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#1422851 - 08/02/10 06:46 PM Re: changed circumstance DD Regs
Dan Persfull Offline
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Then Brock should show us where 3500.7 gives the authority to issue a revised GFE anytime they wish due to a fee changing downward. Using that logic then they should issue a revised GFE every time a fee goes up also, but as the regulation says a change in fees is not in itself a changed circumstance allowing the issuance of a revised GFE.

Without a changed circumstance you have no permissible purpose to issue a revised GFE showing the decreased or increased fee. IMO issuing a revised GFE without a changed circumstance is just as much of a violation of Sec 5 as the failure to provide a GFE.

(f) Binding GFE. The loan originator is bound, within the tolerances provided in paragraph (e) of this section, to the settlement charges and terms listed on the GFE provided to the borrower, unless a new GFE is provided prior to settlement consistent with this paragraph (f). If a loan originator provides a revised GFE consistent with this paragraph, the loan originator must document the reason that a new GFE was provided. Loan originators must retain documentation of any reasons for providing a new GFE for no less than 3 years after settlement.

There is no tolerance for a fee decreasing therefore issuing a revised GFE due to a changed fee not related to a qualified changed circumstance is not consistent with paragraph F.
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RESPA
#1422875 - 08/02/10 07:05 PM Re: changed circumstance Dan Persfull
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Dan, why is my line of logic not consistent with paragraph F? By issuing a new GFE I am still within the tolerance created by the issuance of the GFE at application. In fact, I have created a new more strict tolerance.

Are you also on board with the statement that borrower's aren't that savvy? And that we can't issue a new GFE if the borrower says they want to see it in a disclosure?

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#1422895 - 08/02/10 07:23 PM Re: changed circumstance Brock
Dan Persfull Offline
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Quote:
why is my line of logic not consistent with paragraph F? By issuing a new GFE I am still within the tolerance created by the issuance of the GFE at application.


Using that logic then you should be issuing a revised GFE for all fees that increase within the tolerance, otherwise you aren't issuing consistently with paragraph F because you are only reissuing "within tolerance" of the fees that go down.

Also keep in mind you can only change a fee that is affected by the changed circumstance. So what changed circumstance took place allowing you to adjust the changed fee?


Quote:
Are you also on board with the statement that borrower's aren't that savvy?


No.

Quote:
And that we can't issue a new GFE if the borrower says they want to see it in a disclosure.


Without a changed circumstance, I would have to say yes.

In this case I would issue them our "Funds To Close" worksheet.
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#1422998 - 08/02/10 09:04 PM Re: changed circumstance Dan Persfull
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Let's not misconstrue my comment about borrower's savvy. I meant that if a borrower finds out a fee has been lowered, the chances that he's going to ask for it on a new GFE are mightly slim.

Honestly, if borrowers were more savvy, the need for the new RESPA would never have happened in the first place.

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#1423926 - 08/04/10 02:06 PM Re: changed circumstance Truffle Royale
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Wait a minute Truff- I'd be saying if more Banks were honest we might not have a need for this new RESPA/HUD.

That saying we issue a revised GFE if the loan amount decreases or goes up- no fees are changed unless it's the law- and I'm in a dark place on this because our compliance consultant says he is the boss and a revised GFE will take place if any amount changes regardless. So, we do....we document it......and the only thing I can do right now is wait until October and see what the Fed examiners say. I've already stated all this so right now my hands are tied.

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#1423933 - 08/04/10 02:10 PM Re: changed circumstance pjs
RR Joker Offline
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wow-pjs...just wow.
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#1424145 - 08/04/10 04:45 PM Re: changed circumstance RR Joker
Dan Persfull Offline
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Quote:
and I'm in a dark place on this because our compliance consultant says he is the boss and a revised GFE will take place if any amount changes regardless


This consultant and his firm would be fired immediately. The consultant is just that a consultant and you are under no obligation to abide by their recommendations, especially one as ludicrous as that one.

You should be talking to your own compliance staff and management staff and probably this guy's management staff also unless of course he is the management staff. Then I would just show him out the front the door with an attitude like that.
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#1424155 - 08/04/10 05:07 PM Re: changed circumstance pjs
RR Joker Offline
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Originally Posted By: pjs
Wait a minute Truff- I'd be saying if more Banks were honest we might not have a need for this new RESPA/HUD. I truly take offense at this statement. I realize there were/are a lot of dishonest brokers that took advantage of the housing boom, but banks and bankers, in general, are not. You can also blame government who believed "everyone DESERVES a home of their own"..don't worry about whether or not they can afford it. Come on!

That saying we issue a revised GFE if the loan amount decreases or goes up- no fees are changed unless it's the law- and I'm in a dark place on this because our compliance consultant says he is the boss and a revised GFE will take place if any amount changes regardless. So, we do....we document it......and the only thing I can do right now is wait until October and see what the Fed examiners say. I've already stated all this so right now my hands are tied. So, on this part...are you saying you issue a revised GFE everytime the loan amount changes ,up or down...if so, I don't see that as a procedural problem. you can, but don't have to...it is a valid changed circumstance and you do say it's only for the fees the loan amount affects. I'm thinking this has been interpreted that your compliance consultant states you reissue anytime a fee changes, whether or not you have a CC...in re-reading this..I don't think that was what you meant, was it? If it IS...then he needs to go the way Dan replied and since when was a consultant EVER a BOSS?!?
Last edited by RR joker; 08/04/10 05:11 PM. Reason: elaborated- last sentence
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#1427829 - 08/11/10 11:07 PM Re: changed circumstance DD Regs
VRV Offline
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In one of Truffle's comments above, it stated: "In these same training sessions, the GFE was repeatedly referred to as a 'worst case scenario' estimate of the fees for the loan they applied for. That's why even items that may not be used or even paid for by the applicant must be included on the GFE. Lenders were encouraged to present the GFE to the applicants with this thought in mind. "

My question is this: We are a lender that pays all (in most cases) of the costs associated with the loan, except for a loan fee paid to us by the borrowers. So we reflect this by putting a credit for the amount of the loan costs in Line 2. Then the costs are itemized, and the bottom line number leaves the amount of the loan fee that the borrower pays us.

I read in the FAQs that the lender cannot reduce the amount of the credit in Line 2. Therefore, if we include "worst-case" numbers in the costs on the GFE, and then those costs are less than we listed on the GFE, and we show the correct lower amounts on the HUD, since we can't reduce the amount of the credit, we would have to pay the borrower an amount equal to what the fees were overstated by. (At least that's they way I understood this FAQ.) So I'm thinking that treating the GFE as a worst-case scenario is risky since we may end up paying the borrower for the difference between what was disclosed on the GFE and what the fee ended up being.

I can see where this approach makes sense if the borrower will be paying the charges, but for a lender who pays all the charges on behalf of the borrower, it doesn't seem to work. Whatever amount we overstated the fees by on the GFE would end up being paid out of our pocket to the borrower. Or am I missing something here?

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#1427850 - 08/12/10 01:50 AM Re: changed circumstance VRV
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No, you're absolutely correct in your assessment, VRV. HUD addresses situations like your's in the FAQ under no-cost loans. We don't do no-cost loans so I don't profess to be at all capable of advising you beyond read that section and apply it to your loans.

That said, it would seem to me that if you're not doing no-cost loans, the way to approach this dilemma might be to simply put the costs on the GFE and then PBL them on the HUD or give a credit on p.1. You'd be giving the borrower the worst case scenario and explaining what will really happen when you present the GFE.

Again, I'm only guessing. Someone else who does this is sure to chime in with a better answer.

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#1427942 - 08/12/10 01:24 PM Re: changed circumstance Truffle Royale
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AGree. It was figured out pretty quickly that you could get royally ripped off by putting the credit in Block 2. What most now do is go ahead and complete the GFE as if the borrower was paying everything...give them a different sheet (that doesn't look like a GFE) showing the truer picture...then on your HUD, give the credit in the 200's.
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#1427981 - 08/12/10 01:54 PM Re: changed circumstance RR Joker
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That is a great suggestion. I had not even thought about doing it that way. Thank you both very much for the responses. One question, Truffle...what does PBL stand for?

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#1428063 - 08/12/10 02:48 PM Re: changed circumstance VRV
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Paid By Lender. The codes should be on the bottom of your HUD form.

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#1428097 - 08/12/10 03:24 PM Re: changed circumstance Truffle Royale
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VRV, you may also see it as POCL (paid outside of closing by the lender)
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#1428212 - 08/12/10 04:58 PM Re: changed circumstance RR Joker
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Yes, we use "POC (Lender)", and I've never seen PBL so I was having a hard time figuring out what it stood for. Thanks for clarifying.

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#1428262 - 08/12/10 05:56 PM Re: changed circumstance VRV
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wink Not all forms are created equally. I'm sitting here looking at a handful...The majority have no key at all and the rest have POC = Means Paid Outside of Closing by (b) borrower (s) seller and don't even have (l) lender.
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#1428287 - 08/12/10 06:17 PM Re: changed circumstance RR Joker
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Originally Posted By: RR joker
AGree. It was figured out pretty quickly that you could get royally ripped off by putting the credit in Block 2. What most now do is go ahead and complete the GFE as if the borrower was paying everything...give them a different sheet (that doesn't look like a GFE) showing the truer picture...then on your HUD, give the credit in the 200's.


I'm curious how the examiners would view this practice. If you KNOW you're giving a credit, how can you not show it on the GFE? By not showing it it's not really a "good faith" estimate anymore, nor can borrowers accurately compare GFEs among different lenders.

Don't get me wrong I like the idea, I just don't think it jives with the regulation.

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#1428317 - 08/12/10 06:37 PM Re: changed circumstance MN Banker
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Joker, I've got one that says what your's did plus L=Lender, O-other entity or M-multiple entities. Never seen the last two used.

MN, reiterating that we don't do no-cost loans so my opinion has no reality base, it seems to me if you are doing a true no-cost loan, you should know in advance what the costs you're covering will be. You know the providers you're using so you should know their prices.

As to the GFE being a 'good faith estimate' HUD themselves said in numerous training sessions that the GFE in reality is now a 'worst case scenario'. And that's the argument I would use if an examiner tried to hang me on using the credit as a work-around.

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#1428322 - 08/12/10 06:41 PM Re: changed circumstance Truffle Royale
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MN, there is no contract that says we would be paying all closing costs...but if the decision was made to do so, I see no problem with this practice.

If I were advertising "no cost", I may actually rethink that position.

Also, as far as it being a shopping tool, I see no issue with that...it's showing "worst case"...that may hurt me, but it's not going to "help" me.
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#1428376 - 08/12/10 07:37 PM Re: changed circumstance RR Joker
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Good points. I guess my problem is more with HUD themselves (surprise, surprise) than anything else. On the one hand saying the GFE needs to be "shoppable" and on the other saying it needs to be a "worse case scenario". Sometimes I daydream about running into one of the writers of the regulation and punching them in the face smile

And yes, we typically know our costs but in a case where the borrower chooses a different title company that we based our disclosure on. We also don't know the appraiser when the GFE is provided as they are selected randomly by our LOS system, and I don't let LOs order an appraisal until the borrower has expressed their intent to proceed (having a lower appraisal fee than disclosed is rare, but it does happen)

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#1428385 - 08/12/10 07:51 PM Re: changed circumstance MN Banker
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Your comment made me laugh out loud! Wouldn't it just flat feel good to be able to do that! wink
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#1428492 - 08/12/10 09:16 PM Re: changed circumstance MN Banker
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MN, don't you have to deal with HVCC for your appraisals? I concur that you definitely cannot order one prior to receiving intent.

As to the title, if you're paying for the cost, why/how are you letting the borrower chose a different company?

One last question from she who does not do no-cost loans, if you ARE going to do no-cost, might it not be better to low ball the credit? Would that allow you to give an additional credit or PBL something to actually fulfill the no-cost part without jeopardizing the bank having to give the borrower money? Like I said, just askin'.

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#1428637 - 08/13/10 01:25 PM Re: changed circumstance Truffle Royale
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Oh, I think you can order one prior to consent...if you want to pay for it whether or not the borrower continues with the process! wink

On the title issue for a no-cost loan, I would likely require a specific title agent for that to curb the risk, as TR has questioned above.

And, in theory, you could low-ball the credit, but you'd have to be careful that it didn't throw you out of the 10% category section at the same time! Right?
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#1428737 - 08/13/10 02:45 PM Re: changed circumstance Truffle Royale
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I don't think what we offer can truly be called a No-cost loan since we do ask the borrower to pay a loan fee ($150 for most loan products), but then we pay all the costs associated with the loan, regardless of how much they turn out to be. Generally, we have a pretty good idea what the fees will be on the loan, although we can't always predict exactly. For example, we would start out using a desktop appraisal, and we would disclose on the GFE the dollar amount for that kind of appraisal, and correspondingly, use that dollar amount in adding up with the amount of the credit on Block 2 will be. However, when we get the desktop appraisal back, we learn that it will not be sufficient for some reason, and we need to order a walk-through appraisal. Now the cost of the appraisal is going to be much higher. We're still going to pay for it, though. So here's what I've been doing--on the GFE, I always show the lowest cost appraisal that we might use. Then when we do the HUD, we show the higher appraisal cost (that we actually ended up paying) and also increase the amount of the credit on 802 correspondingly. It's no problem going up, but as discussed above, going from a more expensive appraisal to a less expensive one creates problems with the credit. That's why I have been using the lowest dollar amounts that I know could be charged in connection with the loan on the original GFE. Then if costs end up being more, I adjust on the HUD.

Truffle, in response to your comments, I don't know if you can truly call our procedure a no-cost loan, since the borrower does pay a flat loan fee, usually $150. If I intentionally low-ball the credit, it seems as though I'm not really giving a true "good faith" estimate because I know when I'm doing it that the credit will actually end up being higher, and the GFE would state that the borrower was going to have to pay some of the costs, even though I know they won't. So it seems as though I could be criticized by a regulator for taking that approach.

So it seems to me that I need to prepare the GFE with the lowest possible costs. Then, if necessary, I can increase both the actual costs and the amount of the corresponding credit on the HUD. Does anyone see a problem with this approach?

Where I am now having a problem is with respect to FedEx/wire fees. When we require a payoff to another lender, we FedEx/wire the funds and thereby incur a fee. We don't know when we do the initial GFE that we will incur this fee, so I can't include it on the GFE (if I did and we didn't have the fee, I'd have to pay that amount to the borrower, since I can't reduce the credit). Then if the Underwriter requires a payoff, I now have a fee that increases the origination charge (which I can't do without a changed circumstance). I raised this question on another thread, and the opinion was that this was not a changed circumstance, so that would appear to leave me with no options. No matter which way I go (including it on the initial GFE or not including it on the initial GFE), I have a problem. If I include it, and then don't need it, I would have to pay that amount to the borrower. If I don't include it, and then do have the fee, then how do I reflect it on the HUD, since I can't increase the origination fee?

Someone suggested preparing the GFE without any credit and reflecting what the bank will pay for the borrower on a separate sheet of paper, which sounds like a great idea to me, but again, I wonder if we would get criticized for preparing a GFE that doesn't represent what we know the borrower will be paying.

I honestly have no idea how HUD expects us to be able to comply with these new rules. At our bank, the borrower is asked to pay a flat amount loan fee at closing in connection with their loan (same fee amount for everyone getting that loan product). We pay all the costs, regardless of how much they end up being. The customer knows from day one EXACTLY what their cost will be ($150 for most loan products). But under these new rules, we are driving ourselves crazy trying to fill out these forms as expected, spending countless hours trying to figure out how to do it right, and when we get done, we have documents that contain lots of numbers and calculations that make no sense to the borrower, and then no matter how we fill them out, we can find ourselves having to pay the borrower if our out-of-pocket costs change. It's just plain nuts!

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#1428754 - 08/13/10 03:02 PM Re: changed circumstance VRV
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[quote=VRV]I don't think what we offer can truly be called a No-cost loan since we do ask the borrower to pay a loan fee ($150 for most loan products), but then we pay all the costs associated with the loan, regardless of how much they turn out to be. That's why I have been using the lowest dollar amounts that I know could be charged in connection with the loan on the original GFE. Then if costs end up being more, I adjust on the HUD. So far so good because you're making it work.

Truffle, in response to your comments, I don't know if you can truly call our procedure a no-cost loan, since the borrower does pay a flat loan fee, usually $150. If I intentionally low-ball the credit, it seems as though I'm not really giving a true "good faith" estimate I don't think anyone is really giving a good faith estimate anymore. How can we be when we're forced to include things like owner's title insurance? As HUD as said numerous times, the GFE is now a 'worst case scenario'. because I know when I'm doing it that the credit will actually end up being higher, and the GFE would state that the borrower was going to have to pay some of the costs, even though I know they won't. So it seems as though I could be criticized by a regulator for taking that approach. We're back to the whole 'worst case scenario'. HUD knows this is what's going to happen. That's why they trained that you could give another document as long as it doesn't look like a GFE, that explains the TRUE costs of the loan. Never say never, but I'd fight like he// if an examiner tried to criticize me on this point.

So it seems to me that I need to prepare the GFE with the lowest possible costs. Then, if necessary, I can increase both the actual costs and the amount of the corresponding credit on the HUD. Does anyone see a problem with this approach?

Where I am now having a problem is with respect to FedEx/wire fees. When we require a payoff to another lender, we FedEx/wire the funds and thereby incur a fee. We don't know when we do the initial GFE that we will incur this fee, so I can't include it on the GFE (if I did and we didn't have the fee, I'd have to pay that amount to the borrower, since I can't reduce the credit). Then if the Underwriter requires a payoff, I now have a fee that increases the origination charge (which I can't do without a changed circumstance). I raised this question on another thread, and the opinion was that this was not a changed circumstance, so that would appear to leave me with no options. No matter which way I go (including it on the initial GFE or not including it on the initial GFE), I have a problem. If I include it, and then don't need it, I would have to pay that amount to the borrower. If I don't include it, and then do have the fee, then how do I reflect it on the HUD, since I can't increase the origination fee? Wouldn't you know you were going to have this fee on every refi you do? When you take the application you ask the borrower for the debts they want to repay with the loan and how many mortgages they have. Guess I don't understand how you couldn't know from the start that you were going to need one or more Fed Ex fees.

Someone suggested preparing the GFE without any credit and reflecting what the bank will pay for the borrower on a separate sheet of paper, which sounds like a great idea to me, but again, I wonder if we would get criticized for preparing a GFE that doesn't represent what we know the borrower will be paying. I understand your fear, believe me I do. But if you have the GFE and the explanatory document in your files, the examiner can see that you told the borrower the 'truth' right from the get-go just not all on one piece of paper.

It's just plain nuts! Absolutely totally agree!!!

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