With all the RESPA questions and confusion surfacing out there we thought it was important to arm our clients with a little more knowledge about the GFE, HUD and recent RESPA changes.
This information was put together by Jessica Meyers & Les Martin with Land Title Guarantee Company.
General:
Q: Where is the total cash to close or monthly payment disclosed on the GFE?
A: This information is not disclosed on the GFE.
Purchase specific:
Q: Are the HOA dues or fees disclosed on the GFE?
A: No, they are not disclosed.
Q: If a lender requires a condominium certificate and questionnaire, where does the charge go on the GFE?
A: If a lender requires a condominium certificate and questionnaire, the service is performed by a third party and the borrower is not permitted to shop for the provider of that service, the charge must be disclosed in Block 3 of the GFE (10% tolerance).
Q: If a seller typically pays for the owners title insurance, does the charge still have to be shown on the GFE?
A: Yes, an estimate of the cost must be shown in Block 5, ‘owners title insurance’ for all purchase transactions regardless of who is selecting or paying for it. In Colorado, it is common for the seller to pay this, in which case the title company will list a debit/credit on page 1 of the HUD to offset the charge.
Q: Does a transfer tax (payable to a government entity, not to an association) need to be disclosed on the GFE?
A: Yes. On a purchase there will always be a State doc fee disclosed. Most commonly found in resort communities, transfer taxes must also be disclosed on the GFE. Use of the GFE calculator and confirmation of fees will provide this information if applicable, as does the commitment when issued.
Changed Circumstance:
Q: If there is a ‘changed circumstance’, when does the loan originator issue a new GFE?
A: When there is a ‘changed circumstance’ and the loan originator intends to issue a revised GFE, the loan originator must do so within three business days of receiving the information sufficient to establish changed circumstances. A loan originator may issue a revised GFE reflecting only the increased charges resulting from the ‘changed circumstance’.
Q: What is considered a ‘changed circumstance”?
A: (1) Acts of God, war, disaster, or other emergency; (2) Information particular to the borrower or transaction that was relied on in providing the GFE and that changes or is found to be inaccurate after the GFE has been provided, which information may include information about the credit quality of the borrower, the amount of the loan, the estimated value of the property, or any other information that was used in providing the GFE; (3) New information particular to the borrower or transaction that was not relied on in providing the GFE; or (4) Other circumstances that are particular to the borrower or transaction, including boundary disputes, the need for flood insurance, or environmental problems.
The discovery of previously undisclosed circumstances affecting settlement costs such as unreleased liens could be considered a ‘changed circumstance’.
The property address provided by the applicant, turns out to not be the correct, legal address could constitute a ‘changed circumstance’.
After the GFE is issued, parties are added to or removed from title or the property is moved into or out of trust, or it is determined that a party will be using a POA to sign, which may require additional work and fees could be considered ‘changed circumstances’.
During or as part of the transaction, it is determined that the property use may change, such as from owner-occupied to rental property, this could constitute a ‘changed circumstance’.
The borrower’s credit score changes or additional services are required such as upgraded appraisal, survey or other requirement by the loan originator may constitute a ‘changed circumstance’.
GFE Block Description:
Q: What charges are part of the charge in Block 1 (zero tolerance) of the GFE, ‘Our origination charge’?
A: Block 1, ‘Our origination charge’ on the GFE contains all charges for origination services performed by or on behalf of a lender and/or a mortgage broker. Origination services includes, but is not limited to, the following: taking of the loan application, loan processing, underwriting of the loan, funding of the loan, acting as an intermediary between a borrower and lender, obtaining verifications and appraisals, and any processing and administrative services required to perform these functions.
Q: What services belong in Block 3 (10% tolerance if directed by the lender), ‘Required services that we select’?
A: Block 3 of the GFE contains the charges for all third-party settlement services (except title services) for which the loan originator requires and selects the provider of the service. Examples of these charges for services generally include but are not limited to, appraisal, credit report, tax service, flood certification and up-front mortgage insurance premiums.
Q: Where should the quote for the Lender‘s title insurance policy premium be disclosed on the GFE?
A: The Lender‘s title insurance premium is part of Block 4 (10% tolerance if lender selected or on the provider’s list and selected by the buyer/borrower), ‘Title services and lender‘s title insurance’ on the GFE, along with any fees for title searches, examinations, endorsements and all charges associated with the title services and settlement (closing) agent services.
Q: What charges are disclosed in Block 6 (no tolerance) of the GFE?
A: Block 6 of the GFE includes third party services required by the lender where the borrower is permitted to shop for the provider, other than Title services and lender’s title insurance (Block 4) and Owner’s title insurance (Block 5). These types of charges include, but are not limited to: survey, pest inspection and other types of inspections required by the lender. Charges that are part of the sales contract, but are not required by the lender, are not disclosed on the GFE.
Q: What is included in the GFE boxes #4, 5, 7, 8 as it relates to title and escrow?
A: #4 – title services, 5 – owner’s title policy, not applicable on a refinance, 7 – recording fees, 8 – transfer tax and state doc fee, not applicable on a refinance in Colorado but may be in other States
Q: What fees show in the GFE calculator?
A: The buyers side only, seller paid items aren’t listed, according to the questions answered within the GFE calculator (real estate closing fee split 50/50)
Basics on the HUD:
Line 1101 includes the title policy, real estate closing fee if applicable, loan closing fee, tax certificate, courier fee, e-doc fee and release tracking on a refinance
Line 1201 includes the recording fees
Line 1102 and below list the seller paid fees, which aren’t bundled into 1101
Provider List:
Q: If a mortgage broker provides the GFE and the written list of settlement service providers and the borrower chooses to use a provider identified on the written list for a service, is the lender subject to tolerances for those services?
A: Yes, if the lender permits a mortgage broker to issue the GFE and the written list of providers, the lender is subject to the tolerances for the services in which the borrower chooses to use the identified provider.
Q: If the borrower chooses a settlement service provider that is not on the written list, does the tolerance apply?
A: No, if the borrower chooses a settlement service provider that is not on the loan originator‘s written list of providers, the amount paid for that service is not subject to a tolerance.
Q: May a loan originator state on the “written list” that the loan originator is not endorsing the quality of a settlement service providers service?
A: Yes, the loan originator may include a statement on the “written list” that the listing of a service provider on the “written list” does not constitute an endorsement of that service provider.
Talking points regarding the ‘provider list’:
By choosing Land Title as a provider, we guarantee accuracy and confirmation of fees with the GFE Calculator.
By choosing Land Title as a provider, you will have the consistency of service on refinance transactions, where ‘other’ providers may not provide the same level of service.
If an unknown title company is chosen as a provider in order to avoid tolerance variables, but use of your normal service provider remains, there is a higher risk of audit.
In addition, by choosing your provider for the list, it provides benefit in creating a larger dollar amount variance on the 10% tolerance bucket so there is a larger cushion for error or potential loss.
TIL/APR:
TIL/APR related title and closing fees include, but are not limited to, the closing fee, courier fee and release-tracking fee.
An APR calculator is available at: http://www.efunda.com/formulae/finance/apr_calculator.cfm
The information contained in this web site is the opinion of Jim Renshaw and provided “as is” without warranty of any kind, either express or implied, including without limitations any warranties of merchantability or fitness for a particular purpose.
I help grow your business with marketing assistance, superior title research and professional closing services.
