RESPA Rules and the GFE

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1 REVISED 05/01/2012 PAGE 1 OF 5 RESPA Rules and the GFE Effective Date Per the Real Estate Settlement Procedures Act (RESPA), rules in this policy are effective for all mortgage loans originated on or after January 1, Three Business Day Rule The Good Faith Estimate (GFE) must be issued within three business days of the loan originator s receipt of an application or information sufficient to complete an application. Sufficient information includes: Borrower s Name Borrower s Monthly Income Borrower s SSN Property Address Estimated Property Value Loan Amount GFE-related Disclosures GFE-related disclosures include: Notice of Intent to Proceed, signed by the borrower(s) Good Faith Estimate (GFE) GFE Attachment (Point: Initial Fees Worksheet; Encompass: Itemized Fee Worksheet) Settlement Service Provider List

2 REVISED 05/01/2012 PAGE 2 OF 5 GFE Preparation and Issuance Fees Rule GFE Preparation and issuance rules include: Prior to issuing a GFE, the loan originator/lender may only collect a bona fide fee for the cost of the credit report. Additional fees, such as the appraisal fee, cannot be collected until the borrower has received a copy of the GFE and returns a Notice of Intent to Proceed (with the loan covered by the GFE). Fees may not be listed as POC (paid outside of closing) on the GFE. Changed Circumstances Rules Changing Loan Terms and Charges The loan terms and charges can only be changed in the event there are changed circumstances s outlined below: Acts of God, war, disaster, or an emergency situation has arisen. Information particular to the borrower or transaction, which was relied upon when providing the GFE, has since been found to be inaccurate or has changed; such information may include the borrower s credit to qualify, the loan amount, the estimated property value or any other information that was used to provide the GFE. New information particular to the borrower or transaction, which was not relied upon when providing the GFE, has been discovered. Other circumstances particular to the borrower or transaction, such as boundary disputes, the need for flood insurance, or environmental problems have arisen.

3 REVISED 05/01/2012 PAGE 3 OF 5 Changed Circumstances Rules (Continued) Disclosing Changed Circumstances Changed circumstances must be disclosed within three business days of receiving the changed information and only those fee affected by the changed circumstance may be amended. Common examples of changed circumstances include the following: Underwriter determines a desk review is required Borrower requests a change in the loan amount or terms Loan is locked and points change based on the locked price This is not an all-inclusive list. All instances of changed circumstance must be disclosed within three business days of the change. Refer to the attached changed circumstances matrix for more details. GFE Disclosure s Three Levels RESPA contains three tolerance levels for costs disclosed on the GFE. These levels dictate which of the disclosed fees can change at settlement and by how much (if at all). Zero The following charges cannot increase at closing: Loan Origination Fee YSP and Points Transfer Taxes (State and Local Transfer Taxes and Stamps)

4 REVISED 05/01/2012 PAGE 4 OF 5 GFE Disclosure s (Continued) 10% The following charges can increase up to 10% at closing: Lender-required services when the lender selects the third-party settlement service provider Lender-required services, owner s title services, and required title insurance when the borrower chooses to use a provider identified by the loan originator, but is not required to do so Government recording charges Unlimited The following charges can increase by any percentage or amount at closing: Lender-required services, owner s title services, and required title insurance when the borrower selects a different provider than that identified by the originator Initial deposit for the escrow account Daily interest charges from settlement until the first day of the first period covered by scheduled mortgage payments (i.e. odd days interest ) Right to Cure If any charges at settlement are greater than those listed on the GFE by more than the permitted tolerance, the loan originator may cure the tolerance violation by issuing a lender credit to reimburse the borrower. The reimbursement must equal the amount by which the tolerance was exceeded.

5 REVISED 05/01/2012 PAGE 5 OF 5 GFE Re-disclosure Requirements Required Forms Each time the GFE is amended, the following forms are required with disclosure: Changed Circumstance Form, identifying the change(s) being made Revised GFE with new disclosure date and charges Revised GFE Attachment (Point: Initial Fees Worksheet; Encompass: Itemized Fee Worksheet) Paperless System More Information AFN has modified its paperless system to include an index definition for these forms to be uploaded as a group and numbered for the various re-disclosures. For more information about RESPA rules and FAQs go to: and select New RESPA Rule FAQs (updated 4/2/2010).