Brokers are not required to issue an initial TIL or initial Servicing Disclosure Statement.

In accordance with RESPA and TILA, we will not issue a finding to brokers if these documents are not in the file. Check out the regulations:

• Servicing Disclosure Statement: Delivery. The lender, table funding mortgage broker, or dealer that anticipates a first lien dealer loan shall deliver the Servicing Disclosure Statement within 3 business days from receipt of the application by hand delivery, by placing it in the mail, or, if the applicant agrees, by fax, e-mail, or other electronic means. In the event the borrower is denied credit within the 3 business-day period, no servicing disclosure statement is required to be delivered. If co-applicants indicate the same address on their application, one copy delivered to that address is sufficient. If different addresses are shown by co-applicants on the application, a copy must be delivered to each of the co-applicants. RESPA §3500.21.c

• TILA Disclosure Requirements. The creditor shall make the disclosures required by this subpart clearly and conspicuously in writing, in a form that the consumer may keep. The disclosures required by this subpart may be provided to the consumer in electronic form, subject to compliance with the consumer consent and other applicable provisions of the Electronic Signatures in Global and National Commerce Act (E-Sign Act). TILA 226.17

How does TILA define who is a Creditor?

A creditor is a person who regularly extends consumer credit that is subject to a finance charge or is payable by written agreement in more than four installments (not including a down payment), and to whom the obligation is initially payable, either on the face of the note or contract, or by agreement when there is no note or contract. TILA 226.2(17)


*Don’t forget to check with your investors and state licensing authority regarding their rules and regulations.

• 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.

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(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.)

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.

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.

We received many questions about the GFE and answered the top 5 during the webinar. Any questions that we did not answer during the presentation will be answered in a later blog entry and also in our March 2010 newsletter.

We will be holding these free webinars every month, so please let us know of any topics you would like us to discuss. Thank you!