFE, is the lender left holding the bag? The following FAQ seems to indicate that the lender cannot deduct the "mistake" from the broker's compensation but perhaps someone has a way around this? I appreciate anyone's input!!!
6) Q: If a loan originator pressures a settlement agent to reduce their charges or to ‗cover the difference‘ to bring the costs into compliance with the tolerances, is that considered a violation of RESPA Section 8(a)?
A: If a loan originator (or other settlement service provider) pressures a settlement agent (or other settlement service provider) to reduce their charges or otherwise ‗cover the difference‘ to bring the costs into compliance with the tolerances as a condition of receiving future referrals of business, it may be considered a potential violation of RESPA Section 8(a). Please contact the Office of RESPA and ILS to file a complaint.

I don't see a way around this, even if you have a separate agreement w/ the broker that they are responsible for inaccuries on documents.

Just one of many real scenarios we will be facing come January 1st.

And one of the reasons we will NOT enter into any arrangements with brokers. We'll just originate on our own.

Either the Brokers have better lobbyist than the banks or this is HUDs way of getting rid of the trouble makes for this mess?

I know we will no longer have any broker relationships.

I could really use some help with a few examples that do not justify a changed circumstance. I have read through the FAQ's and they seem to be the obvious ones, but I am more interested in your opinions of those that might not be so obvious. Any help is greatly appreciated.

I can only find one item on the FAQ concerning Yield Spread Premiums on the GFE and I am not sure if I understand it correctly. We are a correspondent lender and receive 1% for the sale of the loan. The loan does not close in our name. Do we list this as an origination fee on line 1 “Our origination charge” and then list it as a credit on line 2 “Your credit or charge (points) for the specific interest rate chosen”?

Does this also apply when we include the point and delivery fees in the rate on a secondary market loan that we close and service?

I think this (in red) should be looked at. It would stand to reason that if a broker messed up, you should have an agreement that they would cure the error...that's different that conditioning future referrals, IMHO.

OK, I have a question. If you have a mortgage loan with a discount or points (charges) and the lender is paying $500 in closing costs (credit) how do you show both on the GFE? It says you can only choose one in box 2, page 2 of the GFE. Any ideas?

If it's a true YSP based on the rate (above par) and you know it prior to closing, it should be included in the origination charge. If it's a SRP and it's paid (if any) after closing, you would not. Because it's a table-funded loan and you are aware of the additional fee you will get, my opinion would be you would disclose it.

On to your second question. Including point and delivery fees in rate. Does this mean you are charging a higher rate that you assume will cover these fees in lieu of charging the fee? If so, then Id say you fit a #2 check box one scenario and would be entering zero in block 2.

Question to HUD:Our question is regarding the No Closing Cost loan, where the bank pays some or all closing costs (including third party costs). The 10/23/09 FAQ has a question on page 21 about GFE-Block 2.

The FAQ's indicate to show a GFE credit on line 2 which creates a credit in Block A. My question is what do we do as a lender when the following occurs?
1) The actual closing costs are less than the credit from the GFE Block A? The HUD-1 FAQ instructions are to carryover Block A to the HUD-1, which means the borrower could receive cash back on a No Closing Cost loan. Surely this is not the intent of HUD.

2) The actual closing costs are higher than the credit from the GFE Block A? Obviously the bank would intend to pay the closing costs that exceed the GFE Block A estimate. How is that reconciled on the HUD-1?


I posed the question above to the FHA RESPA email address and did receive a response. Here is their response below:
1) The GFE is an estimate. If the actual closing costs are lower than the GFE, it is certainly a bonus for the consumer. The estimates for certain fees are expected to be within a tolerance level, but if fees are lower than expected but still within the tolerance, HUD would not expect to see a refund.
The rule includes some references which may be helpful.

“ In the case of ‘‘no cost’’ loans, where ‘‘no
cost’’ refers only to the loan originator’s fees,
the amounts shown in Lines 801 and 802
should offset, so that the charge shown on
Line 803 is zero. Where ‘‘no cost’’ includes
third party settlement services, the credit
shown in Line 802 will more than offset the
amount shown in Line 801. The amount
shown in Line 803 will be a negative number
to offset the settlement charges paid
indirectly through the loan originator.” P. 68245 FR Nov. 17, 2008


2) If the actual closing costs are higher than expected, the lender has an opportunity to cure. I’ve enclosed below another clip from the Federal Register describing the rule. Essentially, lenders have 30 days to work with the settlement agent to cure and issue a new HUD-1.


HUD Determination


Based on the comments received in response to the proposed rule and further consideration of this issue by
HUD, HUD has determined that a cure provision is important to allow loan originators to more effectively manage
any uncertainty in costs associated with the required tolerances on the GFE. By including a cure provision, HUD
recognizes that some errors are inevitable when handling large numbers of complex transactions, and HUD does
not intend for the tolerance requirements to create liability for inadvertent errors.
As described in more detail above, HUD has built an opportunity to cure violations of the tolerances into the
requirements establishing the tolerances. The final rule also provides that a violation of any of the
requirements for completing the HUD– 1/1A shall be deemed to be a violation of section 4 of RESPA. However, the
rule provides that an inadvertent or technical error in completing the HUD– 1/1A shall not be deemed a violation of
section 4 of RESPA, if a revised HUD– 1/1A is provided to the borrower and/or seller within 30 calendar days of
settlement. This opportunity to cure errors on the HUD–1/1A is consistent with HUD’s longstanding policy permitting settlement agents to provide revised HUD–1/1A settlement statements where errors are discovered after settlement.

P. 68222

I believe that section 3500.7(h) exempts home equity loans from the GFE disclosure requirement.

OldSchool...how are you interpreting the answer to #2...It almost sounds like you have to carry over what you disclose...then correct...that doesn't make a whole lot of practical sense....am I missing something?

I have a question regarding if you have an interest-related change on the GFE. For example, if we allow a floating rate for 45 days and then the borrower locks into a rate, my understanding is that we only need to issue a revised GFE to amend those interest rate dependent charges and terms change. We are not allowed to change the other terms on the GFE unless we have a "changed circumstance".

My question is do we have to give the borrowers at least 10 business days from the date the revised GFE is provided to close the loan (in order to shop around)? FAQ #12 under Important Dates states that you do if you have a changed circumstance or a borrower requested change, but this change is outside all other settlement charges.

Anyone have thoughts?

Bump.... anyone have any thoughts on this?

reduce your orignation charges?

What actions, if any, do you plan to take on applications where you have provided the GFE but you do not have the applicant's intent to proceed (i.e., they are shopping around)? Will you do nothing? Will you send a Notice of Incompleteness? Will you start processing the application? What action will you take if the GFE expires and the applicant did not give you an intent to proceed?

My advice to our lenders on this issue - If you have a complete application and no intent to proceed by the borrower, you have a withdrawn application and would follow your current practice for a withdrawn app. If you don't have a complete application, don't issue the GFE. Follow the procedures for an incomplete application.

KML -Some lenders are using No Closing Cost on refinances, whereas others are doing them with closed end home equity loans which are subject to RESPA. You are correct that HELOC are not covered.

RR Joker - cryptic answer indeed. You are correct it looks like you carryover the GFE amount then it is reconciled with the cure process and reconciliation on page 3 of the HUD-1. Obviously the lender's intent is to pay the costs anyway.

I truly hope the attorneys are getting up to speed on this...I've had some want to get together for some training...when we blast them with our fee sheet soon, we may get their attention?

If I am reading the FAQs correctly, if you have a tolerance violation and you are going to cut a check to the borrower then you have to provide a corrected HUD 1. Am I understanding that correctly? If this is true, what is everyones plans? Are you going to close the loan and then provide the check and corrected HUD 1 after closing? Are you going to try to do it all at the closing table?

That's correct. I would think you would want to be done with it at closing and not have to do any follow up after the loan is closed.

So do we give the customer both HUD 1s?