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#1365820 - 03/29/10 09:22 PM RESPA Tolerance Cure
Cloud9 Offline
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Please Help! We thought we understood how to cure a 10% tolerance violation, but we have read conflicting information. At the time of the GFE, we quoted an appraisal fee of $400. In processing the loan, it was decided that a additional field review would be required for an extra $300. Of course, no one declared this a changed circumstance, so a revised GFE was not given. On trying to correct this at closing, we showed the $300 as field review appraisal paid outside of closing by the lender on line 809 (outside the column). We also, showed the amount over the 10% tolerance (for all items) as a Tolerance Cure of $228.10 on line 208. The title company, who is closing the loan, wants us to simply show the $300 POC by the Lender on line 809. Can someone please help??

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#1365829 - 03/29/10 09:27 PM Re: RESPA Tolerance Cure Cloud9
Combustible Offline
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Call me dummy, but it looks like to me that the amount of the cure is $260.00--

400. + 40.=440
700. - 440.=260

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#1365833 - 03/29/10 09:31 PM Re: RESPA Tolerance Cure Combustible
CompDat Offline
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Posts: 553
USA
There are two methods of curing. One is how you described in the 200 series and one is with a line item adjustment (probably similar to how the title company explained). However, you should not permit the title company to dictate the price. The title company must fill out the settlement statement, not decide how much should be cured. But I did get hung up on one item you said: You said the field review was paid outside of closing. How is that possible?

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#1365843 - 03/29/10 09:39 PM Re: RESPA Tolerance Cure CompDat
Combustible Offline
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So, what is the amount of the cure? $260 or $228.10?

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#1365846 - 03/29/10 09:43 PM Re: RESPA Tolerance Cure Combustible
CompDat Offline
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USA
I am unable to venture a guess without looking at your settlement statement. You would need to add up all the 10%, then compare the difference minus 10%.

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#1365855 - 03/29/10 09:46 PM Re: RESPA Tolerance Cure CompDat
Combustible Offline
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Cloud9--how did you come up with $228.10? Did you have other tolerance issues, or is this the figure you came up with for the appraisal that was out of tolerance?

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#1367784 - 04/01/10 02:35 PM Re: RESPA Tolerance Cure Combustible
Cloud9 Offline
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Yes, we had other tolerance issues, therefore the amount was $228.10. I'm not really concerned with the dollar amount, but I'm confused on how the cure is shown. Is it correct that on 0 tolerance items, we are to make corrections by line item and on 10% tolerance cures we are to use the 200 line? CompDat said there are two ways of curing, I don't understand when to use which? Sorry, but I'm still confused. Thanks for your help.

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#1368012 - 04/01/10 06:06 PM Re: RESPA Tolerance Cure Cloud9
Cloud9 Offline
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Help Please!

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#1368025 - 04/01/10 06:19 PM Re: RESPA Tolerance Cure Cloud9
David Dickinson Offline
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David Dickinson
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Central City, NE
1. Show "POC (lender)" in the applicable series to cure.
2. Give a credit in the 200 series for the cure.

I sent an email to HUD stating the following:
Mr. Friend: Can you help me understand how to cure a 801-803 tolerance violation? The FAQs demonstrate a zero tolerance item for transfer taxes, but this isn’t quite the same.

A lender could:
1. Put “POC (Lender)” on a blank line in the 800 series to cover the overage. However, FAQ #4 in the “HUD-1 800 Series” indicates lines 801-803 can’t have POC items.

2. “Eat” the excess and not show the overage. However, RESPA says you must state the actual charge on the Settlement Statement.


3. List the actual charge in the 801-803 lines and then issue a credit for the excess in the 200 series of the HUD-1. However, the instructions state you can’t ever increase the fees in lines 801-803.

As you can see, each solution seems to have a conflict. Can you provide clarification?

Thank you in advance.

David A. Dickinson
---------------------------------------------

David Friend of HUD responded with the following:
David,
The examples on the FAQs are not meant to be exhaustive, and may or may not be able to used in any particular situation.

Since Lines 801-803 are for the loan originator’s own charge, we would not anticipate the need for a POC for a loan originator to reimburse themselves for charges, rather the amounts shown on Lines 801-803 would match the amounts shown on the most recently disclosed GFE, or be less when the tolerance issue is discovered prior to closing. This would indicate that the actual amounts charged in Lines 801-803 are the amounts being collected from the borrower at closing.

For a cure, the loan originator could instead show a credit on page 1 in the 200 series as a tolerance cure if you cannot list the actual charges on the HUD-1 that correspond to the charges at closing for accounting purposes, or because closing occurred before the cure could be effectuated. I do not see in the instructions in Appendix A where the amounts in Lines 801-803 cannot exceed the amounts in Blocks 1 and 2 or Line A of the GFE. The purpose of the comparison chart is to determine whether the charges have violated the tolerance provisions of 24 CFR 3500.7(e). In such a case, the loan originator can cure the violation within 30 days by providing reimbursement to the borrower, and issuing an amended HUD-1 showing the credit.

David L. Friend, Esq.
Office of RESPA and Interstate Land Sales
Department of Housing and Urban Development
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David Dickinson
http://www.bankerscompliance.com

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#1368073 - 04/01/10 07:00 PM Re: RESPA Tolerance Cure David Dickinson
Cloud9 Offline
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Thanks David.

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#1368080 - 04/01/10 07:06 PM Re: RESPA Tolerance Cure David Dickinson
ahou Offline
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ahou
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At least David got an answer that makes some sense. I've gotten so many crazy responses from HUD about lines 801 thu 803 that I finally gave up. Thanks for sharing David.
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#1397291 - 05/27/10 06:10 PM Re: RESPA Tolerance Cure ahou
pjs Offline
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I hope this shoots to the front - we overestimated the transfer tax because the purchase price was based on the payoff of the seller's home loan- we figured it based on the payoff (the payoff prob contained interest per day)quoted upfront when doing the GFE but when it got to closing the transfer tax was less than what we quoted. The comparison chart showed the GFE 240.50 and the HUD showed 218.90---do we owe the borrower $21.60? thanks

I thought 0% tolerance met the amounts had to be the same on the GFE and HUD.

Thanks so much!

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#1397584 - 05/28/10 12:32 PM Re: RESPA Tolerance Cure pjs
Deena Offline
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Deena
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PA
It's not a violation if the charge on the HUD-1 is less that the charge on the GFE - no need to give the borrower the difference.
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#1397994 - 05/29/10 11:52 AM Re: RESPA Tolerance Cure Deena
pjs Offline
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oHiO
Thanks so much Deena!

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#1398385 - 06/01/10 10:30 PM Re: RESPA Tolerance Cure Cloud9
deh Offline
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What if the LO forgot to put our Origination Fee in Block 1?

The HUD shows nothing but on page 3 there is of course a problem when comparing "Charges that Cannot Increase". There is a $1,000 in the GFE column but a big blank in the HUD column.

Do we need to correct the HUD and show a lender paid tolerance cure?

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#1398402 - 06/02/10 12:58 AM Re: RESPA Tolerance Cure deh
Truffle Royale Offline

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HUH? You said there was no origination fee in Block 1 (on the GFE) so how can you have $1000 in the GFE column on the HUD?

Warning: I'm wrestling with a fee missing from Block 1 too. It was left off the GFE and HUD and intended to be POCL from the start. I've gotten conflicting answers and found different opinions by seaching BOL. I'm still not sure how to cure it and I'm into the second week past closing so I've got to decide quickly.

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#1398420 - 06/02/10 12:41 PM Re: RESPA Tolerance Cure Truffle Royale
RR Joker Offline
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The Swamp
deh, did you mean to say you have $1000 on your HUD, but Zero on your GFE column? If so, because it's your fee, I would do a correction showing no charges. Basically, you made a free loan. There is no law that says you HAVE to charge an origination fee.
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#1398502 - 06/02/10 02:31 PM Re: RESPA Tolerance Cure RR Joker
deh Offline
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In line 801 there is nothing.....blank.
In line 802 there is nothing.....blank.
In line 803 there is 0.00.

On page 3 of the comparison chart there is 1,000.00 in the GFE column. This is our normal originiation fee for a conventional loan. The HUD column is blank. I have no idea how the $1,000 got on page 3. Could our system be built to put it there or would it have been put there manually??? I have to admit I don't fully understand how the HUD is suppose to flow with the GFE.

We thought, because we always charge an originiation fee unless giveing a lenders credit, this could be a fairlending red flag. Our closing was a couple of weeks ago and I would like to get this resolved as well. We thought we should correct the HUD and show it somewhere on the HUD as a POC-L, because I realize we can't charge it now. Any help would be greatly appreciated!!!
Last edited by deh; 06/02/10 02:37 PM.
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#1398521 - 06/02/10 02:51 PM Re: RESPA Tolerance Cure deh
Dan Persfull Offline
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Bloomington, IN
Block 1 of the GFE should always carry forward to the GFE section of the comparison chart on page 3 of the HUD.

You can't show lines 801,802 or 803 as POC.

Your revised HUD would show the $1,000 on Line 801 bringing Line 803 to $1,000 and then show a lender credit on page 1 in the 200 series for the $1,000.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1398542 - 06/02/10 03:11 PM Re: RESPA Tolerance Cure Dan Persfull
RR Joker Offline
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The Swamp
Dan, playing devils advocate here because I've been discussing this elsewhere and since you've brought up a similar situation here...let me just ask.

Lines 801, 2 and 3 all carry a zero tolerance. How come you are only showing one credit?

Having said that, being that it's an origination fee which you may or may not charge on a loan...if it wasn't quoted on the GFE, I would leave 801 as it is... It just didn't get charged...and I've seen that discussed elsewhere, I think in a reply from HUD, it may even be in a Q&A. As I mentioned above...who's to say you have to charge an origination fee...there are circumstances where you don't...so it's just not included in the 801 total.
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#1398629 - 06/02/10 05:07 PM Re: RESPA Tolerance Cure deh
Truffle Royale Offline

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Originally Posted By: deh
In line 801 there is nothing.....blank.
In line 802 there is nothing.....blank.
In line 803 there is 0.00.


PLUS, Block 1 on the GFE was blank, correct?

Then after closing you find...

Quote:
On page 3 of the comparison chart there is 1,000.00 in the GFE column. This is our normal originiation fee for a conventional loan. The HUD column is blank. I have no idea how the $1,000 got on page 3. Could our system be built to put it there or would it have been put there manually??? I have to admit I don't fully understand how the HUD is suppose to flow with the GFE.

The borrower was never charged a $1000. It's just showing on p 3, right?

Page 3 is supposed to reflect charges shown on the GFE and HUD.
There was no $1000 fee on either the GFE or HUD.
System glitch.
Send the borrowers a new page 3.
No cure required because no fee was charged.

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#1398632 - 06/02/10 05:14 PM Re: RESPA Tolerance Cure Truffle Royale
deh Offline
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Yes, you are correct to all above.

So only a new page 3 reflecting the no charge in the GFE column and we are good to go? No fair lending issue to consider? We are making it harder than it actually is.

Is this how your are handling your Block 1 issue as well?

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#1398648 - 06/02/10 05:45 PM Re: RESPA Tolerance Cure deh
Truffle Royale Offline

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imo, yes, you were making it harder but I don't blame you at all! Error on HUD = cure = bank loosing money = my name/reputation get muddy. blush

My Block one had fee total in it but one was missing so my cure is not a system failure. It's either interprative or just plain stupid...I haven't decided which yet. crazy

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#1399029 - 06/03/10 01:48 PM Re: RESPA Tolerance Cure Truffle Royale
Dan Persfull Offline
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Dan Persfull
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Posts: 46,855
Bloomington, IN
The reason I answered as I did:

Quote:
The HUD shows nothing but on page 3 there is of course a problem when comparing "Charges that Cannot Increase". There is a $1,000 in the GFE column but a big blank in the HUD column.


This indicates to me the fee was shown on the GFE, otherwise why would the fee carried over to the comparison chart?

They also indicated they wanted to show the fee as a lender credit (POC/L).

Since the $1,000 was on the GFE, as I assumed, and showing the the $1,000 on Line 801 of the revised HUD would not have put them out of tolerance and showing the credit on page 1 of the HUD would have accomplished showing the charge as a lender credit.
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The opinions expressed are mine and they are not to be taken as legal advice.

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#1399067 - 06/03/10 02:37 PM Re: RESPA Tolerance Cure Dan Persfull
Truffle Royale Offline

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Dan, I think you're mixing up threads.
deh started this by saying the Lender left the Origination Charge off the GFE so the $1000 was NOT on the GFE.
Nor was it on the HUD on page 2.
It just popped up in the comparison chart on page 3, probably because it was a prefilled field on the software deh uses.
Because deh confirmed that's the case, I say just prepare a new page 3 and give it to the borrower so that they have a comparison chart that properly reflects what the GFE and HUD said.

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