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#2225436 - 11/12/19 03:02 PM Good Faith - Best Information Reasonably Available
Inspector Offline
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Looking for thoughts on a "good faith" scenario.

Normally, the best information reasonably available on other fees like HOA and inspections will come from the P&S or other documentation as the transaction goes along. But what if a Lender has a close relationship with a builder such that the lender is doing almost all of the loans for consumers buying homes built in the builders developments? I am thinking an argument could be made that the lender has internal information about the fees that would typically be involved in the transactions.

Question is, should the lender be relying on this past experience/internal information and using it to populate fees on the LE? Or could the lender use the typical process and wait until the information about the specifics of the fees comes in? If the lender elected to do the latter would that not be in good faith?

As always, appreciate anyone's comments or feedback.
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#2225440 - 11/12/19 03:51 PM Re: Good Faith - Best Information Reasonably Available Inspector
rlcarey Offline
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But what if a Lender has a close relationship with a builder such that the lender is doing almost all of the loans for consumers buying homes built in the builders developments?

I am not sure how leaving such costs off would be in "good faith" if the lender is actively involved in those developments and knows fully well that there are going to be such fees involved on this transaction.
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#2225447 - 11/12/19 04:31 PM Re: Good Faith - Best Information Reasonably Available Inspector
John Burnett Offline
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I'll second Randy's thoughts, and add that, if one of those fees is then revealed to be greater than what you've provided on the LE, you'll need to issue an updated LE to reflect the changed circumstance within the allowed three-business day window.
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#2225451 - 11/12/19 05:04 PM Re: Good Faith - Best Information Reasonably Available Inspector
Dan Persfull Offline
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John, are you saying if the estimated builder's fee is higher than the bank estimated the fee will be subject to a tolerance?
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#2225463 - 11/12/19 08:05 PM Re: Good Faith - Best Information Reasonably Available Inspector
John Burnett Offline
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I'm saying that, if the bank used its historic data involving loans to purchase that builder's houses to estimate the fee because it had not received the P&S copy in time to use P&S info, but later received the P&S which provided additional detail on the specific purchase (let's say it involves some custom changes or additional features), and the P&S reflects a higher builder's fee, I'd consider that a changed circumstance because it involves information the bank was not aware of when the LE was issued.
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#2225464 - 11/12/19 08:21 PM Re: Good Faith - Best Information Reasonably Available Inspector
Dan Persfull Offline
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How is the builder's fee subject to any tolerances is basically my question?

Let's say the builder's fee for X is normally $100 and that is what is disclosed on the LE. The P&S is received and X for this build is going to be $150. Since this fee is not subject to any tolerances (in my way of thinking) a revised LE is not required because there is no tolerance to reset.

Now if a "courtesy" LE or a revised LE is later issued then of course they would have to disclose the $150 at that time because it is now a known cost.

Am I misunderstanding what you are saying?
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#2225468 - 11/12/19 08:49 PM Re: Good Faith - Best Information Reasonably Available Inspector
John Burnett Offline
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No, actually I was (as we say here on Cape Cod) at the beach. If it's a third party fee not required by the lender to be paid, it's going to fall down to 1026.10(e)(3)(iii) -- no tolerance requirement.

I need to come back from "the beach." It's raining and temps are dropping so it's likely to change to snow early this evening. Not a time to be at the beach.
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#2225476 - 11/12/19 08:58 PM Re: Good Faith - Best Information Reasonably Available Inspector
Dan Persfull Offline
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Bloomington, IN
Thanks John.
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#2225499 - 11/12/19 10:28 PM Re: Good Faith - Best Information Reasonably Available Inspector
Inspector Offline
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Thanks for jumping in for the clarification Dan. All of your discussion would still hinge on if those fees were disclosed in good faith originally though so we shall see.
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