Jan. 11 – Read our January newsletter with agency updates and notes from our last webinar. MCA.com

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.


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


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 “Evaluating Your Appraisal.” We had many excellent questions during the webinar, and we were able to answer several on air. For multiple 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 mortgage 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 – Is it true that if we determine that an appraisal is unacceptable, our only choice is to order a second appraisal?

• Answer – You are allowed to contact the appraiser and ask them to correct any errors with the appraisal. Please review FNMA FAQ regarding who may contact the appraiser with questions.

Question 2 – If the appraiser uses poor comps and has red flags, we are stuck with the appraisal and can only complain to the AMC. Any thoughts?

• Answer – Section II of AIR states: If there is a reasonable basis to believe that the initial appraisal was flawed or tainted and such basis is clearly and appropriately noted in the Mortgage file, then a secondary appraisal may be ordered. However, the burden lies with you proving the first appraisal was flawed.

Question 3 – Is it required to have a copy of legal description attached as an addendum?

• Answer – Legal description is required to be on the top portion of the appraisal. Legal description attached as an addendum appears to be ok.

Question 4 – Can ANYONE ask an appraiser why certain comps were not used in their report?

• Answer – If your intent is to influence the value then this not allowed. Please review FNMA FAQ regarding who may contact the appraiser with questions.

Question 5 – When is it necessary to perform the income and/or cost approach to value?

• Answer – Income is only necessary on investment properties. Cost approach is only required on manufactured homes and when requested.

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 “Essentials of a Compliant QC Plan.” 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 – How do you go about verifying assets?

• Answer – You would attempt to get the company to verify the information you have in your file is correct, via new VOD or phone conversation. You will want to assure that the asset documentation has not been forged or altered in any way.

Question 2 – We are a broker and most of our lenders will require a quarterly audit of our FHA loans.  You mentioned the detailed QC Plan reviews are trickling downhill.  Do you foresee lenders requiring their approved brokers to do more than the 10% of FHA loans being audited?  The FHA loans are all we’re auditing at this time.  Do we need to include all of our other loan types?

• Answer – I do not anticipate any lenders requiring more than the FHA required 10% selection. We are certainly seeing a bigger focus on Quality Control from all lenders and agencies.  You are only required to audit files if your investors or licensing agencies require it.  However, I would recommend you QC at least 10% of all your loans. This will give you a good baseline of the quality and risk level of all the loans you originate.

Question 3 - What is acceptable to meet occupancy certification requirements?

• Answer – There is not guidance on this topic. However, if audited, you will need to justify that a satisfactory attempt to verify occupancy was conducted.

Question 4 – Are these reviews [discretionary reviews] required if you’re a broker and not the lender?

• Answer – If you are a broker, then you are only required to conduct QC reviews if your investors or licensing authorities require you to do so. If those entities do not require discretionary reviews, then you are not required to perform them. However, it’s good business practice to know the quality of the product you are selling.

Question 5 – Adverse Action Reviews. Can they be done in house, with processing staff the same as the prefunding reviews, or do they need to be done using the same process as QC of closed files, in our case, outsourced?

• Answer – I am not aware of any rules stating Adverse Action reviews must be done independently. However, I have also not read where they are allowed to be outside of the independent QC department.  This will need to be a company decision.

Question 6 – If we use a 3rd party servicer, who performs the audits?

• Answer – The 3rd party typically performs the audits.

Question 7 - To be in compliance with ECOA (Reg B) if we have pulled credit on a file as a pre-qual example TBD – are we still required to send a notice of action if we are unable to approve this loan due to excessive ratios or something along those lines, we would have pulled credit. These files would be either TBD loans or incomplete applications. These loans would not be subject to HMDA correct if they are a TBD property.

• Answer – ECOA’s definition of application is much more broad and vague than the RESPA definition of application. I would recommend in this example to meet your ECOA regulations–you either issue an approval or adverse action (denial) within 30 days. If your TBD meets the definition of Pre-Approval, you are required to report this transaction to HMDA.

Question 8 - Since your presentation is focused for the large lenders where agencies are performing audits–perhaps you can comment on the differences on QC level for the smaller brokers, ie is just having a company like MCA auditing our loan files enough?

• Answer – QC is about risk management, so I would I would suggest you complete as many of the steps as possible that I mentioned in the presentation. Obviously, you will not be reviewing as many details as the lender would. If you are outsourcing, your QC your vendor should be auditing your files according to your business type. When MCA audits a file, they only hold the broker accountable for items they have control over.

Question 9 – Will you please repeat the calculation for the defect rate?

• Answer – Fannie Mae defines Defect Rate as: The number of loans, expressed as a percentage, reflecting the total loans with defects discovered in the loan review process divided by the total loans reviewed.

Question 10 - It was mentioned that these webinars are available monthly. What do we need to do to be able to join every month?

• Answer – If you are on our newsletter list, we will send you an invitation to our webinar every month. Anyone can sign up for the newsletter here.

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.

(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 Q&A 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 “Managing the Year of Change.” As promised, below you will find answers to the questions asked during the webinar. You can also download the slides below.

• Download the slides
• Download the slides in handout format

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

QC Audits | QC Plans | Training & Consulting | TPO Management | Agency Approval | Red Flag Policies | Tax Transcripts & Social Security Verifications


Question 1 – You have stated that MDIA defines an application the same way as a GFE. So, you are saying that if we do not disclose a GFE because we do not have all of the pieces, then we do not have to issue the TIL either?

• Answer – Yes. This is correct. TILA/MDIA shares RESPA’s definition of an application. If you do not have what is defined as an application then you are not required to disclose a TIL statement. This can be found in 12 CFR 226.19 for the Truth in Lending Act.

Question 2 – The Dodd 1 yr GFE and TIL combined implemented from what effective date?

• Answer – The effective date is 1 year after transfer. That would be July 22, 2011. However, there is already a working copy going around, and I would expect it to be implemented well before this date.

Question 3 – I had a question related to the LO compensation that we discussed in webinar today. Changing LO compensation is a fairly easy regulation to comply with. It requires a change to the existing mind set, but logistically, it is not difficult. The requirement is to pay the LO based on total volume as a percentage or flat fee per until or some other method that doesn’t result in steering the borrower to an undesirable product.

Ok, so I’m with the regulators so far. Then, here is where I get lost. The regulation also says that companies that broker loans are also subject to the regulations. Ok, so now a brokerage firm or even a lender when acting as a broker also can not be paid differently for different pricing tiers or loan programs? So, effectively investors have to stop by brokerage firms how they are currently paying them. It is not simply paying the loan officer appropriately, but you also have to change the way you pay the firm. The interesting part is that secondary market transactions are exempt, so investors can still pay lenders but not brokers in spread premiums that change with loan program. So, it appears that the regulation much like RESPA is trying to put brokers at a competitive disadvantage. Am I understanding this correctly?

• Answer – Yes, according to the rule, an originator is a loan originator and a broker company. Therefore, a broker company cannot be compensated based on the terms of the loan.

Question 4 – What is GSA and LDP?

• Answer – GSA and LDP are lists compiled by the government that include individuals and companies that have violated certain rules, laws, or who have defaulted on an obligation. If a borrower or company is on either of these lists, then they would be excluded from receiving a loan in certain circumstances.

Question 5 – For an FHA loan, how do we handle where purchasing spouse is legal US resident with valid SS#, but non purchasing spouse is illegal with only an ITIN?

• Answer – FHA does not allow a borrower with an ITIN. You will need to search out a different solution for this or not use the non-purchasing spouse in the approval.

Question 6 – It appears under the new LO compensation rules that take effect 04.01.2010 apply to mortgage broker companies and retail lender companies when their broker loans and not just to how the LO is paid.  Of course, secondary market exception applies to non-brokered rules but it appears that companies not just LO compensation cannot be paid differently based on the loan program. Therefore, it appears to make YSP or market price now illegal even if the LO is paid consistent with the rule.  So, investors are going to have to change the way they pay the broker companies as well is my understanding.

• Answer – Yes, according to the rule, an originator is a loan originator and a broker company. Therefore, a broker company cannot be compensated based on the terms of the loan.

Question 7 – Can you say again where the handouts from the slideshow are on your website?

• Answer – Copies of the slides to all our webinars are located in the News and Resources tab on our website. You can also download the slides directly here.

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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.)