Compliance Blog

Posted by Anthony Demangone

Let us continue the march through RESPA.  I apologize in advance for the length and density of this post.  But what could I do?  This is RESPA, after all.

3500.7(e)  Tolerances

There are three types of fees under the new RESPA rules.  First, the actual charges at closing may not exceed the amounts listed on the GFE for the following charges: origination charges, charges related to the locking of interest rates and transfer taxes. The rationale for these makes sense.  The credit union should know what it's own fees are, and transfer taxes should be known at the time the GFE is provided.  But there is some flexibility, in that creditors can issue revised GFEs  if changed circumstances result in higher costs for the creditor.  In addition, if information that was not know or was not relied upon becomes available, that too can form the basis for a revised GFE.  We'll discuss this a bit more later.

The second category of charges at settlement may not be greater than 10 percent above the sum of the amounts included on the GFE.  These are lender-required settlement services where the lender selects the third party settlement service provide.  Also included are lender-required services, title services and required title insurance and owners title insurance when the borrower uses a settlement service provided identified by the loan originator, and government recording charges.

The third category?  Everything else on your GFE.  Those fees may change at settlement.

3500.7(f) Binding GFE

This section clarifies that the lender is bound (within the applicable tolerances) to the GFE, unless a new GFE is given before settlement according to RESPA's requirements.  When creditors issue revised GFEs, they must document the reason and maintain this record for no less than 3 years after settlement.  The following situations permit a revised GFE.

• Changed circumstances affecting settlement costs.  If such changes increase costs beyond the tolerances, the originator may provide a revised GFE within 3 days of receiving information to establish the changed circumstances. Here's some interesting guidance found within the Preamble:

None of the information collected by the originator prior to issuing the GFE may later become the basis for a ‘‘changed circumstance’’ upon which a loan originator may offer a revised GFE, unless the loan originator can demonstrate that there was a change in the particular information or that it was inaccurate, or that the loan originator did not rely on that particular information in issuing the GFE.A loan originator would have the burden of demonstrating nonreliance on the collected information, but may do so by various means, including through, for example, a documented record in the underwriting file or an established policy of relying on a more limited set of information in providing GFEs. If a loan originator issues a revised GFE based on information previously collected in issuing the original GFE and ‘‘changed circumstances,’’ it must document the reasons for issuing the revised GFE, including, for example, its nonreliance on that information or the inaccuracy of the information, and retain that documentation for at least 3 years. (Emphasis added.) 73 Fed. Reg. 68212.

• Changed circumstances affecting the loan.  These would be changes that affect the borrower's eligibility for the specific loan terms identified in the GFE.

• If the borrower requests changes to the loan that changes settlement charges or the terms of the loan.

• Expiration of the GFE.  If the borrower doesn't express an intent to continue within 10 days after the GFE is issued, or longer if you provide it, you are no longer bound by the GFE.

• Interest rate dependent charges and terms.  If the rate was not locked by the borrower, or a locked interest rate expired, the associated charges and terms may change.  If the borrower later locks the rate, a new GFE must be provided showing the revised rate charges and terms.  All other charges and terms must remain the same, except as otherwise possible under this section.

• New home purchases. In transactions involving new home purchases where settlement is expected to occur more than 60 calendar days from the time a GFE is provided, the originator may provide the GFE to the borrower with a clear and conspicuous disclosure stating that at any time up until 60 calendar days before closing, the originator may issue a revised GFE.  If no such separate disclosure is provided, the loan originate cannot issue a revised GFE, except as otherwise possible under this section.

Again - I aplogize for the length and density of this post.  Perhaps I was just cranky as I wrote this, as PSU was trounced by Iowa this weekend.  Grrrr.