We want to thank everyone who attended our webinar “GFE Compliance.” We had many excellent questions during the webinar, and we were able to answer several on air. For many questions that weren’t answered during the webinar, you can find the answers below. You can also download the slides below.

• Download the slides

Our experts look forward to serving all your compliance needs. Call 877-250-5243 or email info@mortgagecomplianceadvisors.com.


Have more questions? Submit a question or comment in the comment box at the bottom.


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Question 1 – Discounts are charged in the origination charge.  What happens if you have a borrower who agreed to a discount and then changes his mind?  If you cannot change the origination charge, how can you fix this?

• Answer – If you are including the discount points in your origination charge then you are not allowed to change your origination charge. Discount points can be shown on Box 3 of Block 2 of the GFE. If discounts are listed here, you can change them as the rate changes.

Question 2 – RESPA states that box 1 and 2 in important dates do not change.  Is this true?  If not, when does it change?

• Answer – Question 1 in the Important Dates section will change when loan locking information changes. Question 2 in the Important Dates section will not change and will remain the same on all subsequent re-issues of the GFE.

Question 3 – If the seller is responsible for the transfer tax in our state, is it required to be disclosed on the GFE?

• Answer – Please refer to RESPA FAQ (page 34 quesiton 2) Q: How is the transfer tax disclosed in Block 8 of the GFE?

A: The amount the borrower is likely to pay for transfer taxes is disclosed in Block 8 of the GFE. In some areas this amount, as a matter of practice, is governed by state or local laws. If state or local law is unclear or does not specifically attribute transfer tax to a seller or borrower, the amount to be disclosed on the GFE is governed by common practice or experience in the locality of the property.

If the seller is paying a portion of the transfer tax that was not disclosed on the GFE, then that portion should be listed in the seller’s column in the 1200 series on the HUD-1.


Question 4 – RE appraisal: Are you saying that if we guesstimate a $400 appraisal fee and the UW adds a requirement for, say, an additional schedule, which results in an additional cost of $100, we cannot pass on the additional fee to the borrower?

• Answer – A requirement of the lender, such as an additional appraisal requirement, could be basis for a changed circumstance allowing an increase in fees as it was information not known at the time of initial disclosure.  The re-issued GFE must be provided within 3 days of the date of discovery of the change.

Question 5 – Can you tell me a valid change circumstance for lowering a credit after a loan is locked?

• Answer – Borrower requested change would be a valid changed circumstance.  For example, if the borrower requested a lower interest rate, the credit for the chosen rate would be less and would allow a decrease to the credit in Block 2.

Question 6 – I was under the impression that if the buyer shopped for a service, a 10% tolerance did not apply?

• Answer – If the borrower shops for a service provided by a vendor who is not listed on the Service Provider List provided at initial GFE disclosure, charges for those services are not bound by tolerance.

Question 7 – For TPO loans, how do we as the lender determine if the broker disclosed within the required time frame?

• Answer – It is the lender’s responsibility to ascertain whether the GFE has been provided.  Recommend an internal procedure be established to allow disclosure requirements have been met.

Question 8 – Where do I show an escrow holdback amount for an FHA 203k loan or repair escrow funds?

• Answer – Charges for escrow holdbacks on 203K loans are typically included in the loan amount and are not a GFE item.

Question 9 - If you use a contract processor, can that fee be placed in the required services box?

• Answer – Fees for processing services are considered as part of the loan origination charge and should be placed in Block 1.

Question 10 - Is lender credit considered an APR fee?

• Answer – This would depend on what the lender credit is for. If it’s for APR related fees, then it would affect your APR.

Question 11 - How do you view rate extension cost? Should we charge the borrower or eat it?

• Answer – RESPA waivers on this. Please refer to RESPA FAQ (page 18 question 7 iii) Q: The borrower does not proceed to closing quickly upon final approval or does not act diligently in providing information to the lender. A: The particular facts of each situation must be examined to determine if the facts constitute a changed circumstance.

Question 12 - Can you clarify in which GFE block you should put a processing fee charged by an independent NMLS licensed processor that gets paid directly out of the proceeds at closing by title? This would be in a lender-paid model transaction.

• Answer – Fees for processing services are considered part of the loan origination charge and should be placed in Block 1.

Question 13 - Should borrower paid short sale fees be listed on the GFE and if yes in which block?

• Answer – Without knowing the exact fees, the charges you are asking about would most likely be disclosed in Block 1.

Question 14 – Q&A # 2: How would that work in a dry state when docs have been signed? Is it a violation of RESPA to re-disclose after consummation? Or is the definition of consummation not when docs are signed?

• Answer - Consummation is defined as the date the docs are signed.  RESPA does allow for tolerance cures up to 30 days after consummation.

Question 15 – In regards to transfer taxes, if it’s typical in our area for the seller to pay it, do we have to quote it on the GFE?

• Answer – Please refer to RESPA FAQ (page 34 quesiton 2) Q: How is the transfer tax disclosed in Block 8 of the GFE?

A: The amount the borrower is likely to pay for transfer taxes is disclosed in Block 8 of the GFE. In some areas this amount, as a matter of practice, is governed by state or local laws. If state or local law is unclear or does not specifically attribute transfer tax to a seller or borrower, the amount to be disclosed on the GFE is governed by common practice or experience in the locality of the property.

If the seller is paying a portion of the transfer tax that was not disclosed on the GFE, then that portion should be listed in the seller’s column in the 1200 series on the HUD-1.


Question 16 – What if the credit is based on a 1% and the loan amount is lowered, can the credit decrease?

• Answer – Please refer to RESPA FAQ [page 28 question 8] Q: If all or a portion of the charge in Block 1 is calculated as a percentage of the loan amount, and the loan amount changes, can the loan originator issue a revised GFE with an updated charge in Block 1?

A: Yes, but only if issuance of a revised GFE is permissible under 24 CFR § 3500.7(f). In particular, if the loan amount changes and all or a portion of Block 1 is calculated as a percentage of the loan amount, then that portion in Block 1 may be recalculated.


Question 17 – I have multiple borrowers that seem to sit on the disclosures – then sign when we tell them that we are about to cancel the file.  Is there any downside to having borrower signature dates 2 weeks beyond (or whatever) of the issuance of the disclosures?

• Answer – RESPA and TILA initial disclosures are not required to be signed by the borrowers. The lender/broker carries the burden to prove they were issued correctly and timely.

Question 18 – If a charge for a 10% tolerance area does not appear on the initial GFE but does appear on the initial TIL would you have a reimbursable expense?

• Answer – You are bound by tolerances and fees listed on the GFE regardless of what is listed on the TIL.

Question 19 – So, if you do not tie a lender credit to the rate and instead you list on page 3 of the 1003, it could be decreased.  Is that an acceptable way of disclosing a lender credit?

• Answer – RESPA does not issue any guidance that lender credits must be listed on the GFE. Credit for interest rate chosen must be listed.

Question 20 – Any issues with overstating fees such as Transfer Taxes to be sure you are covered?

• Answer – Overstating charges is allowed.

Question 21 – Can tax transcript costs be itemized separately or must they be included in the Origination fee?

• Answer – Tax Transcript charges are allowed to be listed in Block 3 of the GFE.

Question 22 - Borrower is locked, needs an extension– would this be a changed circumstance and allow us to reissue and charge the extension fee to the borrower?

• Answer – RESPA waivers on this. Please refer to RESPA FAQ ( page 18 question 7 iii)Q: The borrower does not proceed to closing quickly upon final approval or does not act diligently in providing information to the lender.

A: The particular facts of each situation must be examined to determine if the facts constitute a changed circumstance.


Question 23 – If we show a termite company and the charge they have for a termite inspection is 75.00. Borrower chooses to use that company and gets the inspection. The company comes back and finds visible evidence of damage or live termites. Borrower “chooses” to make contract with company for treatment, which is much higher than an inspection. Why must we be held to the 10% tolerance on this when it’s the treatment, not the inspection, that costs so much?

• Answer – I would agree with you. I would argue that the treatment is different from the inspection. I would argue that the treatment was not knowable upfront and a changed circumstance would be allowed to be issued along with an updated GFE.

Question 24 – Do you have to include a charge for a credit report in Pg 2 Block 3 if you never charge borrowers for credit reports?

• Answer- If there is a fee charged for a service provided, that fee must be disclosed on the GFE, regardless of whether the fee is paid for by the borrower, seller, or other third party.  If there is NOT a fee charged for a service, a fee will not need to be disclosed.

Question 25 - I thought HUD ruled that if state statute requires a seller to pay a transfer tax, it didn’t need to be disclosed on the GFE?  Not true?

• Answer – Please refer to RESPA FAQ (page 34 question 2) Q: How is the transfer tax disclosed in Block 8 of the GFE?

A: The amount the borrower is likely to pay for transfer taxes is disclosed in Block 8 of the GFE. In some areas this amount, as a matter of practice, is governed by state or local laws. If state or local law is unclear or does not specifically attribute transfer tax to a seller or borrower, the amount to be disclosed on the GFE is governed by common practice or experience in the locality of the property.

If the seller is paying a portion of the transfer tax that was not disclosed on the GFE, then that portion should be listed in the seller’s column in the 1200 series on the HUD-1.


Question 26 – If there is a legitimate change of circumstance and some of the costs disclosed on page 2 change, is it necessary to give a new 10 day shopping period on Line 2?

• Answer – No. The date in question 2 of the important dates does not change with the re-issue of a GFE.

Question 27 - Have you seen any recall of HUD’s ruling that the cost to obtain federal income tax transcripts should be entered in Block 1?

• Answer – I have not seen this recalled.

Question 28 – If the rate is not locked at the time the initial GFE is issued, but later, when the rate is locked, neither the rate, the loan amount, the payment, nor any of the costs disclosed on page 2 have changed, is it necessary to issue a revised GFE where all that would change are dates in Important Dates?  What are the risks of not re-issuing?

• Answer – Yes. Please refer to RESPA FAQ 9 (page 8 question 19) Q: If a GFE has been provided and the interest rate has not been locked, can the loan originator provide a revised GFE when the borrower later locks the interest rate?

A: Yes, if a borrower locks the interest rate after the GFE has been issued, a revised GFE must be issued within 3 days of the interest rate lock reflecting the date that the interest rate lock is good through in Line 1 and ―N/A‖ in Line 4 of the ―Important dates‖ section of the GFE. Any interest rate-dependent charges (Block 2, Line A and Block 10 on the GFE) and terms that changed must also be updated on the revised GFE.


Question 29 – If the GFE is re-issued when the rate is locked, should the date on line 2 of the Important Dates be extended?

• Answer – No. The date in question 2 of the Important Dates does not change with the re-issue of a GFE.

Question 30 – We put the MERS fee in with the origination charge, not in services we select. Is that not correct?

• Answer – This would be acceptable.

Question 31 – If a borrower owns bare land and wants to bring in a modular home but does not have one picked out, is that a prequalification or would we have to issue a GFE and TIL along with the early disclosures?

• Answer – That would depend. If you have all 6 pieces of information that determine a GFE, then you would be required to issue a GFE.

Question 32 – What about taxes estimated on the initial GFE for the initial escrow account that go up after the initial GFE?  What is the rule concerning taxes?

• Answer – Block 9 does not have a tolerance range and this section can change if necessary.

Question 33 – If the broker orders the credit report should the service provider indicated on the HUD-1 show the broker’s name of the name of the credit reporting agency?

• Answer – It would depend on who is collecting the fee and whom title is issuing payment to.

Question 34 – If a fee or charge is POC and was underdisclosed, is it included in the tolerance?

• Answer – All fees should be included in the appropriate section of the GFE and HUD and be used in all tolerance calculations.

Question 35 – About #10: What if we don’t close the loan in the scheduled time?

• Answer – Block 10 does not have a tolerance range and this section can change if necessary.

Question 36 – If we know that the transfer tax will be paid by seller, do we need to include that fee in the GFE?

• Answer – Please refer to RESPA FAQ (page 34 question 2) Q: How is the transfer tax disclosed in Block 8 of the GFE?

A: The amount the borrower is likely to pay for transfer taxes is disclosed in Block 8 of the GFE. In some areas this amount, as a matter of practice, is governed by state or local laws. If state or local law is unclear or does not specifically attribute transfer tax to a seller or borrower, the amount to be disclosed on the GFE is governed by common practice or experience in the locality of the property.

If the seller is paying a portion of the transfer tax that was not disclosed on the GFE, then that portion should be listed in the seller’s column in the 1200 series on the HUD-1.


Question 37 – If we get a app report showing lower value and we reduce the loan amounts and origination fee then, do we have to redisclose GFE?

• Answer – There are two opinions on this topic: one is that you only need to disclose if fees go up. Others say you need to re-issue if there is any change to fees or terms. We recommend to be safe and re-issue.

Question 38 – Let’s say we have a charge on the HUD that was not on the GFE that falls under the 10% tolerance in Section “Charges that in total cannot increase more than 10%.”  Can this happen?  Like a $75 Desk review of appraisal.

• Answer – This is acceptable.  Any charges over the 10% tolerance limitation (or any tolerance limitation) will result in a cost to cure.

Question 39 – What is the curative action if the GFE or revised GFE is not provided to the borrower within 3 business days of the known circumstance?

• Answer - There is no cure for this RESPA violation.

Question 40 - So are you saying that each lender can define what constitutes a loan application?  This makes it even more confusing.

• Answer – Yes. RESPA provides this option to lenders.

Question 41 – If our company provides a rate lock period, shouldn’t Line 3 in the Important Dates have the estimated number of days we normally lock our loans rather than NA when the loan is floating?

• Answer - Yes. According to Appendix C of RESPA (Completing the GFE), the loan originator must state how many days in which the borrower must go to settlement once the interest rate is locked.

Question 42 – If a loan program changes from a conventional to a FHA loan, can the fees in Block 1 also be changed?

• Answer – Your origination cannot change but all program-related fees and credits are allowed to change.

Question 43 – If a LO forgets to disclose the GFE within 3 business days of locking the loan.  They are not allowed to charge a fee, but should they re-disclose after 3 days to update the important date information?

• Answer – Yes. We would recommend you re-issue the GFE with the updated Important Dates.

Question 44 – HUD comparison, can you clarify.  If there was a nonallowable fee added to the GFE, is it ok to show the correct lower fee on the HUD comparison page to correct it OR are we required to show the higher amount?  It seems this would be wrong to include it as it would skew our 10% tolerance category for the over calculation.

• Answer – The GFE comparison column on the HUD should contain the information from the most recently disclosed GFE disclosure.  Your tolerances would be determined based on these figures.

Question 45 – Page 2 #10 settlement date, is this supposed to be the actual date the loan is funded or the date docs are signed?

• Answer – That would be the day the documents are signed.

Question 46 – Where do I show an escrow waiver fee?

• Answer – FAQ 4/02/10 PG 31 #8- This fee may be part of Block 2 on the GFE. However, if known at time of application, the escrow waiver may be included in Block 1.

Question 47 – We have a silent 2nd mortgage given by City Government and they have a processing fee of $150.  Where does that charge go on the GFE?

• Answer – Fees for processing services are considered a part of the loan origination charge and should be placed in Block 1.

Question 48 – Transfer taxes – Block 8 – should we disclose the borrower portion or the total amount regardless if the seller is required to pay half in our state?

• Answer – Please refer to RESPA FAQ (page 34 quesiton 2) Q: How is the transfer tax disclosed in Block 8 of the GFE?

A: The amount the borrower is likely to pay for transfer taxes is disclosed in Block 8 of the GFE. In some areas this amount, as a matter of practice, is governed by state or local laws. If state or local law is unclear or does not specifically attribute transfer tax to a seller or borrower, the amount to be disclosed on the GFE is governed by common practice or experience in the locality of the property.

If the seller is paying a portion of the transfer tax that was not disclosed on the GFE, then that portion should be listed in the seller’s column in the 1200 series on the HUD-1.


Question 49 – If closing attorney fees, title insurance fees were disclosed with our closing attorneys  fees but borrower decided to go with the attorney of their choice and their fees are higher, can we redisclose a new GFE?

• Answer – You may re-disclose and support the changed circumstance as a borrower requested change.  If a re-disclosed GFE is not provided and the fees increase at settlement, a cost to cure should not apply since these are service charges not bound by tolerance because the borrower shopped for their own vendor.

Question 50 – OCC has notified us that the revised GFE can only change items that were impacted by the changed circumstance. For instance, at locking of loan, only the origination charge and daily interest (if applicable) can change.  If other items, such as appraisal fee, have changed it cannot be changed on the revised GFE.

• Answer – This is correct. Only fees directly affected by the change of circumstances can change. Please refer to RESPA FAQ (page 18 question 5) Q: If circumstances change, may a loan originator issue a revised GFE with changes to all of the charges and terms related to the loan?

A: No, the loan originator may only change those charges and terms that are affected by the specific changed circumstance.


Question 51 - Is there a requirement that a minimum # of days interest be shown on the GFE?

• Answer – RESPA does not give a minimum number of days interest that must be disclosed.

Question 52 – If the GFE has expired, can the fees disclosed in Block 1 increase in a subsequent GFE?

• Answer – If the borrower does not receive a GFE and give an intent to proceed within a minimum 10 days, then you are not bound by any of the fees listed on the GFE. However, if the borrower received a GFE and expresses an intent to proceed before the minimum 10 days, you are bound by all fees listed on the GFE.

Question 53 – Is monthly income, for GFE purposes, defined as verified income by documentation or as stated by borrower during interview?

• Answer – RESPA does not allow a GFE to not be issued due to non-verification of income. You would need to issue the GFE based on the income stated by the borrower. Possible change of circumstances could be issued if income verified was not the same as the stated amount.

Question 54 – Will this training include the “how to” on completing the GFE for RESPA as it applies to the Federal Reserve Board’s MLO compensation Rules?

• Answer – Please refer to the March 2011 Issue of RESPA Roundup. This will give guidance on this topic.

Question 55 – Page 1 line 2 date estimated charges are good through. GFE has been accepted. Changed circumstance GFE is issued-do we change that date to 10 days from the new GFE?

• Answer – No. The initial date in question 2 will not change on subsequent GFE’s.

Question 56 – Do 203K fees like the Supplemental Origination fee, Inspection fee, Title Update need to be disclosed on the GFE and if yes, are they noted POC (paid outside closing)?

• Answer – If these fees are included in the loan amount, they will not show on the GFE.

Question 57 – If a borrower agrees to move forward with the loan AND both dates expire (#1 & #2), does the GFE expire?  Or are you still bound by the fees even though the dates have expired?

• Answer – If the borrower does not receive a GFE and give an intent to proceed within a minimum 10 days, then you are not bound by any of the fees listed on the GFE. However, if the borrower received a GFE and expresses an intent to proceed before the minimum 10 days has expired you are bound by the fees listed on the GFE.

Question 58 – Can we stamp the GFE “Amended” or “Final”?

• Answer – RESPA does not allow the GFE to be altered. We would recommend an additional letter to disclosure to the borrower indicating why a new GFE is being issued.

Question 59 – Is the NMLS id number for lender and originator required on the GFE?

• Answer – RESPA does not require the NMLS ID number to be listed on the GFE. However, there are certain states that do require this.

Question 60 – Can the appraisal fee be added if never disclosed?

• Answer – The appraisal is a fee is considered a fee that should be known prior to issuing a GFE and is not allowed to be charged to the borrower if it’s not listed on the initial GFE.

Question 61 – Owner’s title was never disclosed, can you add it at any time or must you wait for discovery?

• Answer - “RESPA FAQ (page 33 question 1) states the following:

Q: Do loan originators have to provide a price for Owner‘s title insurance on the GFE?

A: Loan originators must provide an estimate of the charge for an Owner‘s title insurance policy in Block 5, ―Owner‘s title insurance‖ on the GFE on all purchase transactions. For non-purchase transactions, the loan originator may enter ―NA‖ or ―Not Applicable‖ in this Block. If the Owners Title Insurance is not listed on the GFE you would not be allowed to charge the borrower for this. ”


Question 62 – Where would you enter charges for permits for a FHA 203K?

• Answer - Charges for these permits are typically included in the loan amount and are not a GFE item.

Question 63 – On a re-issued GFE, what would the date be for #2 in Important Dates, stays the same as original, or changed to new 10 day period?

• Answer – It would remain the same as the date on the original GFE.

Question 64 – Are we able to utilize your slides for internal training purposes?

• Answer – Yes. These slides are available for free download on our website.

Mortgage Compliance Advisors offers webinars every month. Visit www.MortgageComplianceAdvisors.com to register for next month’s webinar or to learn more about how MCA can serve all your compliance needs.


(Mortgage Compliance Advisors, LLC (MCA) makes reasonable efforts to ensure the accuracy of the answers. MCA makes no express or implied warranty of any kind respecting the information presented and assumes no responsibility for errors or omissions. This online chat is not legal advice and should not be used as a substitute for proper professional or legal advice.)

We want to thank everyone who attended our webinar “Compliance Q&A Webinar.” As promised, below you will find answers to the questions asked during the webinar. You can also download the slides below.

• Download the slides

Our experts look forward to serving all your compliance needs. Call 877-250-5243 or email info@mortgagecomplianceadvisors.com.


Have more questions? Submit a question or comment in the comment box at the bottom.

You can also sign up to receive invitations to our webinars and monthly compliance updates.


Question 1 – Our in-house officers are paid by salary, our secondary market officers will be paid on a basis point system.  Do we have any worries?

• Answer – Compensation given as salary is acceptable, as well as compensation based on basis points, as long as the basis points are based on loan amount.

Question 2 – If you submit a loan to one investor and they don’t approve it for some reason, and then it gets submitted to a different investor, would that be an allowable CIC if the investor charges are higher than the original investor charges?

• Answer – No, this would not be an acceptable changed circumstance. Please refer to RESPA FAQ:

xv) A mortgage broker issues a GFE based on one lender‘s loan products and origination fees, but places the loan with a different lender.

A: No, this would not constitute a changed circumstance.


Question 3 – Is it correct the TIL does not need to be signed? Do you recommend it be signed?

• Answer – The borrowers are not required to sign the TIL Statement. Yes, we recommend the borrower sign so you will have evidence they received and viewed the TIL Statement.

Question 4 – If a lender accepts a GFE that was issued by a broker, is the lender required to include a GFE in the 3 day disclosure package to the borrower?

• Answer – The lender is not required to issue a GFE when they receive the loan package. However, they are allowed to issue a GFE when they receive the loan package if they wish.

Question 5 – If the seller pays the closing cost, how does this affect the APR?

• Answer – According to RESPA, seller paid costs are still considered borrower paid costs. Therefore, since a borrower paid cost is reflected in the APR, all seller paid costs will affect the APR.

Question 6 – Where does Fannie say we have to pull a new credit report on all loans?

• Answer – If you are referring to the new LQI and Undisclosed Liabilites rule, Fannie Mae does not require you pull a credit report on all loans. If you are referring to audits, in section D1-3-03, Fannie Mae states that on all loans selected for audit “The lender must reverify the borrower’s credit history by obtaining a new in-file credit report for loans underwritten manually and through DU or other automated underwriting systems. The credit report must be from a source other than the original credit reporting agency.”

Question 7 – I am under the impression that since the Origination Fee cannot vary in percent as a function of the loan amount, L.O.’s must pre-determine how many points they will charge every future borrower. So I may decide that everyone gets charged 1.5 points. As a result, If Borrower A asks for a $400,000 loan, I’ll make way more than I would have prior to April 1. And Borrower B, who wants to buy a $60,000 house, with $10,000 down, will be lucky to get a call back. Is this accurate?

• Answer – In my opinion, yes, this would be an accurate statement.

Question 8 – Since the Fed announced in February 2011 that they were declining to finalize the interim rule from September 2010 and the interim rules from August 2009 then is there even a revised TIL requirement?

• Answer – Yes. The revised TIL is still required as this was not part of the rules that were delayed.

Question 9 – Our Bank pays our originators $500.00 for employee loans. Naturally this is different than our normal commission structure. Are we OK with this commission?

• Answer – Yes. A flat fee commission would be acceptable.

Question 10 – Are you saying that a doc prep fee and underwriting fee is now part of the LO compensation?

• Answer – No. Third party fees are still allowed under the new LO comp rule.

Question 11 – What is your advice on this? Our broker has been told he should create an independent DBA and have them invoice separately for processing. If you are a TPO and have an in-house processing department, lenders are recommending we do not include this fee in our base points.

• Answer – It would seem that this would be acceptable. However, remember if you are an affiliate, this would not be acceptable. There has not been clear guidance given regarding this situation.

Question 12 – What if you are a One Man Shop? Do ALL the Rules of the LO Comp apply?

• Answer – Yes, you are still subject to the new LO Comp rule.

Question 13 – In RESPA, when a borrower chooses to remove escrow from the loan application on the day of closing, should the GFE be re-disclosed?

• Answer – We recommend issuing a new GFE when there are any changes to the loan. However, it’s our opinion it would not be necessary to re-issue a GFE in this situation.

Question 14 – If you pull credit but don’t meet all the requirements to be classified as an “application” but the FICO is too low to complete a loan, you still need to send an adverse action notice, correct?

• Answer – Yes. ECOA’s definition of an application is much broader than RESPA’s definition. Because of this, you would need to issue an adverse action notice.

Question 15 – LO Compensation Question #1 (on slides): The answer to this does not seem to match what is indicated in 226.36 D-1-ii. For purposes of this paragraph (d)(1), the amount of credit extended is not deemed to be a transaction term or condition, provided compensation received by or paid to a loan originator, directly or indirectly, is based on a fixed percentage of the amount of credit extended; however, such compensation may be subject to a minimum or maximum dollar amount.

This would seem to indicate the Loan Officer can be paid based on a percentage of the loan amount even when a borrower paid scenario is used.

• Answer – The guidance given in the Federal Reserve’s webinar indicated that if a broker receives compensation directly from the borrower, then employees of the broker may only be paid salary or hourly. I would encourage you to listen to the recorded Federal Reserve webinar for additional guidance on this.

Question 16 – LO compensation question  #2 (on slides): If the borrower is given a credit from the lender for the higher rate, why is the credit not considered the borrower’s funds?  They are “paying” for the credit as part of the high rate. Further, this would keep it under D-1 as consumer paid and work in the consumer’s favor.

• Answer – Lender credits are acceptable as long as they come from the lender and not the broker/LO. If YSP is being paid, all of the YSP must be issued as a credit to the borrower.

Question 17 – LO compensation question  #2: Ok, so if this can’t be used to pay for compensation to the lender/broker, doesn’t this go against RESPA and how the GFE is set up? Since a break down is not required, is all of block one considered compensation to the lender/broker? Block one contains the origination charges and block two (credit) is subtracted to give the borrower an adjust origination charge.  It seems this undermines the intention of RESPA to work in favor of the borrower.

• Answer – Please refer to the RESPA Roundup March 2011 for clarification on how to complete the GFE after the LO Comp rule goes into effect.

Question 18 – Your GFE Cheat Sheet says that the “must go to settlement within __ days” should be NA if a loan is floating.  But, since rate being offered takes into account the anticipated lock period, shouldn’t this field include the anticipated lock period?  Otherwise, if you were pricing a 15 day lock, couldn’t borrower accept the GFE, but say that they want to settle in 60 days?

• Answer – Please refer to the RESPA FAQ page 24 question 11:

Q: The loan originator must state how many calendar days within which the applicant must go to settlement once the interest rate is locked. The number of days cannot be determined until the lock period is determined. May the loan originator enter a range of days for allowable lock periods? Must the loan originator account for the rescission period if the loan is rescindable?

A: No, the loan originator may not enter a range of rate lock options on the GFE. Line 3 requires the disclosure of the number of days in which the borrower must go to settlement. Line 3 in the ―Important dates‖ section on the GFE must be completed with one rate lock period and may need to take into account factors affecting the settlement date.


Question 19 – If your redisclosed GFE has higher fees due to a changed circumstance, don’t you need to allow 10 days on the “Fees Good Through” date?  You said dates don’t need to change, so I just want to clarify.

• Answer – Please refer to REPSA FAQ question #12 under the important dates section:

12) Q: If a revised GFE is provided due to changed circumstances or a borrower requested change, must a loan originator complete Line 2 in the ―Important Dates‖ section on the revised GFE if the shopping period has ended and the borrower has already expressed intent to continue with the application?

A: Yes, the loan originator must complete Line 2 in the ―Important dates‖ section with the same date from the last GFE. The borrower is not required to re-indicate the intent to proceed with the revised GFE because the borrower has previously expressed an intent to move forward with the transaction.


Question 20 – If we are a financial institution that pays only salary and hourly wages to LO’s, is there any reason to have to provide Safe Harbor information?

• Answer – I believe the Safe Harbor is only necessary if you are a broker.  If you are not brokering loans, you would not be subject to the Safe Harbor rule.

Question 21 – What if the lock is being extended? [regarding Important Dates section]

• Answer – We would recommend re-issuing a new GFE with the updated dates in the Important Dates section.

Question 22 – Different investors have different fees which are built into our origination fee. These show on our funding advice.  Will regulators expect to see these reflected differently on the origination charged? ie. RD loan fees are 257.00

• Answer – If audited, they may request these documents. I cannot speak as to what regulators will look for. They always seem to surprise me on what they will look for. I would recommend retaining any information in the file necessary to explain any questions to an auditor.

Question 23 – Flag Star fees are $300- would a regulator expect the origination fee to be $43 higher on the HUD for a Flag Star loan? This question regards what our regulator will want to see.

• Answer – I cannot speak as to what regulators will look for. They always seem to surprise me on what they will look for.  I would recommend retaining any information in the file necessary to explain any questions to an auditor.

Question 24 – Does the lender credit have to be on the GFE?

• Answer – No, a lender can issue a credit at closing and it would not be necessary to re-issue a new GFE, as the costs to the borrower are decreasing.

Question 25 – So how do you clear this issue?  The borrower cannot pay it because this would change fees that should have been disclosed.  The lender won’t eat the fees. So as a lender, do we deny the loan and have the broker start all over?  This is pertaining to fees that a broker forgot to disclose.

• Answer – The lender would need to cover the fees or the borrower would need to pay the difference.

Question 26 – If a customer did not want an escrow account at application and then decides to escrow during the underwriting process or before closing, do we need to re-disclose GFE to include the escrow since it is not one of the changes that effect tolerances?

• Answer – We recommend issuing a new GFE when there are any changes to the loan. Also, if there is any change to the borrower credit (YSP) due to the escrow change, you would need to redisclose.

Question 27 – On a zero cost loan, if you disclose at application on the GFE that you are going to give them a credit of $400 for the appraisal and the appraisal actually comes in at $375, do we still have to credit them the full $400 or can we credit them for the actual cost of the appraisal to the Bank of $375?

• Answer – You are not allowed to decrease the amount of a credit listed on the GFE unless there is an acceptable changed circumstance. A decrease in the borrower credit for the appraisal being less is not an acceptable changed circumstance.

Question 28 – On a zero cost home equity loan, are you required to redisclose because of adding escrow?

• Answer – We recommend issuing a new GFE when there are any changes to the loan.

Question 29 – Is Safe Harbor on all loans or just TPO?

• Answer – It’s our understanding the Safe Harbor is only for TPO loans.

Question 30 – If you put a policy in place requiring an updated credit report be obtained prior to closing for the purpose of QC, do you then have to update the ratios, DU, etc. for underwriting purposes if additional credit has been extended?

• Answer – Possibly. Please refer to Fannie Mae Lender Letter SEL-2010-11. In the letter, it states if you discover additional debts or lower income and DTI to exceed 45% or an increase over 3%.

Mortgage Compliance Advisors offers a free webinar every month. Visit www.MortgageComplianceAdvisors.com to register for next month’s webinar or to learn more about how MCA can serve all your compliance needs.


(Mortgage Compliance Advisors, LLC (MCA) makes reasonable efforts to ensure the accuracy of the answers. MCA makes no express or implied warranty of any kind respecting the information presented and assumes no responsibility for errors or omissions. This online chat is not legal advice and should not be used as a substitute for proper professional or legal advice.)

We want to thank everyone who attended our webinar “Common Compliance Findings of 2010 & How to Prevent Them.” As promised, below you will find answers to the questions asked during the webinar. You can also download the slides below.

• Download the slides

Our experts look forward to serving all your compliance needs. Call 877-250-5243 or email info@mortgagecomplianceadvisors.com.


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Question 1 – What kind of documents are reviewed for proof of UW signature?

• Answer – Loan Approval, Transmittal Summary, FHA Transmittal Summary, FHA Conditional Commitment, FHA DE Approval, VA Loan Analysis, etc.

Question 2 – What is the Tabular TIL?

• Answer – TILA, specifically MDIA, states the following:  “The September 2010 interim rule requires creditors who extend consumer credit secured by real property or a dwelling to disclose summary information about interest rates and payment changes in a tabular format.” This will be enforced on all applications taken after January 30.  For more information, please visit http://www.federalreserve.gov/reportforms/formsreview/RegZ_20100924_ffr.pdf.

Question 3 - What are the penalties or ramifications for not disclosing correctly or timely?

• Answer – The penalty for violating RESPA is up to $10,000 and/or 1 year in prison for each violation. The penalty for violating TILA is $5,000 and/or 1 year in prison for each occurrence. This is in addition to any restitution paid to borrowers.

Question 4 – Can GFE be given to one of two applicants at the time of application and funds collected at that time for appraisal?

• Answer – No, this is would be a violation of RESPA and TILA, as both do not allow for certain fees (including appraisal fees) to be collected at time of application. Also, the GFE must be provided to all borrowers on the application.

Question 5 – When you indicate 7 days from initial TIL to closing, is the day of the TIL day zero, then 7 business days, and then closing can occur after the 7th day?

• Answer – The 7 day waiting period begins the day you send the TIL to the borrower. Closing can occur after the 7th day.

Question 6 – If the borrower dates the disclosures the same day as they were disclosed, would you still need proof of when and how you sent the disclosures?

• Answer – If the application is taken in person and the borrower signs the application and signs/initials the disclosures with a date, this is acceptable evidence of disclosure.

Question 7 - Does the date you pull a credit report count as an item to determine if you’ve taken an application?

• Answer – No. A credit report is not one of the 6 pieces of information that RESPA has defined as an application.

Question 8 - Please provide commentary on important date #2: What is the date for subsequent reissues?

• Answer – You are not required to offer the settlement costs for longer than the original 10 business days.

Question 9 – Can you comment on delivering redisclosures via e-disclosure…do we follow the delivered timeline outline for “mailed” or can we consider received when they receive the e-disclosure?

• Answer – You will need to follow the US mail timeframe unless you have evidence that the borrowers have received the disclosures.

Question 10 - What kind of evidence is acceptable to retain in file that initial disclosures were provided within 3 days?

• Answer – Please refer to page 27 of the presentation. The slides from this webinar can be found at http://www.mortgagecomplianceadvisors.com/wp-content/uploads/2010-Common-Compliance-Findings.pdf.

Question 11 – Is a Decline a changed circumstance?

• Answer - A decline is not a changed circumstance. A decline is an Adverse Action, and a notice must be given to the borrower with reasons for the denial within 30 days of application.

Question 12 – Do any regulators (FDIC, etc.) post common audit findings online?

• Answer – I don’t believe so, but they are government agencies and therefore subject to the Freedom of Information Act.

Question 13 – If a mistake is made on page 1 of the GFE, can or should it be corrected without a changed circumstance, or should you just leave it and risk the violation?

• Answer – It can only be corrected if there is an acceptable changed circumstance. RESPA does not allow for change to be made as a result of a typo or mistake. We highly recommend you review your GFE prior to disclosure.

Question 14 – Should box 1 be the expiration date, or are they asking the date of the GFE?

• Answer – If you are referring to box 1 in the important dates section, this is how long you are going to make the rate offered on the GFE good for. There is no rule as to the time you must give, other than that a date must be given.

Question 15 – Where is the best place to go to get the detailed information on LQI?

• Answer - Please refer to this site https://www.efanniemae.com/sf/lqi/index.jsp.

Question 16 – We need to pull LDP & GSA on FNMA files?

• Answer – Yes. It is now a FNMA regulation that is part of LQI and is required on applications taken after 6-30-10.

Question 17 – We have to re-disclose the TIL if the APR “decreases” by 0.125%?

• Answer – Yes. Here is the excerpt from TILA 226.22:

(2)  the annual percentage rate shall be considered accurate if it is not more than 1/8 of 1 percentage point above or below the annual percentage rate determined in accordance with paragraph (a)(1) of this section.

(3) In an irregular transaction, the annual percentage rate shall be considered accurate if it is not more than ¼ of 1 percentage point above or below the annual percentage rate determined in accordance with paragraph (a)(1) of this section.46


Question 18 - Re: the Final GFE matching the Final HUD, how do we “force” Escrow to not change the Final fees after closing?

• Answer – I would recommend reviewing all the HUDs prior to closing and ensure they have been completed correctly.

Question 19 - Where can we get the Special Information Booklet?

• Answer – Special information booklets can be downloaded at  http://www.hud.gov/offices/hsg/ramh/res/settlement-cost-booklet03252010.cfm or you can contact HUD to order copies.

Question 20 - Does the letter stating that the disclosures were sent need to be signed by the borrower? Or can we just do a certification?

• Answer – No, the letter does not need to be signed by the borrower. You will just need to retain documentation of when and what documents were sent.

Question 21 – Providing disclosures within 3 days is a hot topic. We have online customers that submit online and “view” the disclosures during this process. Is the submittal printout in the file showing the disclosures viewed, proof that the disclosures were provided?

• Answer – If you can show proof that the borrowers viewed the disclosures and you retain this documentation in your file, it should be acceptable. Please review the e-disclosure rules to assure you are in compliance.

Question 22 – We have a few lenders that will not provide copies of the underwriting package signed by the underwriter.  How do we handle this if we cannot get these items from the lender?

• Answer – I would recommend you note in your file that you requested these documents from the lender and your request was denied.

Question 23 – You said RESPA/TILA adopted the 6 pieces of information as a Loan Application. Would that also apply to the ARM Booklet due 3 days after “application”?

• Answer – This is correct. If you take an application for an ARM loan, you will need to provide the CHARM booklet to the borrower within 3 days of receiving all 6 pieces of information.

Question 24 – Are we required to input the SRP that we are receiving for the rate on the GFE, regardless of whether we are bank/broker, correspondent etc….?

• Answer – SRP is not required to be disclosed on the GFE.

Question 25 – Some end investors will not purchase the loans if the disclosures and re-disclosures are incorrect or not provided within the proper timelines. Same with the APR decreasing by more than .125%. Some end investors will not purchase the loans, so I would recommend checking with your intended investor.

• Answer – We always recommend ongoing conversations with your investors as to what their requirements and polices are.

Question 26 – Shouldn’t line 1 of the important dates be the actual lock date if the loan is locked?

• Answer – If your rate is locked, line 1 in the important dates section should be the day the rate lock expires.

Question 27- Is the late fee for VA 5% or 4%?

• Answer – The late fee for a VA loan is 4%.

Question 28 – Refinance loans must be disclosed within 3 days of receiving the 6 pieces of information, correct?  You cannot choose not to ask for income or withhold disclosures for the documentation to support what the borrower has stated or provided, correct?

• Answer - I agree on both accounts.

Question 29 – On the GFE, can the credit amount change if you are a broker?  One of my lenders told me that could never change. My understanding was it could as long as you were below the original total origination fee.

• Answer – It is our understanding that fees to the borrower can decrease (or credit increases) without penalty.

Question 30 – If you have an interview date on the 1003 of the 3^rd, but you don’t have the 6 items to make it an official application but you get a contract on the 10th, can the interview date be the 3rd and all the rest of the RESPAs be dated the 10th?

• Answer – Yes, this is acceptable. However, your application date will be the 10^th, as this is when you received all 6 pieces to complete the application.

Question 31 – By date stamp, do you just mean having a date on the cover letter?

• Answer – Yes. Or a date stamp on each disclosure provided to the borrower.

Question 32 – Must an authorization to release information be signed prior to pulling credit, or can it be done later?  My understanding was they can give you a verbal authorization.

• Answer – You are allowed to receive verbal authorization to pull credit. However, we recommend you document in your file when the verbal authorization was given. Only having a borrower authorization in the file signed after the credit was pulled is not acceptable.

Question 33 – Are fees/costs included in the Rehab Escrow Account on 203K deals disclosed on the GFE?

• Answer – Yes, these would need to be disclosed on the GFE as they are costs associated with obtaining the loan.

Question 34 – Are they going to put the GFE and TIL on one form or just make it one set of rules/timing?

• Answer – They are going to combine both forms into one single form. There have already been some working drafts of the form released.

Question 35 – How can you prove when you received all 6 items needed for the application?

• Answer –When there is evidence in the file.

Question 36 – Could you explain briefly what a change of circumstance is defined as?

• Answer – The following describes RESPA’s definition: Changed circumstance  is now 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.

Question 37 – I know what LDP is, but what is GSA?

• Answer – The GSA is the General Services List, also known as the Excluded Party List.

Question 38 – Earlier in the conference you said there were some exceptions to the 3 day waiting period after a TIL is disclosed.  Can you clarify that?

• Answer – TILA does offer an exception to the 3 day waiting period.  It states if the borrower has a bona fide personal emergency, they can waive the waiting periods. However, I would not recommend using this exception, and most investors will not allow this either.

Question 39 – The error rates re: final HUD-1 does not match the most recent GFE …Do your findings only include those fee discrepancies that exceed tolerance levels, or are you including all discrepancies in this trending analysis?

• Answer – We would issue findings for both a tolerance violation as well as the final HUD-1 not matching the most recently issued GFE. Both would be included in the trending analysis.

Question 40 – What is the best source for testing—Is it Volume Percentage or Statistical Samples?

• Answer – We recommend using the volume percentage sampling.

Mortgage Compliance Advisors offers a free webinar every month. Visit www.MortgageComplianceAdvisors.com to register for next month’s webinar or to learn more about how MCA can serve all your compliance needs.

(Mortgage Compliance Advisors, LLC (MCA) makes reasonable efforts to ensure the accuracy of the answers. MCA makes no express or implied warranty of any kind respecting the information presented and assumes no responsibility for errors or omissions. This online chat is not legal advice and should not be used as a substitute for proper professional or legal advice.)

We want to thank everyone who attended our webinar “Revisiting the GFE: How to Resolve Common Findings.” (This is the third GFE webinar in a series. You can find the slides and Q&A from the previous GFE webinars under the News & Resources tab.) As promised, below you will find answers to the questions asked during the webinar. You can also download the slides from the webinar.


Our experts look forward to serving all your compliance needs. Call 877-250-5243 or email info@mortgagecomplianceadvisors.com.


Have more questions? Submit a question or comment in the comment box at the bottom.


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Question 1 – On purchase transactions, since the seller chooses the title company, are title charges still held to that 10% tolerance?

• Answer – Yes.  Fees disclosed in Blocks #4 or #5 are bound by 10% tolerance. If a settlement service provider list is provided to the borrower at the time of initial GFE disclosure, and the borrower chooses a settlement agent not disclosed on the service provider list, the actual charges at settlement may be listed under Fees That Can Change.

Question 2 – Regarding Important Date #1: Does a new GFE need to be issued when a rate lock is extended?

• Answer – A new GFE will need to be issued with the Important Dates Section updated to reflect correct lock information.

Question 3 – Is a credit report provider required to be on the settlement service list? If yes, what if you don’t charge your borrower a credit report fee ever? Do you still have to list a company on your list?

• Answer – A settlement service provider list must be provided for any service the borrower may shop for. If the borrower is allowed to shop for a credit report provider, the list must be provided. If you do not ever charge a credit report, you are not required to show the credit report, or company, on the provider list.

Question 4 – Can origination ever change due to a changed circumstance?

• Answer – Yes. HUD FAQ’s state that if the loan amount increases, and all, or a portion of, charges listed in Block 1 are disclosed as a percentage of the loan amount, those charges may increase.  The GFE must be re-issued within three business days of the discovery of information, allowing the increase in charges.  A supporting changed circumstance must also be documented and retained in the file.

Question 5 – Initial GFE went out with zero origination because the loan was priced with a rebate for a no cost loan to the borrower. The appraisal came in low which now reduces the amount of rebate. Does this qualify as a changed circumstance and could a new GFE be issued showing a discount cost?

• Answer – A lower than estimated appraisal does not constitute a changed circumstance. Therefore, you are only allowed to collect the origination disclosed to the on the initial GFE.

Question 6 – What if the GFE is disclosed improperly? Is there a cure? Should the file be closed?

• Answer – This depends on the violation. If it’s a fee violation with a tolerance, then you may be able to cure this on the final HUD1.  Some GFE violations cannot be cured, and you should check with your investor to see how they will want you to address these situations.

Question 7 - Regarding Important Date #2: Does this date need to be equal to the rate lock expiration if the rate is locked at the time of GFE issuance?

• Answer – Question #2 is to document how long the charges listed on the GFE are available for.   The initial GFE must reflect a minimum of 10 business days from the date of the GFE. This date will not need to equal the rate lock dates.

Question 8 – Can you use a credit of a flat dollar in Block 2?

• Answer – Yes, you can. However, if crediting YSP, it should be equal to the amount of premium being paid by the lender.

Question 9 - Then your credit to the borrower can always be changed?

• Answer – Credit to the borrower can only change when a legitimate changed circumstance occurs (such as locking the loan).  A revised GFE must be issued within three business days of the discovery of information sufficient to support a changed circumstance.

Question 10 – For an FHA loan – if the UPFRONT MIP is underdisclosed–then does the Broker/Borrower have to pay for–i.e. cannot be cured?

• Answer – This cannot be cured and the lender would need to make up the difference. The UFMIP would be a charge that should have been known at the time of initial disclosure of the GFE.   Incorrect disclosure is not a changed circumstance as defined by HUD.  UFMIP should be placed in block 3 and therefore subject to a 10% tolerance. You would be responsible for any amount above the 10% tolerance.

Question 11 – Can you talk about retail as it pertains to YSP?

• Answer – In the case of a retail transaction, the credit or charge for the interest rate chosen may be included in Block 1 as part of Our Origination Charge. Box 1 in Block 2 must be marked reflecting the rate.

Question 12 – Can this be a changed circumstance if you are not aware at time of initial disclosure (in regards to the roof certs)?

• Answer – If there is an unforeseen charge that occurs as part of the loan process, then this is an allowable changed circumstance. If you were unaware a roof inspection would be needed, you can issue a changed circumstance and disclose only the new fee associated with the roof inspection. Re-issue must be done within three business days from the discovery of the information.

Question 13 – What about short sale fees…mostly on the pc?

• Answer – If the fees are listed on the purchase contract that the borrower will be required to pay, these should be listed on the GFE. If by the time of closing these fees are no longer applicable, then you do not have to disclose these on the HUD1. If the fees were discovered late in the process, this would be considered a changed circumstance and a new GFE would need to be disclosed.

Question 14 – We have seen where the borrower is going to pay for some of the sellers costs.

• Answer – If these fees will be financed into the loan, they are required to be disclosed on the GFE. If the charges are outside the loan, they are not required to be disclosed on the GFE.

Question 15 – Would a GFE be re-issued when the loan amount changes…up or down?

• Answer – If the loan amount changes and the charges increase beyond allowable tolerance levels, a new GFE reflecting the charges is required to be re-issued along with documentation supporting an acceptable changed circumstance.  The GFE and supporting documentation, along with any previously disclosed GFE’s, will need to be retained in the file.

Question 16 – Can you provide examples of page 44 #3? (New information particular to borrower or transaction that was not relied on in providing GFE)

• Answer – Information unknown at the time of the initial GFE disclosure, i.e., inspection, flood insurance or borrower requested change which would affect loan attributes.

Question 17 – If the loan amount increases but no adjustments are made to the fees initially disclosed on the GFE, are we still required to redisclose?

• Answer – Our opinion is that you would not need to redisclose unless the fees are affected. However, we suggest reviewing this with your investor to be sure you are following their policies.

Question 18 – A VOD or VOE is not something you can shop for– it’s a Change in Circumstance.

• Answer – HUD recently posted their position on this in FAQ’s 4/02/10. If the charge for these items is known at the time of origination, these fees are to be placed in Block 3 which is subject to 10% variation.  The charges referenced are those charged by the 3rd party for services provided.

Question 19 – UPMIP does not have a 10% tolerance either.

• Answer – HUD instructs charges for UFMIP be placed in Block 3. Charges listed in Block 3 are subject to a 10% tolerance variation.

Question 20 – Who issues the revised GFE on a wholesale brokered loan? The broker or wholesaler?

• Answer – Both are allowed to re-disclose the GFE. Redisclosure must be done within three business days of the discovery of information resulting in a change to fees. RESPA strongly encourages timely communication between the lender and broker.

Question 21 – On a brokered loan – if floating at the time of issuance on GFE – you know there will be a rebate but not exact amount is known – do you not disclose the rebate in box 2 but include in box 1 and then re-disclose at lock with exact rebate?

• Answer – This would be allowable as long as you redisclose correctly when the loan is locked.  Charges in Block 1 may not increase as a result of YSP, however, credit for the YSP in Block 2 may increase.

Question 22 – What section should tax prorates to a county by a purchaser go (property taxes)?

• Answer – Taxes associated with the transfer of the property (Transfer taxes) should be placed in Block 8.

Question 23 – On an FHA purchase – if at closing there is a lump sum credit – what would be the correct way to disclose the TIL so we have a correct APR?

• Answer – We would recommend using a loan fee worksheet to itemize a lump sum credit to break out and determine what fees will be credited. This will allow you to place the correct credited fees into the APR calculation.

Question 24 – Can a charge for tax transcripts and automated compliance review be included in box 3?

• Answer – Yes, you could include these charges in section 3.

Question 25 – If a genuine error is made on the GFE, can you redisclose within three days of the issuing of the initial GFE?

• Answer – If correction to an error results in an increase of fees beyond allowable tolerance levels, an acceptable changed circumstance must be documented allowing the increase in fees.  Typically, error on the part of disclosure of fees is not an acceptable changed circumstance which would allow an increase in fees subject to tolerance.

Question 26 – It is my understanding that retail originators have a choice of how they disclose a credit or discount and that it is not mandatory to include in the origination fee. Is that correct? Is it mandatory for the Settlement Service Provider List to have a signature line?

• Answer – All originators, regardless of sales channel, are held to the same rules in regards to disclosing the GFE. All credits must be listed in Block 2 Box 2 and all discounts in Block 2 Box 3. Please note: You cannot have both a credit and a discount on the same transaction. You are also allowed to show the discount or premium in your origination charge or show no origination at all.

Question 27 – Subordination fee or Trust Review fee – Are they part of Administrative fees for lender?

• Answer – Yes. These can be administrative fees by the lender.

Question 28 - Do we need to disclose all 3rd party fees, such as Credit Report or Flood Cert, even if the Lender is paying for them?

• Answer – Yes.  All fees associated with the closing of the loan, whether paid for by the seller, buyer, or other third party, should be disclosed on the GFE.

Question 29 – If the appraisal is quoted at $450 but then that fee is only $350, but there is an inspection fee for $100 for a total of $450, should that be re-disclosed as 2 fees or can the total appraisal fee?

• Answer – HUD does not provide specific direction on this type of scenario.  If there are two separate invoices for two services performed, you may be required to disclose the items separately.  The decrease in charges for the appraisal would not require re-disclosure of the GFE.  If the addition of the inspection fee increases charges above allowable tolerance levels, a GFE will need to be reissued and documentation supporting the changed circumstance will need to be retained in the file.

Question 30 – If there is no credit disclosed on the GFE, but at closing the lender decides to give a credit to the buyer’s fees, would that require a new GFE?

• Answer – A redisclosed GFE would only be needed if the fees increase above the allowed tolerances and a changed circumstance is documented.

Question 31 – If the appraisal fee is shown as $750 on the GFE and the appraisal costs $450, but then an inspection is required that costs $100, should the GFE be redisclosed with 2 fees or can the inspection fee be considered part of the $750 appraisal fee previously disclosed?

• Answer – HUD does not provide specific direction on this type of scenario. If there are two separate invoices for two services performed, you may be required to disclose the items separately. The decrease in charges for the appraisal would not require re-disclosure of the GFE.  If the addition of the inspection fee increases charges above allowable tolerance levels, a GFE will need to be reissued and documentation supporting the changed circumstance will need to be retained in the file.

Question 32 – If the borrower signs and dates the TIL that accompanies the GFE, could that signature and date be used to document disclosure to the borrower within the 3 days?  Or, does the borrower have to acknowledge receipt of the GFE separately?

• Answer – The signed and dated TIL does not document provision/receipt of the GFE disclosure within three business days of application.  A separate acknowledgement will have to be provided.

Question 33 – So does “recalculate” mean that if the loan amount increases then the origination fee can increase if it was disclosed as a percentage?

• Answer – If all, or a portion of, the Origination Charge disclosed in Block 1 was calculated as a percentage of the loan amount, and the loan amount increases, those charges may also increase. Please note: Your standard consistent company policy would need to reflect you charge origination as a percentage.

Question 34 – So you can reissue a GFE if settlement fees change? I thought they had to remain the same and could only increase 10%?

• Answer – A GFE must be re-issued if there is an increase in fees outside of allowable tolerances, but an acceptable and documented changed circumstance must be established supporting the increase in fees. You can also issue a new GFE if the customer does not accept the GFE within 10 business days.

Question 35 - If a lender (not a broker) shows an SRP on the Settlement Statement, is this considered a RESPA violation, since, technically, a lender does not have to disclose the SRP?

• Answer – This would not be a violation of RESPA.  SRP is typically not disclosed on a HUD settlement statement.

Have more questions? Submit a question or comment in the box below.

Mortgage Compliance Advisors offers a free webinar every month. Visit www.MortgageComplianceAdvisors.com to register for next month’s webinar or to learn more about how MCA can serve all your compliance needs.

(Mortgage Compliance Advisors, LLC (MCA) makes reasonable efforts to ensure the accuracy of the answers. MCA makes no express or implied warranty of any kind respecting the information presented and assumes no responsibility for errors or omissions. This online chat is not legal advice and should not be used as a substitute for proper professional or legal advice.)

We want to thank everyone who attended our webinar “Common Compliance Findings and How to Prevent Them.” As promised, below you will find answers to the questions asked during the webinar. You can also download the slides from the webinar.

We look forward to serving all your compliance needs. Feel free to contact us with any requests or questions. Click an icon under “Contact Us” at the top right.

Question 1 – If we purchased a QC manual from MCA, are updates available for new laws?

• Answer - Yes, MCA does offer updates to your Quality Control Plan. You can contact us at your convenience so that we can discuss the specifics of your plan.

Question 2 – Do you have a suggestion on how much time before closing we should pull the FNMA comparison report?

• Answer – If you are referring to the re-pulling of credit to check for undisclosed liabilities, we suggest you pull this as close to closing as possible.

Question 3 – What is an example of proof of receipt?

• Answer – An example of proof of receipt would be a confirmation email, delivery receipt, fax confirmation, etc. (See slide 32)

Question 4 – How do you address a GFE issued as a lender and a subsequent submission as a broker?  One will have YSP and one will not, and investors fees are different.  Can you give guidance on this when we are submitting to 2 different avenues?

• Answer – Once you provide the GFE, you cannot change the amount in block 1. This includes your investor fees. However, when you lock the loan, you will then be required to state the credit (YSP) to the borrower.

Question 5 – If the origination fee on the initial good faith estimate is less than the actual origination charge on the final HUD, is any corrective action required?

• Answer – No corrective action is needed. However, some investors will require your most recently disclosed GFE figures match the final figures on your HUD1.

Question 6 – Are we required to provide evidence that the disclosures were provided to the borrowers within 3 days of the application date and/or the disclosures are required to be signed and dated within 3 days of the application date?

• Answer – Yes, you are required to provide evidence you sent disclosures within three days of application. Borrowers are not required to sign the initial disclosures. However, some states do require their disclosures be signed.

Question 7 – Is redisclosure of TILA required if it increases .125%? We are interpreting if this increases or decreases.

• Answer – TILA does state you need to redisclose if the APR increases or decreases by more than .125%

Question 8 – Do you have a list of what is considered “prepaid finance charge”? I am finding a great disparity of what is considered a PPF.

• Answer – We recommend you visit Doc Magic’s site for their Fees & Charges List Matrix.

Question 9 – When a loan goes from a “float” to a lock and nothing else will change, is the GFE required to be redisclosed?

• Answer – Yes, you will need to redisclose and update the important dates section on the GFE.

Question 10 – What is considered an early default, and if we do not service, how would we know?

• Answer – Early Payment Default (EPD) is defined as 60 days late in the first 6 months by FHA and Fannie Mae defines EPD as 90 days past due in the past 24 months. For FHA, you can get this info in FHA Connection. For Fannie Mae you will need to be the servicer for this info.

Question 11 - How do you determine the application date while auditing to know that the initial disclosures were provided within 3 business days?

• Answer – We generally use the earliest date located on the application. Generally the day the LO signed the application.

Question 12 – Must we issue a new TIL to customer within 3 days of discovering a change of interest rate or is it okay if mailed 6 days before closing?

• Answer – A borrower must receive the new TIL 3 days prior to closing. If you mail the redisclosed TIL, you can close on the 7th day after mailing.

Question 13 – If you are a wholesale lender, does the 7 days start when you get the application or when the broker took the initial application?

• Answer – According to TILA, a broker cannot issue a TIL (unless table funded). The 7 day waiting period does not start until the lender issues the initial TIL.

Question 14 – Does the 10 business days include Saturdays? I’ve heard yes and no.

• Answer – Yes, you can count Saturday as a business day. (See slide 33)

Question 15 – What is a best practice correction, if a GFE does not have the important dates filled in correctly?  Is it okay to send a revised one to the borrower and put a processor cert explaining why in the file?

• Answer – Yes. You are required to redisclose the GFE if there are changes to the important dates. Your Changed Circumstances form should state the reason for the change.

Question 16 – Do we need to include the TIL verbiage on all Truth in Lending disclosures? We have heard it is not required on the final TIL.

• Answer – When reviewing the file for an audit, we follow the instructions per MDIA in that we look to see the verbiage has been included on the initial and any subsequent TIL disclosures, as well as the final TIL. What you are referring to is that some lenders are allowing the omission of the verbiage if the final TIL is within .125% tolerance of initial TIL. If the final is over the .125% tolerance, technically it is a re-disclosure of the TIL and is required to be provided to your borrower within 3 business days of closing. You will then have three disclosures, the first two which will be required to have the verbiage, and the Final, which your lender may not require the verbiage to be printed on.

Question 17 – What can I do to remedy findings in my QC audit report?

Answer – We suggest you review all the findings you receive in your Quality Control report. If you find that the issue was incorrect, copy the documents and attach them to your Quality Control report and make note of the corrections.

(Mortgage Compliance Advisors, LLC (MCA) makes reasonable efforts to ensure the accuracy of the answers. MCA makes no express or implied warranty of any kind respecting the information presented and assumes no responsibility for errors or omissions. This online chat is not legal advice and should not be used as a substitute for proper professional or legal advice.)

Welcome to the MCA Monthly Update. To help you stay compliant and up-to-date, our newsletters contain underwriting tips, processing tips, and compliance updates. We hope that you find the content informative and useful. As always, your feedback is appreciated. Join our free monthly webinar “Managing Your Early Payment Default Risk.” We want to thank those who attended last month’s webinar, especially our panelists. We had great interaction and discussion, and we look forward to the next webinar. . We have posted the slides from March’s webinar on our website. You can find slides from every webinar on our website under the News & Resources tab. . Because we receive many questions about Early Payment Defaults (EPDs), April’s webinar will focus on managing your EPD risk. . Learn what constitutes an EPD, its effects, and how to limit your exposure. . Join our webinar on Thursday, April 22 at 12:00 pm MST. Reserve your webinar seat now at: . https://www1.gotomeeting.com/register/585502440 . Today, mortgage lenders are working to reduce the risk of one of their loans going into early payment default (EPD). Join us for our next free monthly webinar to learn what constitutes an early payment default, how it can affect your business, and steps you can take within your organization to limit your exposure. . We are always happy to hear from you and encourage you to submit your questions to info@mortgagecomplianceadvisors.com. . - – - – - – - – - - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - – - - . If you have any questions, simply reply to this email or call us at 877-226-3216. . For real time compliance news, you can now follow us on Twitter and Facebook. www.MortgageComplianceAdvisors.com

Feel free to call us with any questions at 877-226-3216.

To add to the questions from February’s webinar, we received many excellent and challenging questions during our March webinar “Continuing to Make Sense of the New GFE: A More in Depth Look.” As promised, below you will find answers to all 32 of the questions asked. The answers come from our best available resources, and we will all continue to learn more as HUD posts new information. Reviewing findings from your quality control audits is also a good way to learn how to meet RESPA requirements.

Have more questions? Submit a question or comment in the comment box at the bottom.


(This is the second in a series of GFE webinars. You can find more GFE questions and answers from our webinars on the News & Resources tab.  To receive notifications of our free monthly webinars, sign up for our free Monthly Compliance Update.)


Question 1 – On the 2010 GFE – if a borrower gave an incorrect house number on a purchase, do we need to re-disclose as a changed circumstance?

• Answer - Assuming fees will remain the same, you should be fine to update your disclosures with the correct address.  If you were attempting to increase fees and trying to use the change in house # as a documented changed circumstance, the change in house number alone would not constitute a changed circumstance allowing the increase in fees.  If the legal address of the property changes, however,  this may constitute a changed circumstance and we recommend contacting your lender to determine their procedure.

Question 2 – Can a separate line item be added for lock extension fee?

• Answer - Additional lines may only be added to Blocks 3, 6, 11 of the GFE.

Question 3 – Borrower is in the process of purchase loan and decided to purchase a different home – Is this a changed circumstance or new transaction and start with new application and RESPA?

• Answer - A change in properties can be viewed to fit into the following definitions of allowable changed circumstance (1/28/10 RESPA FAQ’s pg. 15 #1):  A, 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 and 3) New information particular to the borrower or transaction that was not relied on in providing the GFE.  Change in legal address also constitutes a changed circumstance.  The originator is still bound by the dates of the initial GFE, however, we suggest contacting your lender to determine what is acceptable to them.

Question 4 - How do you disclose the loan origination is a % and not a flat fee so if the loan increases our origination could increase?

• Answer - We recommend contacting your lender or LOS provider for recommendations on this type of fee disclosure.   The lender/investor may have procedures used to determine a specific fee (such as an origination fee), has been disclosed as a percentage rather than a dollar amount, thus allowing the percentage to increase with the loan amount.

Question 5 - What is your understanding of the Intent to Proceed form? Is it needed prior to processing the loan?

• Answer – The letter of intent to proceeds verifies the borrower’s interest to move forward with the loan within the 10 business days as disclosed on the Important Dates Section page 1 of the GFE.  Without a signature line available as part of the 2010 GFE, the Intent to Proceed document may be used to verify the GFE was provided within 3 business days of application.

Question 6 – What about removal of an applicant from the application? Is that a changed circumstance?

• Answer - This may be considered a changed circumstance due to the following:  borrower requested change, information relied on when initially disclosing the GFE has changed, or found to be inaccurate (such as credit quality), or New information  particular to the borrower or transaction that was not relied on in providing the GFE was discovered.

Question 7 – Should we do another 1003 when the borrower finds the property so the dates will be within the 3 day period?

• Answer - At the time the application is provided, it is presumed all 6 pieces of information required have been obtained and the initial GFE must be disclosed within 3 days of receiving that information.  Requirements include the following:  borrower’s name, monthly income, SSN, property address, estimate of value of the property and loan amount.   See 1/28/10 RESPA FAQ’s page6 #4.

Question 8 – Why did you not include the YSP in the total origination charges in the examples?

• Answer – Charges listed in Block 1 may be itemized on a worksheet (YSP, Origination fee, processing, etc.). The origination charge we used as one figure could encompass both YSP and an origination fee.  Since these fees are ‘lumped’ together into one charge, the fee split can be done any number of ways as long as Our Origination Charge is high enough to allow reduction for the entire credit of any YSP reflected in Block 2.

Question 9 - Please repeat number 3. If unlocked this should read N/A…. Is that correct?

• Answer – Page 1 Important dates Section; item number 3 will remain N/A when unlocked and will be completed with the appropriate rate lock period, allowing for any rescission period, when the loan is locked.

Question 10 - Hello, our brokers are responsible for redisclosing at the time of our rate lock. How can we confirm that the GFE has been in fact received by the borrowers?

• Answer - When the GFE is re-issued for rate lock purposes, the Date of the GFE will need to be updated.  For purposes of documenting the disclosure was sent to the borrower, the procedure you typically use (date stamp, email confirmation disclosing a date, etc.) is acceptable.

Question 11 – What if the origination % stays the same yet the loan amount changes, therefore the amount will change?

• Answer – If a portion of the origination charge is a percentage of the loan amount, and the loan amount increases, that portion of the origination charge disclosed as a percentage of the loan amount may also increase.  A documented changed circumstance permitting the increase must be retained in the file.

Question 12 – Does a change circumstances require a new TIL in addition to the new GFE?

• Answer – A new TIL must be redisclosed if the APR increases above .125%.  Evidence of redisclosure of the TIL must be retained in the file.

Question 13 – If one lender will not do the loan for some reason, so it has to go to another lender and the new lenders fees are higher, why can’t I reissue?

• Answer – 1/28/10 RESPA FAQ’s page 18 #xv indicates a change in lender’s does not constitute a changed circumstance.  One of our panelist’s addressed this issue indicating although the fees may increase from lender to lender, those fees are considered the cost of ‘doing business’ and may not be passed on to the borrower.  This is assuming that the reason for a change in lender is not due to a borrower requested change, change in loan product, etc. which may fall under the category of an acceptable changed circumstance.

Question 14 – As per HUD, YSP should not be added to origination charges.

• Answer – YSP can be considered as a component of Our Adjusted Origination Charge in Block 1 if the originator wishes to itemize charges, for example, on a worksheet.  The originator may include YSP as part of the origination charge, however, may not retain any portion of the YSP as the entire credit will go towards reducing settlement charges for the borrower.

Question 15 – If block 1 cannot go up or down, what happens when the origination charges are exceeding section 32?

• Answer – The fees disclosed in Block 1 may decrease at settlement.  Tolerance limitations only apply to increase in charges to the borrower, or decrease in credit to the borrower.

Question 16 ­- The redisclose is only if there is an increase in the origination and not a decrease, correct?

• Answer – Correct, charges to the borrower may decrease at any time.  A credit to the borrower indicated in Block 2, however, may not decrease without a documented changed circumstance.

Question 17 – If we are a direct lender, funding our own loans, do we need to show YSP?

• Answer – For transactions without a mortgage broker, the lender may choose not to separately disclose in Block 2 any credit, or charge, for the interest rate chose on the loan.   Box 1 of Block 2 will, however, need to be marked with the chosen interest rate.  See Sec. appendix C to Part 3500- Instruction for Completing the Good Faith Estimate.

Question 18 – Do you know what form in Encompass would work on TBD?

• Answer – We suggest contacting your LOS support provider for questions specific to its operation.

Question 19 – Delaying the GFE means Section 7 of the 1003 and the GFE won’t agree; advice on how to handle this? (Section 7 is the details of transaction.)

• Answer – Unsure of what the reason for a delayed GFE disclosure would be?  An originator is required to disclose the GFE no later than 3 business days after receipt of an application, or information sufficient to complete an application (1/28/10 RESPA FAQ’s page 6 #4).  We have seen several LOS providers advise on ways to input fees to allow an accurate dollar amount disclosure to the borrower and can recommend contacting your provider for support.  You are also welcome to contact us directly to provide more detail in allowing us to answer your question more accurately.

Question 20 – I have several investors who say that if the borrower opts to use a different title company than on the service provider list we are still on the hook for tolerance requirements. Is this correct?

• Answer – We are unsure as to why your lender would hold these fees to a tolerance limitation.  1/28/10 RESPA FAQ’s page 13 #3 addresses this question specifically.

Question 21 – So if the appraisal comes in lower and decreases the YSP, the credit in block 2 decreases but the fees in block 1 do not?

• Answer – That is correct.  The decrease in YSP due to the higher LTV will reduce the credit the borrower has towards settlement charges as reflected in Block 2.

Question 22 – Actually, the issue I’ve encountered is not having a credit bureau because I didn’t yet have an authorization to pull credit; you answered it for me by reaffirming that without all 6 items it’s a huge financial risk providing a GFE.

• Answer – Happy to hear we were able to be of assistance.

Question 23 – Different investors of mine have tossed out Saturdays as a business day.

• Answer – (3500.7(c) RESPA defines a business day as follows:  3500.2, business day means a day on which the offices of the business entity are open to the public for carrying on substantially all of the entity’s business functions.   This would allow Saturdays to be counted as a business day.

Question 24 – If there is a time listed in box #1 does that mean the rate is good thorough that time?  Any time after the date and time the rate could change correct?

• Answer – That is correct.  The quoted interest rate must be made available for the date and time indicated in   item #1 in the Important Dates section located on page 1 of the GFE.

Question 25 – Do we adjust the rate lock period by the rescission time?

• Answer – Yes, the rate lock period should include any applicable rescission period.

Question 26 – The lender sends out the revised GFE to the borrower…should we be receiving a copy to be retained in our file? The lenders are not wanting to send us copies.

• Answer – Any re-issued GFE and supporting documentation must be retained in the originator’s file.   HUD FAQ’s page 19, #12 specifically addresses this question:  “If there is a changed circumstance resulting in a revised GFE, loan originators (mortgage brokers and lenders) both must retain documentation of the reasons for providing the revised GFE for no less than 3 years after settlement”.

Question 27 – Does the lender or the broker generate the re-disclosed GFE? Do we need to have the copy of the redisclosure sent and the date to be sure we can charge at closing?

• Answer – Any re-issued GFE and supporting documentation must be retained in the originator’s file.   HUD FAQ’s page 19, #12 specifically addresses this question:  “If there is a changed circumstance resulting in a revised GFE, loan originators (mortgage brokers and lenders) both must retain documentation of the reasons for providing the revised GFE for no less than 3 years after settlement”.

Question 28 – For a refinance, do we make the rate good thru the closing date or the funding date?

• Answer – The interest rate and date quoted in the Important Dates Section, once the loan is locked, should be made available through funding, allowing for any applicable rescission.

Question 29 – Lenders don’t use Box 2 under Number 2 at all – correct?

• Answer – One of the boxes in Block 2 must be marked.  For example, if SRP applies (vs. YSP), box 1of Block 2 should be marked with only the interest rate.  If there is a YSP to the borrower, box 2 will be marked and if there is a charge, or discount, to the borrower for the interest rate chosen, box 3 will be marked.  Only one of the boxes in Block 2 may be marked.

Question 30 – So the YSP credit or charge is to the borrower? For the broker to retain compensation/get paid on YSP, it has to be included in block 1?

• Answer – That is correct.  Also, the YSP included in Block 1 may not exceed the YSP credit to the borrower in block 2.  100% of YSP will go to the borrower as a credit on the settlement statement.

Question 31 – What if the broker is keeping the YSP? Then do you show YSP in 2 block 1?

• Answer – 100% of YSP received for a chosen rate will always be shown in Block 2 as a credit to the borrower, reducing settlement charges.   Our Adjusted Origination Charges in Block 1 may contain YSP, however, the YSP included in Block 1 may not exceed the YSP credit in Block 2.

Question 32 - I thought I heard Connie say that the amount of “additional broker compensation” added to the origination and fees in Block 1 could never exceed the amount of the YSP credit to the borrower. I have never heard that before. Do you know where that information came from?

• Answer – I believe Connie made the following clarification regarding YSP:- If part of Our Origination Charges in Block 1 is comprised of YSP (additional broker compensation) and the YSP increases, the YSP credit may increase in Block 2, however, Block 1 may not increase due to the increased YSP.  By increasing only Block 2, the borrower now can realize the full benefit of the increase in YSP.

ALWAYS check with your lenders and investors if you have any questions specific to your loan scenario. The information provided by Mortgage Compliance Advisors, LLC has been taken from various public resources and does not constitute legal advice.

We received many excellent and challenging questions during our webinar “Making Sense of the New GFE,” hosted in the month of February. As promised, below you will find answers to all of the questions asked. The answers come from our best available resources, and we will all continue to learn more as HUD posts new information. Reviewing findings from your quality control audits is also a good way to learn how to meet RESPA requirements.

Have more questions? Submit a question or comment in the comment box at the bottom.

(This is the first in a series of GFE webinars. You can find more GFE questions and answers from our webinars on the News & Resources tab.  To receive notifications of our free monthly webinars, sign up for our free Monthly Compliance Update.)


Question 1 - We understand two circumstances in which the compensation to the originator can change: the loan amount changes and a portion of the origination charges are dependent on the loan amount; the loan program changes.  If a loan is floating and is later locked, we understand that the credit or charge to the borrower may change, but “Our Origination Charges” may not change and the originator’s comp (even if the YSP or rebate changes) will not change.  Correct?

• Answer: According to our interpretation of the resources we have utilized, that is correct.   HUD FAQ’s #19, page 8, states the following- If a borrower locks the interest rate after the GFE has been issued, a revised GFE must be issued within 3 days of the interest rate lock reflecting the date that the rate lock is good through.  Any interest rate-dependent charges (specifically Block 2, Line A and Block 10 on the GFE) and terms that changed must also be updated on the revised GFE.

Question 2 – We have seen several large lenders consider a change in pricing to be a changed circumstance that permits redisclosure and a change to Our Origination Charges and the broker’s comp.  Is this permitted?  If so, what is the rationale under the rule?

• Answer: This is not permitted once a rate has been locked.  HUD FAQ’s 1/28/10 states market fluctuations do not constitute a changed circumstance and a GFE may not be revised to reflect market fluctuations.

Question 3 – If I change the loan amount, does a new 1003, TIL and GFE need to be signed?

• Answer: These documents will need to be re-disclosed to the borrower within 3 days and evidence of re-disclosure or re-issue will need to be maintained in the file.

Question 4 – If the Buyer is paying a 1% commission of the contract amount to the seller (in this case a bank).  The transaction is a short sale.  Should this be disclosed as a closing cost on the GFE for the buyer?

• Answer: No. This charge is considered real estate commission and will not need to be disclosed on the GFE.

Question 5 – If a GFE is issued for a purchase of a property and the transaction falls out of escrow, and the buyer finds another home to purchase… is this considered a “changed circumstance”? I read in  the guideline  that “address” is not considered a “changed circumstance”.

• Answer: A change in property address does constitute a changed circumstance and a GFE may be reissued.  For clarification, if the legal description is maintained when a property address changes, for example with a new construction, this does not constitute a changed circumstance and the GFE may not be reissued.  A loan originator may issue a revised GFE reflecting only the increased charges resulting from the changed circumstance.

Question 6 – If a buyer applies to borrow $50,000 on a first mortgage and I issue a GFE based on that loan amount, and then the buyer decides to revise the loan amount to $250,000 (to possibly save on the origination fee), is this considered a “changed circumstance” allowing for an increased to my 801 compensation?

• Answer: Yes.  A requested change by the borrower, such as a requested increase in loan amount, is considered a changed circumstance and the GFE may be reissued.

Question 7 – A title rep told me we have to include state deed taxes on the GFE for purchases, even though the seller normally pays those in MN. Any other odd items we must add to the GFE?  Some brokers are using a ‘Cost Estimate Worksheet’ in lieu of the GFE, until all ‘6 pieces of required info’ are obtained.  do you have any comments/recommendations on that? Going over valid ‘changed circumstances’ would be helpful too.

• Answer: All fees related to the transaction must be disclosed on the GFE, regardless of whether those fees will be paid in part, or in whole, by the seller, buyer or other party.   Regarding Changed Circumstances, HUD FAQ 1/28/10 page 19 provides an abbreviated list of acceptable changed circumstances allowing for reissue of the GFE; acts of god, war, disaster or other emergency, information deemed inaccurate particular to the transaction, borrower requested change in terms, expiration of the GFE itself, interest rate change before the loan is locked and parties added to, or removed, from title.

Question 8 – If the Provider of Services lists ABC TITLE COMPANY, the GFE2010/Initial fees worksheet reflects attorney fees and title insurance paid to DBA TITLE COMPANY (company not on Provider of Services list) and then the borrower chooses DBA TITLE COMPANY, is the broker/loan officer responsible for the charges on the HUD-1 by DBA TITLE COMPANY?   It is our understanding once a SPECIFIC name is reflected on the GFE2010/Initial fees worksheet then it is no longer considered “Borrower select” and must fall into the 10% variance.  Is this correct?

• Answer: According to the resources we have available, that is correct.  The originator should not be responsible for fees equal to, or less than, those initially disclosed if the service provider itself changes.  These charges will be subject to the 10% tolerance limitation.   A change in settlement service providers would not constitute a changed circumstance (HUD FAQ 1/28/10 pg 19 # 13).

Question 9 – What do you consider as legitimate changed circumstances that would allow “Our Origination Charges” to increase after initial GFE disclosure.  For example:
• Loan is locked, pricing to the originator increases, no other changes, originator timely discloses.
• Appraisal comes in higher than expected and at the same time (within 3 days of getting the value information) pricing to the originator increases, no other changes, originator timely discloses.
• Originator works for a bank and provides an initial disclosure that does not contain compensation from the lender or a corresponding credit to the borrower.  The loan is declined because the bank has a minimum credit score of 650 and the borrower’s score was lower.  Originator finds a lender who will accept borrowers with a credit score of 620 and the borrower’s score is higher.  The other lender will also pay the originator a .25% in a YSP for the same rate as applied for at the bank.  Originator discloses a new GFE which shows the same origination fee, and the YSP (for a higher “Our Compensation Charges”)

• Answer: Pricing to the originator may not increase. Block 1 , Your Adjusted Originator Charges, is subject to 0% tolerance, meaning, charges may not increase at settlement.  Information deemed inaccurate particular to the borrower or transaction that was not relied upon for issuing the GFE, such as estimated value or FICO change, should allow for a changed circumstance and a GFE may be reissued.  HUD is very specific in what fees can change and will only allow affected charges OR loan terms to be changed.  HUD FAQ page 18 #8 xv states the following would NOT constitute a changed circumstance:   a mortgage broker issues a GFE based on one lender’s loan products and origination fees, but places the loan with a different lender.

Question 10 – If we are showing 3% Origination Fee, this is to account for 1% Origination and 2% Potential YSP, to offset what we receive from the investor, Calyx Point (our origination system) has indicated to put the 2% figure in section 1302 as a negative figure.  Is this correct?  Most lenders are taking it this way but I have one saying it is wrong.  The problem that I see is the “interpretation” of the RESPA reform by each investor.

• Answer: We are unable to provide instruction on use of a particular LOS system.  Our recommendation is to consult your LOS administrator, or lender, to determine what is acceptable (or common) practice.

Question 11 - If a survey is more complicated than originally thought (e.g., the property has water features and/or multiple structures), would this be a change in circumstance?

• Answer: According to RESPA FAQ 1/28/10 page 15 #1 and page 16 #2  “Changed Circumstance” , this would constitute a changed circumstance.

Question 12 - If clearing title is more complicated (e.g., unknown recorded items), is this a change in circumstance?

• Answer: According to RESPA FAQ 1/28/10 page 15 #1 and page 16 #2 “Changed Circumstance”, this would constitute a changed circumstance.

Question 13 - If the borrower has locked a loan, then lowers the loan amount per the borrower’s request:
• The loan amount will affect the YSP – Is the Borrower Credit allowed to change lower in proportion to the YSP or does the mortgage originator need to absorb?
• This would also apply to if the broker has any responsibility to change Our Origination Charge lower or may that remain the same?

• Answer: Interest rate dependent charges in Block 2, as a result of a borrower requested change, can be a changed circumstance and a reissued GFE may be provided.  The revised GFE may only reflect the increased charges resulting from the changed circumstance.
  We are also able to provide the following information-GFE-Block 1, Pg 26:
  8.) Q: When the interest rate goes from float to rate lock, may Block 1 on the GFE change?

  A: No. However, Block 1 can increase due to a changed circumstance if the change affects the loan amount and all or a portion of the Origination Charges were calculated as a percentage of the loan amount. Block 1 may also increase if the borrower either requests a different loan product or the borrower is no longer eligible for the loan product contained in the initial GFE, but is eligible for a different loan product.

Question 14 - We have been getting a lot of questions about Block 6 and what exactly is required by RESPA law.

Some lenders seem to think that if the purchase contract requires a pest inspection, home inspection, or home warranty, then the GFE 2010 must include those items.

I cannot find anything in the RESPA Rule or RESPA FAQs that reference the purchase contract anywhere.

What I have found indicates that if the loan originator requires those items, then they must be included in Block 6. We are a mortgage broker and our loan originators do not require those items so they do not feel that they should be forced to include them. What are you finding is the precedent?

• Answer: Typically, items required as part of the purchase contract, and only by the purchase contract, do not have to be disclosed on the GFE.  However, if at any time, the charge is required by the lender,  the requirement to disclose that fee is applicable.

Question 15 – We still have lenders sending GFE’s back to the loan officers for “do-overs” when they don’t like the way the GFE was put together. (Some think the Important Questions section can have NA in Question 1, some think it has to have an actual date. Some think Question 4 should have a certain minimum number of days in it to match their company policy while the loan is in a float status, some let the loan officer choose. Etcetera.)

We understand each lender has their own interpretation of RESPA, and that we are in the 180-day period of leniency granted by HUD (through April 30th) while everyone gets used to the new forms, however, there seems to be too much interpretation going on. What happens after the 180 days are over? Has anyone heard anything about what to expect then? Lenders won’t be able to just ask for a “do-over” then, will they? As a broker, it is almost impossible for our loan officers to have perfect GFE’s because every lender has their own hoops to jump through.

We end up with more than one version of GFE’s in our files, and have asked our LO’s to write letter of explanations indicating that the lenders required them to revise and re-issue the disclosure document to meet the lender’s needs. This seems to be the best “audit-proofing” we can do under the circumstances. These are not “changed circumstances” and fall outside of RESPA guidelines and yet lenders are doing this every single day.

I realize this is a very general question, more of a concern, but anything you do have to address this would be greatly appreciated.

• Answer: We would like to be able to assist you with your question, however, we cannot comment on what lenders and investors are doing to accommodate specific transactions.  We can suggest you verify with your lender or investor when you have specific questions regarding your loan scenario.

Question 16 - If an investor will table fund a loan and immediately pay a servicing release premium (SRP) to the originating lender, must the lender disclose the SRP to the borrower?  If yes, where, included in Box 1?

• Answer: For transactions without a mortgage broker, the lender may choose not to separately disclose in Block 2 any credit or charge for the interest rate chosen on the loan.  If this block does not include any positive or negative figure, the lender must check the first box to indicate that the credit or charge for the interest rate you have chosen is included in our origination charge.  Box 1 of Block 2 will be completed with only the interest rate chosen.  Part 3500 RESPA Sect. Appendix C Instructions for Completing GFE.

Question 17 - My very top question is what we should be doing with the owners title insurance policy fee.  It is common practice in our area for the seller to pay 50% of the owners policy.  According to HUD’s FAQ’s, it still needs to be listed on the initial GFE that the borrower will be responsible for 100% of the fee–even though at closing the borrower will be credited back for 50% of it.

When it is time to do docs, with our software, the only way we can make our Itemization of Amount Financed correct is to go into our HUD page 2 and input the actual 50% amount there.  Most of the title companies handle it this way, and we match up correctly with them on HUD page 3.  However, a couple title companies are following the rule that they must credit the 50% amount back on HUD page 1, rather than correcting it on HUD page 2.  If they do that, it is difficult to make everything match for us.  If we input the actual 50% amount on HUD page 2, our Itemization will be correct–which is foremost in our minds, but the Itemization does not match the title company’s HUD page 3 since they still show the 100% amount there.  If we just leave it at the 100% amount on  HUD page 2, and credit the extra 50% off our HUD page 1 or the 1003, we match the title company, but the Itemization is incorrect.

This problem will only be magnified when there are other seller paids.  What is the best solution?

• Answer: The owner’s title insurance policy does need to be disclosed on the GFE if it will be a charge at settlement.  Keep in mind, all fees (in whole), regardless of who will pay those fees at settlement, must be disclosed on the GFE.  In answer to the second part of your question, we are unable to comment on the use of a specific LOS system and the input of fees.  We recommend contacting your LOS support for direction.  Your lender and title companies may also be of assistance.

Question 18 - I do have a couple of very important questions I was hoping to get answered.  See below and let me know what you can do?  We mainly do correspondent lending and warehouse our loans (have our own line) so none of the following situations are as a broker.

We have a closing company that we hire when our closer is out and they company is a group of attorneys, but not the closing attorney.  They are stating their fees should be included in the origination fees.  We sometimes may not know if we need to hire them upfront and have not disclosed the doc prep fees.  How can we address this and is it possible to have a changed circumstance with a revised GFE or are we required to eat the cost?  I was also wondering why the cost could not just go in the 1100 doc prep fee even though they are not involved in the title services or actual closing?

• Answer: The loan origination charge includes all charges received by the originator, including all amounts received for any services including administrative and processing services performed on behalf of the lender or mortgage broker.  Loan document preparation done on behalf of the loan originator is a processing and administrative service in the origination of the loan and would be considered as part of your origination charge.  HUD RESPA FAQ 1/28/10 page 44 # 1 and 2.

Question 19 – We sometimes waive our Admin fee for repeat customers.  Should we still be listing this in our origination charges and checking box 2a with a credit instead of just not including?  We say waived on the initial fee worksheet instead of entering as a negative amount.

• Answer: The fee may be included as part of Your Origination Charge, Block 1.  Block 2 is specific to credit (YSP) from interest rate chosen only and additional credits should not be part of this Block.

Question 20 – If there are any update changes such as appraisal fee, hazard monthly amount; can this be updated as they come along and does a new GFE need to be disclosed every time? [asked during webinar]

• Answer: If the updated changes qualify as changed circumstances that would require reissue of the GFE, the GFE must be redisclosed within three days of receiving the information.

Question 21 – Where should a final inspection from the appraiser fee be placed? [asked during webinar]

• Answer: This should be listed in Block 3, Required Services That We Select.

Question 22 – On Block 2, should the “credit” be a positive or negative amount? [asked during webinar]

• Answer: The credit should appear as a negative.  Your Adjusted Origination Charge will be a total of Block 1 and Block 2.  Block 2, if a credit from YSP, will reduce total settlement charges.

Question 23 – I believe this box can change is your rate is NOT locked. If it is locked it may not change. [asked during webinar]

• Answer: If the question is in reference to Block 2, going from an unlocked rate to a locked rate may constitute a changed circumstance and a reissued GFE may be disclosed with changes to Block 2 as well as Blocks containing interest rate dependant charges.  HUD RESPA FAQ 1/28/10 page 21 #3.

Question 24 – A changed purchase price will change the loan amount. will this be a changed circumstance? [asked during webinar]

• Answer: Yes.  HUD RESPA FAQ #1 page 15, 1/28/10:  Information particular to the borrower or transaction that was not relied on in providing the GFE and that changes, or is found to be inaccurate, after the GFE has been provided.  May include the amount of the loan, the estimated value or any other information that was used in providing the GFE.

Question 25 – The fees may decrease correct? [asked during webinar]

• Answer: Correct. Tolerance limitations apply to increase of fees at settlement.

Question 26 – If the til is off more or less .125 are we still req to re-disclose? [asked during webinar]

• Answer: Yes, if the APR increases more than .125, the TIL must be redisclosed and evidence of redisclosure must be maintained in the file.

Question 27 – As a “lender” are we required to mark any box in section #2? As a lender we are not required to disclose any ysp correct? [asked during webinar]

• Answer: Correct. Instructions for completing the GFE, section 5 of RESPA and 24 CFR 3500.7 states the following regarding Block 2 and disclosure required by lenders:  for transactions without a mortgage broker, the lender may choose not to separately disclose in this block and any credit or charge for the interest rate chosen on the loan, however, if this block does not include any positive or negative figure, the lender must check the first box to indicate that ‘The credit or charge for the interest rate you have chosen is included in our Origination Charge above’ (complete the box 1 with the interest rate).

Question 28 – On a VA loan how do we handle the extra fees? [asked during webinar]

• Answer: We need you to specify which extra fees to answer this question accurately.

Question 29 – How do we define a “change in program?”  For example, in a HECM loan, a borrower may initially want to draw down a small amount of money and at docs decide a large amount – this will change the amount of rebate paid on the UPB – is this a program change [asked during webinar]

• Answer: According to the information we have available, this does not constitute a program change.

Question 30 – Is an 800 phone number for a national company sufficient contact info for a list of settlement service providers? [asked during webinar]

• Answer: The settlement service provider list should include the following information:  Service, Amount, Company Information and corresponding HUD 1 line #.   Lenders may have different requirements, we suggest verifying with them what is acceptable and custom practice.

Question 31 – Do you believe “mortgage taxes” unrelated to the transfer of the property should be included as Transfer Taxes? [asked during webinar]

• Answer: No.  Block 8 is for Transfer Taxes and is subject to zero tolerance.  For Block 8, transfer taxes are considered state and local government fees on mortgages and home sales that can be expected to be charged at settlement. Mortgage taxes unrelated to transfer tax, such as property taxes, should be included in Block 9 -taxes held in escrow.

Question 32 – The answer seemed very evasive concerning the increase in compensation if the borrower requested an increase in the loan amount.  On page 26 Question 8 of the RESP UPDATE (1/28/10) it appears that HUD is stating that the broker’s compensation can increase IF all or part of the origination charges were based on a a percentage.  Just trying to get clarification on this issue.

• Answer: This is the information we were able to gather from HUD RESPA FAQ’s 1/28/10-GFE-“Changed circumstances”, pg 16 & 19:
  5) Q: If circumstances change, may a loan originator issue a revised GFE with changes to all of the charges and terms related to the loan?
  A: No, the loan originator may only change those charges and terms that are affected by the specific changed circumstance.

  9) Q: If a GFE is revised to reflect a changed circumstance, may other charges on the GFE be made to reflect market fluctuations?
  A: No. A GFE may not be revised to reflect market fluctuations.

  GFE-Block 1, Pg 26:
  8.) Q: When the interest rate goes from float to rate lock, may Block 1 on the GFE change?
  A: No. However, Block 1 can increase due to a changed circumstance if the change affects the loan amount and all or a portion of the Origination Charges were calculated as a percentage of the loan amount. Block 1 may also increase if the borrower either requests a different loan product or the borrower is no longer eligible for the loan product contained in the initial GFE, but is eligible for a different loan product.

Question 33 – If there’s a premium yield spread it is disclosed but does it go to the borrower and reduces his cost or the lender/broker gets to keep it as usual?

• Answer: All credit (YSP) for a chosen rate will show as a credit to the borrower on the HUD, reducing settlement charges.

ALWAYS check with your lenders and investors if you have any questions specific to your loan scenario. The information provided by Mortgage Compliance Advisors, LLC has been taken from various public resources and does not constitute legal advice.