I haven't received full details yet, so maybe my understanding of the purpose was not correct. The lender told me it was documented and correct as a business purpose loan, but I will confirm once I get the docs myself Thanks for pointing that out!

I can certainly see where the title companies want to be careful about using the new HUD correctly, and I appreciate that.

Yes, it would be impossible to complete a new (2010) SS without the corresponding GFE.

For non-RESPA loans, I would rather see just a simple closing statement prepared, if anything.

About the purpose, trout...this is one of THE most frequent mistakes a LO makes, IMO. Calling it business, when it's not. In all due respect..it really can be confusing.

Seriously! Who is going to nit pick this? House flipping doesn't have to be the borrower's main source of income. Perhaps it's the borrower's first splash and dash loan. And who's to say exactly how often a person must buy and sell before the practice is considered "business worthy?" Once per year?....10 times per year?....depending upon what market, what community? Our fix and flip loans are all considered business purpose.

In our situation, the title company is the driving force behind this issue.

Upon further review, this is the borrower's first investment property, so no tax returns from prior endeavors. We'll take the LO's determination as he's the one who worked with the customer and has the best understanding of the actual purpose.

Update - I was able to speak to the title company's compliance person and apparently it was a bit of a misunderstanding... when they heard 'investment' they interpreted that as a personal loan instead of a business investment. With that information, they agreed that a GFE was not necessary. In the end, we got it all straightened out.

Thanks so much for all the input - I totally agree that purpose coding is anything but an exact science with all the variables involved!

Fortunately for me, I didn't make the decision to call all of 'em business loans, and so I won't have to defend the decision should an examiner decide to "nit pick."

swiggles, if you read the commentary for business purpose, I wouldn't considering this nit picking.

Yes, I've read it....many times. Like I said, fortunately I did not make the decision about how my bank will treat loans to purchase investment (non-rental) property. I expect we'll see what pans out during an exam.........

It can easily become hit and miss, since during compliance exams they review very little on the "commercial" side anyway. We're just pretty strict where compliance is concerned. That ole "spirit and intent" thing.

Here's HUD's response:

If the cure pertains to an item in the 0 or no tolerance category, the actual "cured" amount may replace the previously out of tolerance amount on page 3 of the HUD-1.

If the cure pertains to the 10% aggregate tolerance category, the amount may be listed on page 3 in the category as a negative number. See below:

From the FAQs, Tolerance Cures:

14) Q: In some areas the deed and deed of trust are recorded after a transaction closes and funds. If the actual amount of transfer taxes increases and the settlement agent later collects the increase from the borrower, would this be a tolerance violation even if it occurred after settlement?

A: Yes. Whether settlement charges are collected before, during or after settlement, if the charge exceeds the tolerance threshold, there is a tolerance violation.



15) Q: In some areas the deed and deed of trust are recorded after a transaction closes and funds. If the settlement agent pays the difference to get on record and intends to collect the increase from the borrower, may the lender reimburse the settlement agent directly to cure the potential tolerance violation?

A: If the settlement agent pays the difference in transfer tax on behalf of the borrower, the lender may reimburse the settlement agent. The settlement agent must prepare a revised HUD-1 showing the cure of the potential tolerance violation and send the revised HUD-1 to the parties in the transaction, as appropriate.

Can someone give me some insight on how they are handling signatures on other required disclosures under the new GFE rules? Our stance is on a purchase transaction we will send out all disclosures with the exception of the GFE when the person wants to become prequalified. Then when the person has an address we require the GFE to be disclosed and an intent to proceed form to be signed and returned. The problem I am running into is that some investors are questioning why all the other disclosures are signed at a different time from the intent to proceed form. Are other people running into this? Is there any legal reason to require all disclosures (including the 1003) to be resigned after the GFE is delivered?

Management here doesn't know the meaning of the words.....prefers to wait 'til stung....then adapt. If a reg doesn't say "you must do this in this exact manner" (black and white), they're going to go least amount of compliance first....see what examiners say. Grrr....

In the 1/28/10 Q&A's, Q#30 on pg 10 and Q#4 on pg 21 both say that "Important Date" #4 on the GFE should state "NA" if the rate is locked. Q#6 on pg 21 states that "Important Date" #4 should state "NA" if a rate lock is not offered. This would seem to suggest that #4 should be NA in every case, but I can't imagine that was HUD's intention. Has anyone seen a clarification of this issue?

You would enter a number in block four when you issue the GFE prior to locking (floating) and you require the person to lock a certain number of days prior to closing.

Was not sure where to put this questions-RESPA or Reg Z (HPML).

Our loan officers determine a HPML at loan approval with the APR in effect at that time and again re-verifying at consummation with the final APR.

If loan is not a HPML, we would not require an escrow account and this would be reflected on the GFE as “NO we do not require an escrow account for your loan”, however, at consummation a loan is determined to be a HPML now requiring escrow. Am I correct that this should not affect the GFE ? Am I comparing apples to oranges?

Two Questions:

Our bank receives loan applications thru an online service with a property address, but not a legal description. A disclosure is give to the customer online with an estimated charge for a survey of $600.00. After we contact the customer and find out what the legal description is and it is for more than a lot and block legal (metes & bounds) can we increase the survey charge and re-disclose to the customer. Would this be considered a change circumstance?

The estimated charge for an appraisal in our immediate area is $450.00. Occasionally we may do a loan for property located 75 miles or more from our area and the appraiser may charge a lot more for the appraisal. Would this be considered a change circumstance since this is outside out our normal lending area?

Pounder, I can see how it would affect the loan amount if you agree to finance the initial amout of the escrow reserve. I think if your loan amount changes, this changes the recording charge, so I think it would be a changed circumstance. Any thoughts anyone?

That is a changed circumstance and requires a new GFE within three buisness days. There is no waiting period to close. It is entirely possible to have a changed circumstance at the closing table, issue a new GFE and continue with the closing.

Unless, of course, if the new APR threw it out of the APR tolerance threshold!

What is the penalty if the a revised GFE is not provided for a changed circumstance but the only thing that actually changed is the important dates section? I want to comply, but providing a new GFE just to tell the borrower that they have to close in 30 days in order to get the particular rate (when our company honors the rate anyway once the rate is locked - no extension fees) seems rediculous.

I really thought I had read this somewhere - either here, in an email from HUD, in the FAQ....somewhere, but I can't seem to find that "somewhere" anywhere! Did a search of my email, search of the threads - apparently I'm not using the right search terms. I really thought it was an email from HUD, but today they are giving me a conflicting answer - which was combined with some other answers that conflict with the FAQ...so...I'm checking with the better experts....

1) No rate lock - Put "NA" on GFE for lines 1, 3, 4. I say yes, believe FAQs say yes. HUD said no in an email today - that line 1 must always have a date.

2) If your rate remains floating until closing, do you ever have to give a revised GFE? I would not think so, and I was pretty sure HUD had said no (still looking for that email) - otherwise, you could be issuing a GFE at the closing table along with the HUD-1. Today via email, HUD says you must eventually issue a revised GFE since the rate locks at some point even if its at the last minute. Our rates RARELY ever change from the time the loan officer puts it on a worksheet until closing, but periodically they do - we've determined that just because it's on a worksheet doesn't make it locked, so we've gone to lock agreements any time the rate is locked - without the agreement, the rate is considered floating.

From Compliance Coach:

Line 1. Insert the date (and time, if applicable) until which the stated interest rate will be available. If this does not apply, enter NA

Line 3. Enter the rate lock period in calendar days. If this does not apply, enter NA

Line 4. Specify the minimum number of days before settlement that the rate must be locked. If this does not apply, enter NA.

From the FAQ’s:

5)
Q: If a lender does not offer a rate lock, how should Line 1 in the Important dates section on the GFE be completed?
A: In Line 1, the loan originator must state the date, and if applicable, time until which the interest rate for the GFE will be available. If the rate is not available for any period of time, then Line 1 should state Not Available or NA.

6)
Q: If a lender does not offer a rate lock, how should Lines 3 and 4 in the Important dates section on the GFE be completed?
A: If the lender does not offer a rate lock, then Lines 3 and 4 of the Important dates section should state Not Available or NA.


From Vicki Botts, “In plain English” presentation, the only time there should be an NA is in line 4 after a rate lock.

Is it just me or is HUD beginning to sound like a bunch of dithering fools?

Kinda like that kids game where you sit in a circle and one person whispers something in the next one's ear and it keeps going around and the last person says what the first person did except it NEVER comes out to be that?

All this contradiction between FAQ and HUD answers and training is driving me bug nuts!

We just had a loan that we need to cure on. This is a refinance. Can you show a cure on a HUD 1A or do we have to use the HUD 1?

FlamingoGal...for line 1 (important dates) we enter the day of application and a time (like the amount of time they are sitting there!) for that info.

You have to use a HUD-1 for tolerance cures.