I am with a state housing finance authority that purchases qualifying mortgage loans that are originated by banks & credit unions throughout our state. We have been presented with a loan where the application was taken by a TPO on 1/31/2011. Their wholesaler, who wants to sell the loan to us, received the application on 2/2/2011 and issued a GFE dated 2/4/2011. I think the GFE should have been issued no later than 2/3/2011 at the latest. Q1 - Is the day of application day 1 or the day following? Q2 - Either way, this appears to be out of compliance. Can this be corrected? If yes, how? (I have reviewed Section 3500.7 of Reg X and the FAQs but all I have been able to find is that "the application is in violation of Section 5 of RESPA" [FAQ #18].) Thank you.

BUMP

Not sure what a TPO is. But the GFE is required to be sent within 3 business days from the receipt of an application. If the TPO is a broker or agent of the wholesaler the application date is IMO 1/31/11. There is no cure for late delivery.

The date of receipt is day zero.

Thanks Dan. TPO = third party originator, so you were right on.

So if originator didn't issue the GFE within 3 days should the loan be denied and start over? Or can the borrower sign something that states they understand the MLO screwed up but they still want to pursue the transaction and will accept the costs disclosed in the "late" GFE? Or must the lender "eat" all of the costs associated with originating the loan?

What would be your basis for denial?

You have folks sitting on both sides of the fence on the rest of your question. Some will say (and HUD has said this too, but not officially) that a late GFE = a "free" loan (tolerance and non tolerance items considered) and some feel that so long as it's not overly late or missed all together, it's just a technical vio of what..section 5?

On what terms are you denying on?

There is no cure. There is nothing you or your customer can attest to that will cure this violation. You either go ahead with the loan knowing there is an issue with it, or you tell the wholesaler that you are not interested in buying the loan due to the deficiency in it, and then it becomes their problem.

Drat!! Joker beat me!

I can't find the post but there was an opinion put out by David Friends an attorney with HUD that a late delivery of a GFE would be a violation and you would have to abide by the cure provisions to correct the violation. Not everyone agrees with that opinion.

The borrower can sign such a document but that does not relieve you of any regulatory violations that could or would be cited by your regulator. IOWs the borrower acknowledging you violated the regulation does not cure the violation and I would also suspect having the borrower sign such a document may get you in hotter water with UDAP. Basically having the borrower give up their right to the cure.

FWIW, if it was me I would tell the wholesaler they need to market it to someone else but it's a risk decision for you to make.

If the original poster is with a state agency, and this is a qualifying loan...there may not BE any other 'someone' to market this loan too!

Dan, here is the one I got from Mr. Fay:

Ms. Hall –

It has come to our attention that the guidance provided in the email below is incorrect. The correct answer is that, if a loan originator fails to deliver a GFE or fails to deliver a GFE within the required time period (see 24 CFR Part 3500.7(a) and (b)), the loan originator will have significantly high tolerance violations at the HUD-1 stage.

When completing the HUD-1 comparison chart, the settlement agent should fill in the GFE columns with $0 and the HUD-1 columns with the actual charges. The loan originator shall reimburse accordingly to cure the tolerance violations. Although the loan originator cannot cure the violation of failing to give the GFE, by filling in the HUD-1 comparison chart with $0 in the GFE column, comparing $0 to the actual amounts paid and then curing the resulting tolerance violations, the loan originator will be deemed to have cured the violations of RESPA Section 3500.7(e).

Andrew Fay

Thanks to all for your responses.

One more question - who is Andrew Fay?

He is one person at HUD that thinks he can write law in e-mails

and, from prior posts, one of the team that drafted the new rules.

It's never been made an 'official' statement, but because the regulator's interpret and enforce and because I have it in writing (even tho not official), our procedures follow this protocol..too many people have received this same opinion. I'm in no way wanting to do anything that could be twisted into 'blatant'.

If it doesn't do anything else..it certainly makes LO's think!

Okay...let's look at this from another direction since we know nothing of the "TPO" and their role.

Let's say community bank A wants to serve their customer, but do not have originators, software, etc, to handle the process. They take the application and efile it with a TPO for instance, who handles the entire process for them. They don't make a fee, they just are accomodating their customer.

Files are uploaded Friday night from apps taken Friday. TPO downloads files on Monday. They will be date stamped on Monday and the clock starts.

Isn't this a possiblity of what may be actually happening?

Or to add another twist, in case they are not "efiled", but put in an envelope and mailed to another bank.


They are simply a conduit.

I don't know I am just asking. I am thinking from my Credit Union Days, they worked this way.

ETA: We had no first mortgage expertise in house, so to be able to "offer" mortages to our members, they could give u an applicaition and any supporting docs, and we would package and forward to a bank we had an arrangement with, and they did all the disclsoures and processing.

I would think the "app date" would begin when it got to "the bank" that is truly the originator. No different than if the member had mailed directly to the bank.

That's what made me think of it too, DD. I used to originate loans for my bank and at one time my conduit was Georgia Banker's Bank (no longer in existence)...I handled my own processing, but I remember they had different levels of service and if memory serves me, the example I listed was one of them (or back then, maybe they were snail mailed!). So, I could see where it's possible that just because an application began in one place, it wasn't official until it reached the real originator?

Now I'm confused again (or as usual). Q 25 in the April 2, 2010, FAQs issued by HUD (which I just printed from HUD's website) states, "When a mortgage broker receives an application or information sufficient to complete an application, when does the lender who agrees to go forward on the application (I'm reading this to be the wholesaler) have to provide the GFE?" A: "Not later than 3 business days after the mortgage broker received the application or information sufficient to complete the application, either the lender or the mortgage broker must provide the GFE. The lender is responsible for ascertaining whether the GFE has been provided."

My interpretation of this is, say a broker receives all information sufficient to complete an application on 3/7/2011 (Monday) and the lender receives it on 2/2/2011 (Wednesday), the GFE must be issued no later than Thursday, 2/3/2011 [Mon = day 0, Tues = day 1, Wed = day 2, & Thurs = day 3], regardless of whether it's issued by the broker or the lender. Is this correct?

I think the question being raised is whether or not the TPO (to use your phrase) is truly a broker.

Yes and TPO is bugging me...from RESPA:

Third party means a settlement service provider other than a loan originator.

IMO, these are the definitions in RESPA that needs to be considered, WHEDA, in helping you define your issue at hand:

Loan originator means a lender or mortgage broker.

Mortgage broker means a person (not an employee of a lender) or entity that renders origination services and serves as an intermediary between a borrower and a lender in a transaction involving a federally related mortgage loan, including such a person or entity that closes the loan in its own name in a table funded transaction. A loan correspondent approved under 24 CFR 202.8 for Federal Housing Administration programs is a mortgage broker for purposes of this part.

So, does the application taker meet the definition of a Mortgage broker? If not, does the "wholesaler" first meet that definition?

Perhaps a CSR assists a customer in filling out an app and sending it to the "wholesaler"...if that's the case and they have no further interaction in the loan process, the clock may not start until the 'wholesaler' gets the application in hand..no different than a customer filling it out themselves and mailing or bringing back in an application to the bank. We would notate or date stamp the day we received it and start the clock.


OH! And I'm going to request this thread be moved to the RESPA forum where it belongs so it can be searched for more easily down the road.

My apologies for causing confusion by using TPO (third party originator). In this instance the person who first received the documentation sufficient to complete an application is a Loan Officer at FDIC regulated Bank A. The loan processing will be handled by and the loan will close in the name of Bank B. The loan will then be sold to us (a state housing authority).

Since an LO at Bank A received the application docs, does the RESPA/GFE clock begin then, or the day the app docs are received by Bank B?

Thank you.

I think you will have to determine if they meet the definition of a broker (we know they aren't the creditor). Until then, it's hard to say. I would suggest a convo with the creditor to find out what role Bank A really plays in this arrangement.

Thank you to all for your input. It's greatly appreciated.