We have a loan that is ready to close. The original GFE did not contain an amount for the owner's policy (it is a purchase). We now have a tolerance issue were we are out 60%. This policy is being paid for by the seller. Is this still an item that will need to be reimbursed to the customer?

There is not any way to redisclose this now correct? It would not constitute a changed circumstance?

Yes.

No.

No.

I hate to try and beat things to death, but I am trying to have a clear understanding of our issue. I sent the following question to our examiner and expanded on the posted question because other things had surfaced.

We have uncovered our first violation under the new RESPA changes. It was a purchase loan that we did not disclose an amount in Block 5 for the ‘owner’s title insurance’ on the GFE. The customer used a title company that was on our list and obtained owner’s title insurance. This caused us to be about 60% out of tolerance. The seller was paying for the owner’s title insurance. We do have to reimburse the customer even though the seller was paying the fee? I need to make sure I can back this up when I go to the officer. I know this will be an issue they will argue. Looking at the 1/28/10 New RESPA Rule FAQs on page 39 it does address this specific question. We want to make sure we understand this and do the reimbursement correctly. We decided to review our loans for violations after closing. Do we need to provide the customer with a new HUD-1 showing this violation since the loan is closed and funded? One item that we find confusing is the HUD-1 that came from the title company. When we looked at their page 3 where the ‘increase between GFE and HUD-1 charges’ is listed they show a difference of $40 or 2.3%. The settlement that printed with our docs shows us to be 60% out. The reason for the difference is that they put the cost for the owner’s title insurance in the seller’s column on line 1103 on page 2 and therefore removed it from the comparison on page 3 since it was listed as zero on the GFE. Is this correct?

I spoke with him on the phone and he stated that if we don't normally require an owner's policy then we don't have a violation. I told him in the FAQs it said on a purchase we should have an amount in box 5.

I got back from lunch and received the following email from him: I would recommend that you document the file that the seller agreed to pay for the owners title policy, use the title company tolerance analysis, and use the time period prior to closing to review loans going forward. Once the loan is funded, your only option to correct a mistake is to reimburse. Reviewing the loan prior to closing allows you time to redisclose when an error is discovered.

I just sent this back to him: I am confused by your comment about redisclosing. I thought that if the borrower accepted our GFE offer during the 10 day period we were bound by the fees on the GFE for tolerances unless there was a ‘change in circumstance’ that would allow redisclosure. From the list, missing a fee would not be a ‘change in circumstance.’ We do go over our docs before closing, but we choose to use the 30-day period to reimburse instead of preparing a new HUD before closing.

I would appreciate any responses that anyone has out there. I feel like I have lost my mind and now I am questioning what I think I know.

We review all of our loans prior to closing for violations. In all purchase transaction the owner's insurance is required to be listed on the GFE regardless of who pays for it. On the HUD, if the seller is paying the owner's insurance, it can be listed in the borrower's column with a credit from the seller on page 1 of the HUD or in the seller's column. Regardless of who pays it would still be required to be disclosed in the comparison charts on page 3 in the appropriate column and if subject to the 10% tolerance then reimbursable. Since we review ours prior to closing we show all of our credits to the borrower on page 1 of the HUD so we don't have to document the correction later.

What planet is the person from? I agree with jme3's comments.

You can't make any adjustments to the GFE unless there is a qualified changed circumstance and forgetting to disclose the fee is not a qualified changed circumstance.

Also his statement about you not requiring OTI or the seller paying the premium is not accurate. You must disclose the OTI regardless if it's required or who is paying for it and if the disclosed amount on the GFE causes an out of tolerance with the amount disclosed on the HUD then the cure must be given to the borrower, again regardless who paid the fee.

Get 'em, Dan!

FWIW, I agree and me thinks the examiner is clueless.