Friday, December 25, 2009

The New Good Faith Estimate (GFE): Fee Tolerances

(This is Day 6 of 12 in a series called "The 12 Days of RESPA Reform" which will run until December 31st. For a full list of RESPA topics, check here.)

The teeth behind the new disclosures are the Fee Tolerance provisions imposed on lenders. There are 3 categories of fees that permit a limited variance from the time of disclosure on the GFE to the HUD-1 at loan closing. The 3 categories and the permitted tolerances (as taken directly from the new Good Faith Estimate) are as follows:

The first group (the no tolerance group) are mainly made up of origination charges - those fees that the lender imposes to provide the loan.

The second group (the 10% group) are mainly settlement fees, provided the borrower uses the title company the lender identifies.

The third group (the "fees can change" group) are primarily fees charged by companies that the borrowers have chosen on their own which the lender has not identified (plus some other fees the lender either has little control over or cannot estimate at time of origination).

This provision is probably the biggest change of them all, and the one that will require the most explanation during loan origination and settlement. It is highly recommended that agents review the new GFE before it is rolled out in January, and read this FAQ document provided by HUD.

Tomorrow we will dig deeper into the distinction between "lender-identified" providers and those the borrower chooses on their own.