I think HUD has block my email address.......

Maybe your total number of emails exceeded their tolerance.

I just got an answer back today I sent on December 30th!

totally forgot I sent that question, and it was a good one!

So are you going to share?

So....a broker issued a GFE for a fixed rate loan, then asked us to make the loan. We would consider an ARM, but not a fixed rate. I don't believe this is a changed circumstance. Is there any way to issue a new GFE? Do we deny the loan? Make a counteroffer? Is there a way for the customer to request a new GFE? Does a different product constitute a different GFE?

I struggle with this too as the FAQ do state "IF you accept the GFE". I believe you have the right to not accept the application from the broker.

You could also counter-offer the customer and if they accept your count-offer, you have a borrower requested change (a changed circumstance).

I have two questions regarding changed circumstances.

1) The first has to do with appraisal charges. My company deals primarily with VA loans. Sometimes the VA will select an appraiser outside of the area where the property is located. My question is whether or not it would be an acceptable changed circumstance to increase the appraisal fee for milage charges that are charged by the appraiser? As a side note there is really no way for the lender to know where the appraiser will come from or if they are going to charge for mileage at the time the GFE is issued. Any help would be appreciated.

2) My second question is a little more complicated. My company operates as both a direct lender and a mortgage broker. There are situations when a loan is initially intended to be underwritten and closed in the name of our company but for one reason or another we cannot do the loan. So we now want to send the loan to an outside lender. The question is could this be considered a changed circumstance? I know HUD has stated that non-acceptace of a broker issued GFE by a lender does not consitute a changed circumstance, but this seems to be a different situation. Of course the real problem here is that there is no yield spread disclosed on our in house loan where it would have to be disclosed on the brokered loan. What we would like to do is add the ysp to block 1 and give the credit in block 2 as a result of this changed circumstance. Any help would be appreciated.

Brock, I sent this question to HUD the other day. Depending on what the reason is that your bank can't do the loan, this might answer your second question above.

Q: The borrower still wants a 30 yr fixed rate loan. After the original GFE has been delivered, there is a changed circumstance in the loan that makes it no longer qualify for the original product offered. We have to find another investor willing to make the loan. Normally this means a change in fees and/or rate because we are no longer able to give the borrower the best possible rate that Investor A offered.

A: It seems like if there was a change in the borrower's eligibility it could be considered a changed circumstance affecting loan and a revised GFE could be provided.


As to your first question, everything that I've read says mileage charges that raise an appraisal fee do not qualify for a changed circumstance. That's why a lot of lenders are high balling the appraisal fee. Makes absolutely no sense if the intent of this new RESPA was to allow comparison shopping, I know. But that's DUHHUD for ya'.

Where are subordination fees supposed to go on the GFE?

We are doing a 9 month construction loan with no permanent commitment and the owner already owns the lot. Am I correct, that RESPA would not apply in this case and we would NOT have the use the new HUD, we can simply do a disbursement summary? THANKS

yes, Em, you are safe!

err..one caveat, IMO, however. If they are going to be paying out WITH permanent financing, we would require a commitment from whomever, otherwise we "may" be doing the Perm by default and in that case, we would disclose both.

I believe Subordination Fee to 3rd party is located in Block 3, line 808.

Thank you. I get your point about the permanent.

Yet another changed circumstance question;

We have a customer that we approved with one of our investors sent out the GFE...he accepted, but then rates dropped with another investor of ours....customer comes back and says he wants to do the loan but with the investor offering the lower rate. Mostly, that's OK, except that this investor requires a more expensive appraisal.

Based upon HUD's FAQ page 18 xiii, I'm thinking maybe we CAN issue the revised GFE with the increased appraisal cost...but I wanted to be sure.

Thank you!

You could go with borrower requested changes and do a changed circumstance. Only fees relating to the CC would be changed and I'm thinking the tolerances would still apply.

You need to read on down to xv on page 18:


xv) A mortgage broker issues a GFE based on one lender‘s loan products and origination fees, but places the loan with a different lender.
A: No, this would not constitute a changed circumstance.


I would question whether you have a changed circumstance.

I don't think you can rely on a "customer requested change" in this instance. Any customer is going to go with a cheaper interest rate if you offer it to them. So what's to keep you from estimating the cheapest closing costs based on the higher rate and then "bait and switch" them after they agree to proceed. Oh BTW, we have this cheaper product but your appraisal is going to be $600 instead of $400.

IMO you don't have a changed circumstance in this scenario.

This is what kills me about the new RESPA.
Look at the answer I got from HUD above. Apparently if the borrower doesn't qualify for one investor's product, they say it IS a changed circumstance to switch investors.
BUT, if a good borrower wants to take advantage of a better interest rate it's NOT a changed circumstance?!
How does that work, exactly?

Broker's GFE shows the credit for the YSP, however he simply for got to add it into the origination charges. :-o The loan hasn't locked yet. When the loan locks, it will be a changed circumstance, but the broker will not be able to then ADD a YSP in the orgination charges, right???

The changes don't keep the customer from taking advantage of the better rate, it just prevents you from the bait and switch tactic. And the customer's credit quality has nothing to do with this particular change in rates.

That was one of the ploys used by unscrupulous brokers. They would quote the fees based on the higher rate then once they had the applicant hooked they would offer them a 1/8 to 1/2 percent lower rate if they wanted to pay higher fees which instead of $200 as in my example it was usually $2,000 to $4,000.

The only thing the borrower is requesting changed is the interest rate so the only fees that could be revised would be the fees that are dependent on the interest rate.

If the product is the same (30 year fixed for example) and the only difference is the investor and the fees then I don't think you can argue the borrower is changing products. However, if they are going to a different product, such as fixed to variable then you could possibly rely on the following from page 26:

8) Q: When the interest rate goes from float to rate lock, may Block 1 on the GFE change?
A: No. However, Block 1 can increase due to a changed circumstance if the change affects the loan amount and all or a portion of the Origination Charges were calculated as a percentage of the loan amount. Block 1 may also increase if the borrower either requests a different loan product or the borrower is no longer eligible for the loan product contained in the initial GFE, but is eligible for a different loan product.by the interest rate.

I see your point....I think our customer just wants the lower rate..the first product he accepted required only a drive-by appraisal...but the investor that he now wants to go with requires a full walk through...which will cost more.

Thankfully, we are only a few bucks outside of tolerance..so will pay the difference...and be much more cautious about borrowers wanting to switch products...

thank you all for the good discussion!!!

Very often the recording fee quoted on the HUD-1 at closing will differ from the actual billing we get later(after closing) from the clerk of court.

Do we need to revise the HUD-1 to show the actual fee? (since the bank will have to pay the difference)

If so, is this an acceptable way to disclose the increase:
example: $50 shown on HUD-1 and $52 on actual billing

On line 1201 we put the final charge of $52 in the borrower column and a credit on line 204. Or do we put $50 in the borrower column, with POC(L) $2 outside the column - with nothing on the 1st page?

"..the first product he accepted required only a drive-by appraisal...but the investor that he now wants to go with requires a full walk through."

manylayers, I think this fact may alter the determination of whether or not there is a changed circumstance. This statement makes it seem like you are doing more than just switching lenders. It makes it seem like you are switching loan programs. And certainly switching loan programs would qualify as a changed circumstance and I would think that an increased appraisal cost is a reasonable cost to be affected by such a switch. I think what Dan was concerned with was just the fact of switching lenders alone would not allow you to increase the appraisal cost without any change the actual appraisal service being performed. But when you start talking about a requirement for a more extensive appraisal, that sounds like it could work. I think the point here is that in order to make a real determination we need all the facts. These are complicated questions and one little fact can make all the difference. All that being said, your gut reaction to eat the difference might still be the most prudent course of action.

Can anyone tell me what they are doing to adjust to the new GFE application requirements. We have been sending out the 1003, state disclosures, and program specific disclosures prior to obtaining a property address from the borrower and then only required a signed intent to proceed statement once a property address is obtained. We recently had one lender say they wanted all new signed disclosures. Anyone have any thoughts? Advice?

I have a title company who just informed us that they can't issue a HUD under the new 2010 rules until they have a 2010 GFE - which is perfectly understandable except, this is a business loan (granted, it's for a consumer under her SSN) and we did not issue a GFE. My understanding is that RESPA excludes business purpose loans even if it is for a 1-4 family residential property? Our borrower is purchasing this as an investment to renovate and flip for a profit. Has anyone else run into this with their title company - and if so, how did you resolve it? I've given them an excerpt from RESPA's section 3500.5 explaining coverage/exemptions and Reg Z's section 226.3(a)(1) for the definition of a business purpose loan, just waiting on a reply. Anything else I should consider? Am I missing something? Thanks!

Curiously, trout...you say this is for investment to renovate and flip...is this person in the business to do this? Is it supported by tax returns? If not, I'd consider this a personal investment rather than a business investment and would disclose it as a consumer loan.

If it truly is business, there's no need for a SS to be completed, so I'm not sure what the issue really is.