Compliance Blog

Posted by Anthony Demangone

Section 3500.7 of RESPA discusses Good Faith Estimates (GFEs), so we're going to walk our way slowly through the material. Very slowly.  In fact, today, we're just going to hammer 3500.7(a).  This little subsection is more than enough for a Wednesday.  Believe me.

Section 3500.7(a)

GFE timing. Credit unions making loans subject to RESPA must provide the borrower a GFE no later than three business days after it receives an application, or information sufficient to complete an application.  Note that I bolded "terms of art."  Both "application" and "business days" are defined terms.  As I noted in an earlier post, an application must contain at least six required pieces of data.  And business day?  You won't find that in the final rule, as HUD didn't change the definition.  It continues to mean any "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."  If you mail the GFE, the borrower is considered to have received it three calendar days after it was mailed, not including Sundays and legal holidays.

Exceptions. You are not required to provide the applicant a GFE before the end of the 3-day period if you: deny the application or the application is withdrawn.  There's another exception, which has not changed, although it has been renumbered.  The GFE requirement does not apply to HELOCs, assuming that you provide the disclosures required by Regulation Z.  This will now be found within section 3500.7(h).

Fees.  You are not permitted to charge as a condition of receiving a GFE any fee for an appraisal, inspection or other similar settlement service.  You can charge a fee for the cost of a credit report.  No other fees can be charged until the member has received the GFE.  But note: HUD's frequently asked questions guidance document adds another layer to this.  

 Q: At what point can a loan originator charge a loan applicant fees for services other than the cost of obtaining a credit report?

A: After a loan applicant both receives a GFE and indicates an intention to proceed with the loan covered by the GFE, the loan originator may collect fees beyond the cost of a credit report for origination-related services.

Supplemental information.  You can collect any information that you require in addition to the required application information.  But you are not permitted to require, as a condition for providing a GFE, that an applicant submit additional information to verify information provided on an application.

Editor's note: HUD's RESPA FAQ document has been updated again.  This time on September 18, 2009.