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#1548700 - 05/10/11 03:03 PM Overstating fees
Insanity Queen Offline
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I understand that we don't want to "pad" fees on a GFE and that it might be a red flag to examiners (besides being competitively stupid). However, our RE Department believes that the "overstating" red flags would also apply to disclosing a fee on the GFE for a required settlement service provider that in the end isn't charged to the borrower after all.

I disagree. If it is a good possibility that a fee for a required settlement service provider will be charged, it should be included on the initial GFE. Then if the fee isn't charged after all, no harm has been done and it is not a violation. Here's the specific example:

Borrower has not locked a rate on the loan at the time the initial GFE is issued. However, lender knows that some, not all, of their investors will require an appraisal review fee. Since the bank does not know which Investor will purchase the loan, and therefore require the appraisal review fee, the fee is being left off the GFE altogether. When the borrower locks the loan with the Investor, and the fee is going to be charged, it cannot be added as a Changed Circumstance. However, this fee is being charged on the HUD under the "10% tolerance".

I have recommended to the RE Department that if they have this scenario, they should disclose the appraisal review fee on those loans that have not been locked because there is a good possibility that the fee will be charged. They don't want to do that because they claim it is overstating the fees.

I'm fine with them not disclosing the fee if the loan is locked at the same time the GFE is issued and we know the Investor isn't requiring the fee, but if it is not locked with an Investor, it should be disclosed because of the likelihood it will be charged once an Investor is selected and the loan locked.

Anyone have a different opinion or a better way to do it?

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#1548737 - 05/10/11 03:27 PM Re: Overstating fees Insanity Queen
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The definition of a GFE is that it is an estimate of the charges the borrower is likely to incur at settlement. So, if it's likely that they will be assessed the fee, it should go on the GFE. I agree with you, if they don't know the investor up front, they give the fee as part of the estimate. If they do know who the investor is, they estimate accordingly.
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#1548759 - 05/10/11 03:37 PM Re: Overstating fees DawgFan
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Thanks.

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#1549245 - 05/10/11 11:01 PM Re: Overstating fees Insanity Queen
jlroberts Offline
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Ohio
We were told we could quote fees based on worst case scenerio. There are so many of those fees out our control. For example the appraisal fee; with Appraisal Independence we don't have a choice to order from the least expensive appraiser (we use a rotation list)so we quote the fee of the highest appraiser.

Same goes for Title Compnay and Survey fees....

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#1549292 - 05/11/11 12:40 PM Re: Overstating fees jlroberts
Tater Offline
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Originally Posted By: jlroberts
We were told we could quote fees based on worst case scenerio. There are so many of those fees out our control. For example the appraisal fee; with Appraisal Independence we don't have a choice to order from the least expensive appraiser (we use a rotation list)so we quote the fee of the highest appraiser.

Same goes for Title Compnay and Survey fees....


Ditto for us.
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#1549434 - 05/11/11 03:11 PM Re: Overstating fees Tater
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Unless you need a survey on every loan, I would not quote this on every GFE. If you determine that you need a survey, that's a valid CC and then you can quote the actual fee. Also, you have to determine if the borrower will chose the provider from your list or not.

As to title company fees, I don't understand what the big discrepency would be. Fees usually run pretty standard with a cost per thousand on owners and a lesser set fee for lenders policies. Closing fees should also be in the same ballpark across the board. Again, if something crops up on title work, look for a valid CC and redisclose to capture the higher fee.

Now to appraisals...why would you keep an appraiser on your list if they charge so much more than another? I'm finding that appraisers around here are sticking close to each other in price to remain competitive and to stay on all the banks' lists.

jmho

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#1550675 - 05/13/11 01:43 AM Re: Overstating fees Truffle Royale
jlroberts Offline
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We do not list unnecessary fee. We list fees that are required by product the borrower chooses.

Title "insurance" fees are standard however we have companies charging a Settlement Fee anywhere between $50.00 and $350.00. Some even charge what we consider garb fees. For that reason we only list one title company on our provider list so our title fees are always accurate but other financial institutions have decided to list several on their list.

Some appraisers can vary between $25 to $75 for the same property. Also some appraisers charge $50 for an out of county appraisal and some don't. We keep them on our list because of the quality of their work.

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#1550694 - 05/13/11 02:58 AM Re: Overstating fees jlroberts
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Totally agree on the way you're handling the title fees, jl. A single provider on your list is my preferred method too.

As for the appraiser, You know at the time of application if the property is out of county and could incur that fee so your GFE should include it.

Personally, if I was dealing with appraisal review fees, I would list those on the GFE, explain it to the borrower and give them the choice when it comes to locking. If the rate they want is with an investor that wants the review, they know why the fee is there. Isn't borrower knowledge what the new RESPA is all about?

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#1556297 - 05/25/11 01:49 PM Re: Overstating fees Truffle Royale
Carolyn31 Offline
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On the scenario listed for the appraisal review fee...if it was listed on the GFE and not used, do you leave it off of the HUD?

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#1556341 - 05/25/11 02:28 PM Re: Overstating fees Carolyn31
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The July 2010 RESPA Roundup has the answer to your question at III on the second page.

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#1556376 - 05/25/11 02:58 PM Re: Overstating fees Truffle Royale
Carolyn31 Offline
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Thanks, I was hoping that something had come out since then and had a different answer.

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#1556391 - 05/25/11 03:13 PM Re: Overstating fees Carolyn31
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Why? You didn't use it so why would you want it to show? Or am I misreading your post?

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#1556396 - 05/25/11 03:16 PM Re: Overstating fees Truffle Royale
raitchjay Online
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OK
I'm thinking Carolyn was hoping it could go in the comparison chart, not that the actual fee would show up on the HUD-1.
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#1556452 - 05/25/11 04:04 PM Re: Overstating fees raitchjay
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But that would be padding fees too, don't you agree, raitchjay? If you put it in the comparison chart, you're padding the tolerance in the bank's favor and that's exactly what RESPA doesn't want.

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#1556476 - 05/25/11 04:15 PM Re: Overstating fees Truffle Royale
raitchjay Online
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Yes i agree totally. I just thought that might have been what the "hoping" for was in reference to.
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#1556479 - 05/25/11 04:19 PM Re: Overstating fees raitchjay
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I mean...as a compliance officer, i don't want my bank getting in trouble. If HUD said that we could put fees not actually purchased into the comparison chart (like OTI), i would like it. (Not saying that's fair to the consumer or HUD's intent, but it would suit my intent as a compliance officer.) I'm guessing Carolyn is in my camp.
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