changed circumstance

If fees change whether increase or decrease, is it considered changed circumstance? I'm reviewing a loan file that has a revised GFE. The following were changed from the initial GFE to the revised GFE
- survey fee removed from section 3 (relied on an old survey...new one was not ordered)
- increase in the initial deposit of escrows in section 9
- homeowners insurance removed from section 11

Is this changed circumstance? If not, what do we need to do?

thanking you in advance

None of these are a changed circumstance. RESPA is clear that changes in fees are not a changed circumstance. Changed circumstance means something occured to change a fee, not just it came it higher/lower.

Read this thread RESPA - fee not charged, to learn more how the survey should have been handled.

I agree with Truffle that none of the items listed by themselves are "changed circumstances." However, that does not mean a new GFE cannot be issued. Any time a fee goes down (such a a survey not being required) a new GFE may be issued, but it is not required. The other two items mentioned are non-tolerance dependant items, so there is no problem in updating them with a new GFE. The problem with doing this that you could end up with a standard practice of underdisclosing your escrows or something which would be a violation even though it isn't subject to tolerance.

Brock, that's not correct. You can only issue or must issue under a CC, a customer request, or a rate lock.

Brock, I'd be interested in knowing what you're basing your statements about the ability to redisclose on. I find nothing in RESPA or the FAQ or any of the zillions of answers from HUD that allows for redisclosing just cause a fee went down.

I agree with Joker. You can only redislose when you have a qualified changed circumstance. Further, the FAQs refer to only changing those items that are affected by the changed circumstance. So even if you know the insurance premium is less, you cannot adjust Block 11 or the escrow amount if you're redisclosing because of a rate lock.

So it's not changed circumstance, not borrower requested, and not rate lock (we locked the rate at the time the GFE was issued and it hasn't expired yet), what do we do now? We already issued it and loan closed a couple of months ago.

thanks,

You need to go back and refigure the comparison chart on p3 of the HUD using the figures from the original GFE and cure if needed. Yes, you're past the 30 days but as has been said more than once, do it now yourself before the examiners come in and make you do it and cite you to boot.
***
ok, I wrote the above and went for a swim. It cleared my head and I realized all you're going to have to do is redo the HUD. You got really lucky. Everything you mentioned went down or wasn't charged at all. And the escrow box is not one that has a tolerance attached so it can change. So you have no cures...this time.

After you reread that thread I linked above and the FAQ section on changed circumstances, I strongly suggest you revisit when a GFE can be redisclosed with the staff because one of these times someone's going to redisclose when they shouldn't and the cure could be HUGE.

[WARNING: swimming while thinking RESPA puts you at risk for drowning.]

Ok...when redoing page 3 of the HUD with the fees from the original GFE, I don't include the survey fee because it was not purchased, correct (as per the RESPA roudup guidance and the the above mentioned thread).Or should I include it because the HUD is dated in May- before the respa roundup guidance was issued.


thanks,

I wouldn't include it.

Where can I find the section of the regulation that states we need to redo the HUD when there was no reimbursement required, like in this case. I know the loan officer is going ask me about it.

thanks,

Thank you all for your help-I have one more question:

If we disclosed an amount under the daily interest charges on box #10 as $200, but when I manually calculate the amount per day disclosed x # of days disclosed, I get a different amount of $280.....page 3 of the HUD reflects the $200. There are no tolerance issued. Should we redo the HUD or is it okay since the actual amount disclosed on the GFE is the same on pg 3 of the HUD?
thanks,

Reg X provides the following: "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)." [Section 3500.7 (f)]

The way I read this is that you are subject to the tolerance of the original GFE unless you issue a new GFE based on a changed circumstance or reason outlined in the paragraph quoted above. The regulation does not say that you can't issue a GFE for other reasons. It just says that the only way to change the tolerance in your favor is to issue a GFE based on one of the items mentioned in the paragraph. In the case where you issue a new GFE based on a lower fee, the lender is effectively tightening the tolerance in the borrower's favor. I am not saying that issuing a new GFE is required in the circumstance of a lower fee or even appropriate in all situations. I am simply saying that it is not prohibited by the regulation. As I stated earlier, this could potentially result in a situation where this is viewed as a standard practice and therefore is violating the Good Faith part of the estimate, but in the case where the fee comes in lower for some legitimate reason, I see no problem with it. This also makes sense because borrower's frequently want to see a new GFE when certain fees come in lower. As they should, because the tolerances will adjust in their favor. I am saying that the bank doesn't have to wait for the borrower to ask for a new GFE, it can just be issued.

The next sentence in (f) reads: Then it goes on:



I stand by my statement that the ONLY time you can redisclose is when you have a bona fide changed circumstance. As HUD has said on numerous occasions (webinars and email responses, etc) a change in fees is NOT a changed circumstance.

FWIW, I agree with Truffle. A redisclosure is only allowed under the definition of a change of circumstance. A fee change (up or down) in and of itself is not a change of circumstance. Why waste the time and expense to redisclose for a fee going down?

Agreed.

Please show me where it says that a new GFE can only be given for one of these reasons. I can't find it. What it says is that the tolerances can only change (go in the lender's favor) based on a a new GFE disclosed for one of these reasons. I think this is an important distinction to understand for this particular issue.

Brock-here is the definition of Change of Circumstance. This is clipped from the RESPA in Plain English seminar presented by Vicky Bott, Deputy Assistant Secretary for Single Family Housing:

Changed Circumstance
•What is it?
–Acts of God, war, disaster or other emergency
–Changed situation or inaccurate information provided by the borrower after issuance of the GFE


If you under or overquote a fee, that is your problem. If the borrower provides inaccurate info and fees change due to that, that is a change of circumstance. For example, borrower applies and says its a single family, appraiser goes out and says its a multi. Higher cost, you can redisclose since the borrower gave you bad info.

The next slide in that presentation:

"Changed Circumstance
•What can change?
–Only those fees impacted by the changed circumstance–When going from a float to a lock, if pricing changes due to a changed circumstance, or a borrower requested change, only the interest rate dependant charges and terms may change. This includes only those charges or credits in Block 2 which will, in turn, impact the “Adjusted Origination Charges.”
–Block 1 fees CANNOT change, even with a changed circumstance
Exception: If the loan amount changes and a portion of the “Origination Charge”is a percentage of the loan amount or the overall loan program changes
–Important Dates Section –must be updated to reflect any new information"
Given the definition of change of circumstance, and the fact that only the fees affected by that change can be revised, your scenario does not constitute an acceptable reason to redisclose.

I still see no language that limits a change of the GFE to one of the four items listed in the reg. I still maintain that there is nothing in the reg or FAQ that says a new GFE can't be issued with lower fees. The reg specifically says that the lender is bound by the tolerances of the GFE unless a new GFE is issued based on changed circumstances, and when a fee is lowered there is no tolerance violation. The FAQ quoted by Sox above does say that only the fees impacted by the change can change, and that is probably the strongest argument, but IMO if you look at the FAQs as a whole, HUD is not saying you can't decrease a fee that is unrelated to the change. Instead, they are saying you can't increase such a fee. If you look at the changed circumstance section of the FAQs every single scenario is referring to the additon of a fee. None of the scnenarios deals with a fee subtraction. And as stated above the regulation only restricts the issuance of a GFE if it will result in a tolerance violation. And clearly there is no tolerance violation in decreasing fees.

12) Q: Is there a potential tolerance violation if the amount in Line 801 on the HUD-1 decreases from the amount disclosed in Block 1 of the GFE?
A: No.

Let me pose a question to everyone. What if an originator at your institution issued a second GFE with lower fees than the original GFE issued at application despite your policy to the contrary. And let's say you caught this prior to closing. Which GFE would you use to generate the tolerance table for the HUD? No question you would use the one with the lower fees because that is what is in the consumer's best interest and would certainly go against the regulations to base the tolerance off the higher fees. This is my whole basis for believing this practices acceptable. As long as the subsequent GFE is moving the tolerances in the favor of the borrower, I don't believe HUD, or any other regulator for that matter, could fault an institution for that.

Brock-
I think that we all agree that many aspects of the "new" regs don't make sense and oftentimes seem to go against the intent of the new regs. Seems that regardless of how people here respond, you feel your interprtation is correct and you will proceed that way. Knock yourself out.

As to your scenario, we have centralized disclosing-we don't allow loan officers to send GFE's. My reply to your scenario would be that your LO's need some retraining on when GFE's can be reissued. I would use the second one not because it is in the customers best interest, but because it was the last one issued and the lender should be held accountable to what they disclose, for good or bad.

Brock, you haven't swayed me. Every training session I attended on the new RESPA, whether given by HUD or a vendor, emphasized the fact that the ONLY time you reissue is when you have a valid changed cirucumstance. Each session also emphasized the fees changed was not, in and of itself, a changed circumstance.

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. imho, Constantly changing the GFE to lower fees not only flies in the face of the 'worst case scenario' concept, it confuses the heck out of the borrower.

I hold my stance that what you're doing is not permissable. I have, however, emailed HUD asking that Mr. Friend or Mr Fey respond either here or to me so that I can share their answer.

Truffle, I would love to hear what HUD has to say on this issue. I just have one more question. What do you guys do when you find out a fee on the GFE is overdisclosed and the borrower says "I want to see it on the GFE." Do you issue a new GFE in that circumstance with the lower numbers? I think you have to, if not by law/regulation, as a matter of practicality. Anyway, I just see that as a wrinkle/problem with the position you are taking.

Seriously, Brock, what borrower is going to be savvy enough to say that?
Secondly, how is a borrower going to know if a fee comes in lower if you don't tell them?
Third, they can say it all they want, if there's no valid changed circumstance, my polite response is 'sorry, the Reg doesn't allow me to do that. We discussed how this is the worst case scenario of the costs for your loan.'

The key is that this is an ESTIMATE. Under the new rules, the lenders feet are held to the fire if they quoted outside the tolerances. The HUD is the final accounting of the fees.

Truff, it is because Brock is in Missouri, you know, the SHOW ME state

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.

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?

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?




No.



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

In this case I would issue them our "Funds To Close" worksheet.

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.

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.

wow-pjs...just wow.

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.

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?

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.

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.

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?

Paid By Lender. The codes should be on the bottom of your HUD form.

VRV, you may also see it as POCL (paid outside of closing by the lender)

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.

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.

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.

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.

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.

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

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)

Your comment made me out loud! Wouldn't it just flat feel good to be able to do that!

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'.

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!

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?

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!

[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!!!

"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."

Thanks so much for your reply, Truffle. In response to your question (quoted above), we don't know because my area is consumer lending, not the mortgage department. So we do many loans in which nothing will be paid off. In other cases, we do not know anything will be paid off until underwriting reviews it and determines we can make the loan, but only if certain other loans are paid off. We only require the Fed Ex/wire if we are requiring the payoff, and, in this instance, we pay the fee. If the borrower decides at some point that they WANT us to pay off another lender with the proceeds, and they want the funds wired, I'm not disclosing that on the GFE because we're not requiring it. I would, however, disclose it on 1301 of the HUD because in that instance, we would be assessing that cost to the borrower.

I may be way off base here but wouldn't finding out a loan has to be paid off fit under the FAQ p17 Changed Circumstance 1) where it reads: (3) New information particular to the borrower or transaction that was not relied on in providing the GFE; ? That would mean that you would redisclose and add the fee and appropriate credit. Or is this just too easy to possibly be right?

FWIW, I agree with TR's first and second responses.

That's exactly what I thought originally, and that's how I started out my question under the thread titled "Fed Ex/wire fees", but someone responded that they didn't think this did constitute a changed circumstance, so that led me to think I couldn't take this approach.

But if you both think, like I did in the beginning, that this does rise to the level of a changed circumstance, then I'm good. If we determine during underwriting that we will need to pay off loans and will therefore incur a Fed Ex or wire fee, I'll just issue a revised GFE. Thanks much!

You may also want to discuss this situation with your lead examiner...they will ultimately be the one you have to pacify.

Rereading both these threads, if you're doing refinances, you should know up front that you're going to have a payoff fed ex charge. So one charge/credit should be included in your original GFE.

If, after underwriting, you find out that the borrower needs to pay off additional loans and you will have to fed ex those too, then I believe you can use the FAQ reference I quoted above to rediclose to cover the ADDITIONAL payoffs.

That sounds reasonable to me too. Anything you would be aware of, you need to account for. Surprises only can likely become CC's.

That makes sense. There are certainly a small number of loans we make that start out as refinances, and for those, we would definitely know at application that there will be a required payoff. But the vast majority of our loans are second mortgages, and no one has any idea until underwriting gets done with it that we will be requiring some other loans to be paid off.

I really appreciate all your input. It's been very helpful and I feel like I have a game plan we can live with now. Thanks much!

Finally heard back from HUD today in response to the message I sent them on this topic.

My Question: Please forward this message to Mr. Friend or Mr. Fey.

They have stated that they read BankersOnLine regularly.
There is a poster there who states adamantly that redisclosing the GFE because fees have gone down is allowed by RESPA. You can see this post here.

Can you please comment on this for us either by reply or on the site? If true, this would drastically change the way the vast majority of us approach the GFE.


HUD Answer: A new GFE can only be issued if there are changed circumstances. Changed circumstances is defined in §3500.2 as: (1) Acts of God, war, disaster, or other emergency; (2) Information particular to the borrower or transaction that was relied on in providing the GFE and that changes or is found to be inaccurate after the GFE has been provided, which information may include information about the credit quality of the borrower, the amount of the loan, the estimated value of the property, or any other information that was used in providing the GFE; (3) New information particular to the borrower or transaction that was not relied on in providing the GFE; or (4) Other circumstances that are particular to the borrower or transaction, including boundary disputes, the need for flood insurance, or environmental problems.

A change in fees, up or down, is not a changed circumstance warranting a new GFE.(my emphasis added)

This was not signed by anyone at HUD nor was there any indication of who answered beyond the HSGRESSPA@HUD.gov email address.

At least it agrees with how we've understood things to be.

That's why I rely on Bankersonline and talk to management about it. I'm going to talk to the examiners about it when they get here. We've had an outstanding rating in compliance and he is good at what he does. Just don't agree with him at times.

I said some banks-some bigger banks have caused problems with being greedy. Also, like you said brokers and government. No offense meant Joker.

You're right about what I meant- loan amount changes Joker we re-issue a GFE. No, no not anytime a fee changes.

Okay, somehow that's what I thought you really meant! I don't see any real problem with that so long as no fees are changed other than was was affected by the up/down loan amount change, which I also have a feeling he isn't suggesting.

No offense taken! It's just there were likely only a very few real banks heaviliy involved in this fiasco and unfortunatly ours has been hurt as a byproduct of it. Being a GA bank that handled a lot of C&D isn't a very good thing right now! Getting caught on the wrong side of the pendulum swing bites!

I would like to call the attention of HUD and ask them if they would consider a BOL intervention similar to what we did with FinCEN on the 314a process a few years ago.

Backstory: As a result of the USA PATRIOT Act, FinCEN started sending a list of names to financial institutions with a confusing, conflicting, and logistically almost impossible set of instructions on what needed to be searched.

Mary Beth Guard arranged a conference call with a few BOLers who were steeped in BSA/AML/PATRIOT compliance issues. I think the call was 90 minutes in which we hashed out the issues, concerns and difficulties for this brand new process and made suggestions for improvement. Mary Beth put all of this into a very well written letter to FinCEN.

FinCEN took the comments and suggestions to heart and a few months later we had a MUCH IMPROVED (and secure!) 314a process which now operates in a rather smooth and seamless fashion.

How about we try the same with RESPA - specifically GFE and HUD-1 issues with respect to:

1. How not to end up with a lose-lose situation on a No-Cost loan - i.e. Does the lender REALLY owe the borrower a refund if the third party charges are either over-estimated or under-estimated????
2. How to uniformly show a lender credit on the GFE and HUD - in a manner that can be understood by the borrower, lender and examiner.
3. How to uniformly execute tolerance cures when the error is discovered just before or at closing - in a manner that can be understood by the borrower, lender and examiner.
4. How to uniformly execute tolerance cures when the error is discovered AFTER closing - in a manner that can be understood by the borrower, lender and examiner.
5. How to turn in slimy brokers who are stealing customers by lying about the true cost of the loan? (okay - the last one is wishful thinking on my part - but SERIOUSLY! Can't we honest bankers and credit unions turn in the bad apples?)

Curiously, PR...with the rules the way they are now, how are brokers still lying about the true cost of the loan? Can you give some examples?

Also, don't you think the new compensation rules might put a final halt to that?

I'll be the first to say I see absolutely zero difference between a ysp and a srp, other than one must be disclosed and the other is a "secondary market fee" not requiring disclosure...you will NEVER convince me they aren't the same...So currently, brokers are the ones that are on the short end of the stick at the moment...aren't they?

What am I missing?

This isn't an argument for what you have laid out above. The only issue up there that I still have issues with is #1 because it makes no sense for a lender to lose just because they overestimated something...but I'm just curious as to what you are experiencing with #5?!?

With #5 - a broker issued a GFE that shows a boatload of fees but tells the consumer that it's a no-cost loan - and the consumer believes the broker!

I have a lender that is really, really upset about losing deals to this broker and wants to know HOW they can get away with it. I suggested that the lender should e-mail that broker's GFE to HUD and ask that same question.

Items 2-4 are there because I see potential train wrecks come exam time (not to mention in court when a borrower turns to an attorney to get out of a loan) over the Bass-akward way these things can be shown on the HUD. I've been in compliance for over 30 years and I am having a hard time understanding the logic.

WAIT! There's logic behind this???!!!

I've seen non-bank lenders do some crazy things. We had one consumer come in and tell us that she asked a broker (not sure if they were a true "broker", but I do know they were a non-bank lender) for a GFE and they said "well, I could give you a GFE but it would be pointless since this is a no-cost loan - the GFE wouldn't have anything on it".

I get LOs coming to me all the time with things they've seen from non-bank lenders that aren't compliant. My motto has become "just because someone else does it doesn't make it right!". I don't know that we've ever lost a loan to a broker, but I DO know that many, many of them are not complying with the regulation. How they're getting their loans sold I have no idea, since I know our investors go through our files with a fine tooth comb.

Nice! We haven't run into that problem with rogue brokers...at least not to my knowedge. If you could get your hand on the GFE and the HUD, I'd turn them in to HUD or the DOJ.

I don't really think the GFE alone would do it (in the case there is a second fee sheet involved)

Fortunately in every situation I've seen the consumer never actually closed with the broker, so no HUD. I'd love to turn some of them in but so far I haven't seen enough "evidence" to actually do it!