No GFE provided

Am I correct in assuming that, if no GFE was provided to the applicant at all, no fees can be charged to the borrower in connection with that loan (other than items that have no tolerance, such as escrow deposit)? In this situation, the applicant applied for a loan, was approved, and is now scheduled to close in a few days, but no GFE was ever provided. I don't see any option except to provide the loan with no fees--am I overlooking something?

1. I am by no means an expert on this issue, but I would suggest sending a GFE so the borrowers understands what you are going to do for them.

2. I would pay all the items that have a tolerance related to them.

3. I would put a size 14 up someones you know what. I understand we all make mistakes, but cheese whiz, what kind of training did this person get.

4. Do a review of the process, how does a loan get to closing without disclosures being sent?

Those who are smarter than me can chime in, I would love to read what you think.

Thanks so much for your thoughts. I agree with you that we should go ahead and send a GFE now that will show no fees being paid by the borrower. We will pay all third-party costs associated with the loan and waive our internal loan charges.

This error arose out of an unusual situation--it didn't come through our normal process, so that's how it happened. It's too complicated to explain in detail here, but suffice to say, it doesn't cause me any concerns about our procedures.

I really appreciate your thoughts. I was assuming we would be required to cover the borrower's costs, but I wanted to make sure I wasn't missing something that would provide some remedy here.

I disagree. I would send the GFE, the violation being that it was not provided within 3 days....which would be a RESPA violation.

But I would appreciate a guru stepping in and shooting me down.

Good thought, Swiggles. But I'm not proficient enough on the actual Reg to know if you could charge fees after the three day period has passed.

DD, I so agree that no matter what, this should never be able to happen.

I'm wondering if a GFE should be prepared and given to the borrowers at closing. You could prepare it to reflect the borrower paid items exactly as they appear on the HUD and put the rest of the fees on the way you would for a no-cost loan.

I do not find anything in Reg X which states that if a GFE is not provided within 3 days of receipt of the application, that no fees can be charged to the borrower. But I was thinking....in addition to a violation for not providing the GFE timely, you would also have a violation for obtaining verification documents in advance of providing the GFE. Perhaps the best fix is, as you suggest, don't charge the fees.

Just like swiggles, I can't find anything that specifically addresses this situation. So I assumed that if you are not allowed to charge any higher fees (after taking allowable tolerances into consideration) than what you disclosed on the GFE, then it would be deemed that we disclosed $0 (due to no GFE being given) and therefore couldn't charge anything.

If you look at it as though you can go ahead and provide a GFE as soon as you realize you haven't done so, and then charge fees according to what was disclosed on this late GFE, it seems as though it defeats the purpose of the form, i.e., give the borrower all the information about what this loan will cost them as soon as they apply so they can comparison shop.

By the time you provide the delinquent GFE, it may be too late for the borrower to shop around and find a better deal, so they are stuck with this loan that is going to cost them a lot more than what was disclosed ($0.) Just seems as though it defeats the primary purpose of these new amendments. I will feel much more comfortable with not charging the borrower anything for the loan unless someone can come up with a basis in RESPA for not having to take this route.

Rather than deal with what the Reg doesn't say, let's look at what it does.
*the GFE must be provided within 3 days.
*the GFE must show all the fees to be charged to the borrower in order to get the loan.
The logical extension is the conclusion VRV comes to above that by ommission you've told the borrower there are no fees to get the loan.
I totally agree that giving a GFE after the three days flies in the face of the spirit of RESPA by defeating the borrowers ability to shop the loan.

FWIW, I also agree.

You are saying that anytime you do not provide the GFE within the three day requirement you are stuck with a no fee loan? So for whatever reason the GFE is not issued until the 4th or 5th day, the penalty is the borrower pays no fees?

IMO - that seems a little harsh not to mention not specifically supported within the regulation or FAQs (that I am aware of). I would be interested to see if others are taking the same position.

No. That is not how my bank would handle the situation. As this would be an isolated case (I would hope!!), we would rather take the regulatory hand slap for failure to meet the 3-day deadline than the financial loss. Of course you know that the loan you mess up on will somehow find its way into the examiner's sample.

Finding a pattern or practice of this would be a training issue. I would provide specific training and note that in our training records.

Back in the old days of GFE, missing the three day mark may not have been that big a deal. The new RESPA is all about benefitting the borrower. I'm willing to bet that the regulatory hand slap you're talking about would be a lot harder if you did it your way, swiggles. If you miss the three day mark and go ahead and charge fees anyway, it's the borrower who's ending up with the short end of the stick. As long as this was the isloated incident we're all talking about it being, I would advise my bank that we blew it...we should take the hit.

If this were to happen a second time, I'd be out for someone's head. This is Rule #1 and there's just no excuse for this to happen, again imho.

As I said previously in this thread, there might also be a violation cited if the GFE is provided AFTER the loan officer obtains verification documents. So that's two regulatory "hits."

Our procedures are so tight that I doubt this scenario could happen at all. But there can always that one slip up.

swiggles, I'm so grateful that this is hypothetical for me too. We're just both offering differing opinions to someone who actually needs it hence the debate.

Seriously, TGIF!

Back atcha!!!!

P.S. TGIFBV!!!! Thank God it's Friday before vacation. I will be in Michigan by this time tomorrow!!!!!

Providing it on the 4th or 5th business day when the loan closing is still 20 days away, is one thing (still would be a viol), but right before closing? I can't imagine this would be ok. The spirit of the revised reg is the whole "shopping" thing along with the accuracy/dependability of the GFE.

So you're saying if you miss the three day mark, just don't provide one at all?

ok, so who's going to take this one to HUD? I'm curious what they'll say on it.

I really appreciate everyone's input on this problem. It is very helpful to get others' thoughts. It's clear that we all agree that it's a violation not to provide the GFE within 3 days and it appears we agree that RESPA doesn't explicitly state what a lender can or must do if this happens--I guess the outstanding question is what would a regulator expect the lender to do when this happens?

If we gave a GFE within 3 days, but inadvertently left off a fee that should have been disclosed, I think it's clear from RESPA that we would not be able to charge that fee. Using that analogy, I'm not sure how we would justify charging any fees that were not disclosed (whether it be because it was omitted from the GFE or because no GFE was provided.)

I think I feel most comfortable just eating the costs. It seems like the best course of action to try to make amends for the error since it was our fault that the borrower who didn't get their consumer protection

I too would love to get HUD's thoughts on this. Does anyone want to take the lead on this?

If you provide the GFE a day or two late I do not feel the intent of the rule is to cause you to have to eat those fees.

However as mentioned by proceeding the loan application you have violated several of the GFE rules, especially if you collected any fees.

This is just my thoughts, no official guidance to back it up.

1. Issue the GFE and allow the applicant to give their intent to proceed before continuing any further with the transaction.

2. I would seriously consider refunding any fees that were collected before issuing the GFE.

3. If you are 3 or 4 weeks into the application process or 2 weeks or less from closing when you discover the GFE has not been provided then you most likely deserve to eat 100% of the fees.

Well....there 'ya have it....straight from the horse's Dan's mouth.

Dan, seeing as how we're just batting this around anyway, would you mind clarifying your #2 a bit more? Are you saying you'd still issue the GFE at these late dates and do it as a no-cost loan?

That's pretty much what I meant when I said to give the GFE at closing with no fees so I'd be happy to know my mind was on the same path as your's.

What I was inferring is if you issue the GFE late then I wold suggest refunding any fees you collected, except for a credit report fee, before you issued the GFE.

IOWs, if you collected the appraisal fee I would refund and waive that fee because you collected it before the GFE was issued, however I wouldn't waive all the other fee such as title insurance services, recording fees, etc.

As I said I don't think the intent of the rule is to cause the FI to absorb all the fees if the GFE is issued a few days late. But I also am saying you can't wait and issue it just before closing and not suffer any consequences.

If you have a pattern of this happening then yes the FI, and in particular the person or persons (and especially their supervisor) responsible for delivery of the GFE should suffer consequences.