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#1307351 - 12/16/09 05:00 PM Required repairs and the new GFE
DoorKey Offline
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Wisconsin
There are times that we require repairs to the property before we will approve or fund the loan. Repairs could be done before the loan closing is held or funds can be held in escrow until the repairs are made. This could be repairs for well or septic systems, roofs, foundations, or any other major repair. The need for repairs could be identified through the Offer To Purchase or through comments on the appraisal. Would we be responsible for selecting a service provider to complete the repairs or to provide the borrower with a list of providers and provide a quote on a GFE? If so, we would rarely have time to locate a provider and provide a revised GFE within the 3 business day requirement. We certainly would not want to be strapped with a 10% tolerance on the quoted amount. How will this need to be addressed to comply with the new RESPA rules?
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#1344721 - 02/17/10 07:14 PM Re: Required repairs and the new GFE DoorKey
In the middle of it Offline
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Central US
Bump. Did this get answered somewhere? We're facing this now.

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#1344834 - 02/17/10 08:24 PM Re: Required repairs and the new GFE In the middle of it
manylayers Offline
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I'm just going to take a stab...and offer an opinion.

I'm not sure this is part of the GFE. The INTENT is for the GFE to cover the cost of getting the loan...the repairs are not exactly part of that cost...any more than real estate taxes...and those were intentionally left off the new GFE.

I think inspections belong on the GFE, if required by the FI; however any resulting repairs do not.

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#1345052 - 02/18/10 03:29 AM Re: Required repairs and the new GFE manylayers
jlroberts Offline
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Ohio
You can select the service provider and list the service in Block 3 or you can allow the borrower to shop, which would be listed in Block 6. Block 6 triggers the written list.

This was a question I asked HUD.

Question:

We do not require home inspections, pest inspections etc even though they may be written in the purchase contract. It is our understanding that since we don't require them; they do not go on the GFE. Our question is: What if the appraisal comes back and they found termites or note that the well and septic needs to be flushed out. We would then require those items to be cured in order to proceed with the loan. The seller would typically pay for these items on a purchase transaction; however if it was a refinance transaction, the borrower would be paying for them. Is this a changed circumstance? Do we issue a new GFE with the fees for these items and that they are now being required? If so, do we then have to give a written list of service providers?

Answer:

If a loan originator finds that an additional service is required in order to fund the loan, in your example a well and septic report must be provided, and the requirement is based on a changed circumstance, a revised GFE can be issued listing the additional service. Note that a written list of providers for that service must be given at the same time as the revised GFE.

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#1345116 - 02/18/10 01:50 PM Re: Required repairs and the new GFE jlroberts
manylayers Offline
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Thank you for reposting HUD's response..I remember seeing this now....i'm adding it to my folder!!!

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#1345269 - 02/18/10 04:01 PM Re: Required repairs and the new GFE manylayers
RR Joker Offline
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You know, I understand giving a list of providers for a well/septic report, however, around here, the only provider is the Health Department...so how does one shop for that?

I think HUD skirted the issue. If you have roof repairs required, I can't imagine giving a list of roofers...this seems a bit "absurd" really.
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#1345379 - 02/18/10 05:02 PM Re: Required repairs and the new GFE RR Joker
Brock Offline
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Repairs are not a settlement service. We are basically not putting anything that shows up in the 1300 section of the HUD on any revised GFEs.

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#1347824 - 02/23/10 09:07 PM Re: Required repairs and the new GFE Brock
In the middle of it Offline
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Ran this by HUD. There is agreement on not showing the cost of repairs, but they indicated the inspections related to them should be reflected. Here is the reply to the question regarding what to reflect on the GFE when an appraisal is returned requiring a variety of repairs:

The inspections and estimated charges should be on the revised GFE, the repair companies and estimated charges should not be on the GFE.

So do you just call a local roofing company for an estimate of a possible inspection?

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#1347867 - 02/23/10 09:37 PM Re: Required repairs and the new GFE In the middle of it
Dani York, CRCM Offline
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The inspection would be by the appraiser. The appraisal would be the source that tells you the house needs a new roof or roof repair. The seller/owner would have to make the repairs, and the appraiser would have to go back out to inspect the property again to see if the repairs he noted in the appraisal had been made. That's why the inspection fee would be required on the GFE (because appraisal inspections are settlement services).

You run into this mostly on FHA loans, since FHA won't guarantee the loan until the repairs are made.
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#1351547 - 03/03/10 04:34 PM Re: Required repairs and the new GFE Dani York, CRCM
Parluc Offline
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We have an in-house bank loan where the sellers, by contract agreed to make electrical repairs to $500.00. The bill came in at at $680.00, so the borrower has to pay the rest at closing. We don't allow borrowers to "shop" for anything so we don't have a list to provide and wouldn't have electricians on it anyway.

Is my only solution a "changed circumstance" and redisclose the GFE. If I don't, I'll be out of tolerance...it's more than 10% difference.
Or can you put something in the 1300's on the HUD without having it on the GFE? Even though it says "required services that you can shop for (From GFE #6)?


Last edited by Parluc; 03/03/10 05:46 PM.
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#1351631 - 03/03/10 05:33 PM Re: Required repairs and the new GFE Parluc
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Parluc, what I get from this thread is that the actual cost of repairs do not go on the GFE. Only the inspection costs, which would come from the appraiser, would go on the GFE.

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#1351693 - 03/03/10 06:27 PM Re: Required repairs and the new GFE Truffle Royale
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I agree with Truff.
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#1661362 - 02/06/12 10:52 PM Re: Required repairs and the new GFE DoorKey
mac444 Offline
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Posts: 78
Question along this topic. Lender requires termite inspection and clearance on all section I items noted on the report for purchase transactions, regardless of contract. The inspection fee estimate is listed on the GFE along with written list of providers for this service. The contract does not call for clearance and the lender is requiring 'hold funds' for repairs at closing and is indicating the amount should show under the 1300 HUD lines and not subject to tolerance. The settlment agent is indicating since the lender will be retaining the funds at funding that this becomes a "lender charge" and should be disclosed in the 800 sections. The settlement agent will not hold funds in escrow after closing because it is not part of the contract. Can anyone chime in and advise?
Thanks

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#1661374 - 02/06/12 11:47 PM Re: Required repairs and the new GFE DoorKey
Truffle Royale Offline

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Escrow for completion is not a part of the GFE nor does it belong in a tolerance block.
They fall in the same catagory as the repair funds discussed here.
The settlement agent is wrong.
btw, remember the settlement agent works FOR your bank.
Also, YOUR BANK is responsible for the HUD being correct.
So, tell them to do it the right way as outlined above.

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