The New GFE - A Line by Line Walk-Through

Transcription

1 The New GFE - A Line by Line Walk-Through Webinar February 12, :30 a.m. CST Presenter Ms. Christine Sisseck Dennis Schwartz & Assoc., Attorneys At Law 1446 Heritage Dr Mc Kinney, TX christine@docsdirect.com Panelists Mr. Alan Jackson Dennis Schwartz & Assoc., Attorneys At Law 106 Blue Sky Court Georgetown, TX alan@docsdirect.com Ms. Charlotte M. Meyer Robertson & Anschutz Richmond Ave., Suite 550 Houston, TX cmeyer@radocs.com Ms. Janet S. Minke, CTIA Alliant National Title Insurance Company 7967 S FM 51 Boyd, TX jminke@alliantnational.com Mr. Charles H. Newman, III Beadles, Newman & Lawler 3500 Hulen Fort Worth, TX cnewman@bnllaw.com Mr. Dennis Schwartz Dennis Schwartz & Assoc., Attorneys At Law 1446 Heritage Dr Mc Kinney, TX dennis@docsdirect.com

2 Alan W. Jackson Compliance Administrator Schwartz and Associates Al has extensive experience in the residential mortgage business including loan production, loan servicing, regulatory compliance and government relations. Previously he served as Vice President of Government Relations at CitiMortgage, Inc. (St. Louis), and Vice President of Compliance and Government Issues at Principal Residential Mortgage, Inc. (Des Moines). Al has participated in various working groups of the Mortgage Bankers Association, Financial Services Roundtable, and the Consumer Mortgage Coalition, and is past chair of the Principal Financial Group Political Action Committee. Al obtained a Bachelor of Science degree in Mathematics & Business from Minnesota State University, and attended graduate school at the University of Colorado and Drake University Law School Christine Sisseck Operations Manager Schwartz and Associates Christine has been with Schwartz & Associates, a real estate document preparation Texas law firm, for 20 years. Employed in the mortgage industry since 1985, she has a broad and detail knowledge of residential real estate regulations and compliance matters, as well as experience in all phases of loan production, closing and operations. Prior to Schwartz & Associates, she worked at Merrill Lynch Mortgage, First Union Mortgage and Gregory Gregg & Associates. Christine attended Missouri Southern State College in Joplin, Missouri. Her expertise, attention to detail and commitment to accuracy in document preparation have been instrumental in taking Schwartz & Associates from a start-up operation to a national document preparation firm with a reputation for knowledge and quality.

3 CHARLOTTE M. MEYER Attorney at Law Robertson & Anschutz Richmond Avenue Suite 550 Houston, Texas EDUCATION B.A. in Journalism, South West Texas State University J.D., South Texas College of Law PROFESSIONAL ACTIVITIES Texas Land Title Association Education Committee Certification Committee Legal Issues Committee Texas Mortgage Bankers Association The College of the State Bar of Texas Texas Association of Mortgage Attorneys LICENSURES AND CERTIFICATIONS State Bar of Texas United States Southern, Eastern, Western and Northern Districts Courts of Texas Texas Board of Legal Specialization Residential Real Estate Texas Board of Legal Specialization Farm and Ranch Real Estate Certified Title Insurance Associate PUBLICATIONS AND ARTICLES Tierra Grande Magazine Recognizing Mortgage Fraud (January 2006) Co-Author State Bar of Texas 28 th Annual Advanced Real Estate Law Course The Non-Borrowing Spouse in Real Estate Transactions (2006) Co-Author Texas Mortgage Lending Law & Practices Deskbook Contributing Author Texas Mortgage Bankers Association Annual Education Seminars Fraud, Closing and Disclosing (2006) Author and Lecturer Texas Mortgage Bankers Association/Texas Land Title Association The New RESPA Road: Where Lenders and Title Intersect (2009) Panelist Texas Land Title Association Regional Seminars The Legal Perspective Deceased Real Property (2004) Author and Lecturer Advanced Title Examinations and Underwriting Easements (2006) Author and Lecturer Liabilities and Responsibilities of a Notary Public (2006) Author and Lecturer Lost in Translation Lender Lingo (2007) Author and Lecturer Ad Valorem Taxation (2008) Lecturer Foreclosure and Its Various Alternatives (2009) Author and Lecturer RESPA and the New HUD-1 Hands On, How To Workshops (2009) Lecturer

4 JANET S. MINKE Vice President, Underwriting Support Services Alliant National Title Insurance Company Toll-free: x440 Direct: Mobile: EDUCATION BA in Social Science from University of North Texas, 1970 Texas Secondary Teaching Certificate TITLE INSURANCE EXPERIENCE Ms. Minke entered the title insurance industry as an escrow assistant and conveyancer in a fee attorney office in Fort Worth, Texas, in Shortly thereafter, the attorney retired, selling his closing offices to Guardian Title Company, where Ms. Minke remained until 1994, progressing from escrow assistant to commercial escrow officer and eventually to Executive Vice President. Since that time, she has held various regional and national roles with major national title insurance companies where for the past 10 years she was a Business Process Manager and Corporate Trainer. She has recently moved into her current position with Alliant National, where she is available to respond to underwriting questions, as well as providing training and education for the company s partner agents. TEXAS LAND TITLE ASSOCIATION ACTIVITIES AND HONORS Honors: Title Woman of the Year 2006 Professional Excellence Award Outstanding Underwriter Support, 2005 Peggy Hayes Teaching Excellence Award, 1995 President s Award for Outstanding and Exemplary Contribution, Outstanding Young Title Person, Current Chair: Education Committee Current Member: Certification Task Force, Regulatory Committee TEACHING AND TRAINING ACTIVITIES TLTA and NMLTA Land Title School and Texas Land Title Institute State Bar of Texas: Advanced R E Law Course 2006; Agricultural Law Course 2009 TLTA, OLTA, NMLTA and NAPMW Conferences and Seminars Underwriter Agency Seminars and Training in Texas, New Mexico and Oklahoma PUBLICATIONS - Articles in TLTA News Money-Saving Ideas That Everyone Can Use, 1988 Proper Time Management Ensures Efficient Closings, 1989 Tips Help Clarify Procedural Rules, 1991 Training Today s Workforce: Educating for Excellence, 1997

5 Charles H. Newman Biography Charles H. Newman is a founding partner and Chairman of the Board of Beadles, Newman & Lawler, P.C. Beadles, Newman & Lawler is a real estate law firm whose primary focus is the preparation of residential and commercial closing documents and is located in Fort Worth, Texas. The firm clients include national and regional banks, mortgage companies as well as title companies. Mr. Newman s career started in the title industry. From 1978 to 1999, he was Chairman of the Board and Chief Executive Officer for Trinity Western Title. Trinity Western Title was purchased by Alamo Title and ultimately by Fidelity National Title. He was honored as Title Man of the Year by the Texas Land Title Association in 1981 and he served as President of the Texas Land Title Association from 1982 to Mr. Newman is Board Certified in Commercial and Residential Real Estate Law by the Texas Board of Legal Specialization. He is a member of the State Bar of Texas, the Texas College of Real Estate Attorneys, the National Mortgage Bankers Association and the Texas Mortgage Bankers Association. He received his Bachelor of Arts from Washington & Lee University in Lexington, Virginia and his Juris Doctorate from the University of Texas School of Law in Austin, Texas. Charles is in high demand as a speaker. His presentations combine an informal style with humor and real world examples. His topics include Federal Regulatory Compliance, real estate and title related issues.

6 Executive Biography: Dennis P. Schwartz Founder DocsDirect (Schwartz & Associates) Dennis P. Schwartz is founder of McKinney, Texasbased Schwartz & Associates real estate law. Since 1989, Schwartz & Associates has specialized in residential loan document preparation for mortgage lenders of all sizes. Under Schwartz s leadership, Schwartz & Associates has developed DocsDirect Online, a Web-based mortgage document solution that offers the flexibility needed to handle the array of lender channels and loan programs offered by their clients. From 1996 to 2001, Mr. Schwartz was general counsel for the Texas Mortgage Broker Association and is currently general counsel to the Tarrant County Mortgage Broker Association and Dallas Association of Mortgage Brokers. He was a member of the Board of Directors for the Texas Association of Mortgage Brokers from Mr. Schwartz was a key participant in drafting legislation and communicating with state political figures for the passage of the Texas mortgage broker licensing and home equity constitutional amendment. He is an active member of many other associations, including the State Bar of Texas, National Mortgage Brokers Association and the Independent Bankers Association of Texas. Mr. Schwartz began practicing law in 1976 with the Tarrant County District Attorney s office. From 1977 until 1983, he was a litigator in a general practice law firm. He began his focus on real estate law in 1983 representing numerous savings and loan associations. Since 1989, he has limited his practice to residential real estate lending document preparation representing banks, mortgage brokers and wholesale lenders nationwide. After receiving his Bachelor s degree from Sarah Lawrence College in 1973, Mr. Schwartz received his Juris Doctor from Southern Methodist University in 1976.

7 Welcome to Today s Webinar Presented by Independent Bankers Association of Texas and Texas Land Title Association February 12, 2010 Presenter Christine Sisseck, Schwartz & Associates, McKinney Panelists Alan Jackson, Schwartz & Associates, McKinney Charlotte M. Meyer, CTIA, Robertson & Anschutz, Houston Janet S. Minke, CTIA, Alliant National Title Insurance Company, Dallas Charles H. Newman, III, Beadles, Newman & Lawler, Dallas Dennis Schwartz, Schwartz & Associates, McKinney Purpose of this presentation is to provide a detailed line by line instruction on how to complete the GFE. Whether you are a loan originator, processor, underwriter, closer, doc prep attorney or closing agent, everyone needs to have an understanding of the GFE and HUD1 as they now go hand in hand. It is truly a collaborative effort for all parties.

8 RESPA Real Estate Settlement Procedures Act Introduced in Reform Additional Reform Process began in 2002 Proposed New Rule released March 14, 2008 Final New Rule published November 17, 2008 Portions Final New Rule effective January 1, 2009 Final New Rule effective January 1, 2010 RESPA RESPA Reform impacts all parties in a real estate transaction Lenders Title Providers Settlement Agents Mortgage Brokers Realtors Builders Buyers Borrowers Sellers

9 New RESPA Final Rule Consumer Protection Act Greater Disclosure of Loan Terms and Settlement Fees New standardized forms Encourages consumer to shop for loan and service providers Fees disclosed upfront must be closer to the actual fees collected at closing Lender bound to settlement charges and terms disclosed in GFE, subject to certain tolerances Goal was clarity, transparency and accuracy New RESPA Final Rule New Good Faith Estimate New HUD 1 Settlement Statement Service Provider List

10 Good Faith Estimate Good Faith Estimate (GFE) lists the settlement charges that Consumer is likely to incur with a federally related mortgage loan. Originator must estimate charges based upon what Consumer would normally pay or incur at or before settlement. New Standardized GFE form 3 pages Ten (10) business day shopping period Tolerance Restrictions 0% Bucket 10% Bucket Unlimited Bucket Changed Circumstances GFE Page One Summary of Loan Terms Red Flag Items Adjustments in rate and payment Negative Amortization Prepayment Penalties Balloon Payments B0ttom Line Shopping Numbers Total Adjusted Origination Charges Total Charges for other Settlement Services Total Estimate Settlement Charges

11 GFE Page One GFE Page Two Simplifies fees by categorizing and combining Lender s Origination Charges Required Services Lender Selects Borrower Shops Title Services All normal Borrower costs must be reflected on GFE No matter who ultimately pays the fee at closing Will be reflected in Borrower column on HUD1 Page 2 If paid by Seller, Lender or Third Party will be offset by credit on HUD1 Page 1

12 GFE Page Three Instructions and Information Tolerance Descriptions Zero Percent Tolerance Ten Percent Tolerance Unlimited Tolerance Trade off Table Summary of Rate and Charges for loan disclosed in GFE Summary of Rate and Charges for a higher rate/lower costs Summary of Rate and Charges for a lower rate/higher costs Shopping Chart

13 GFE Page Three Good Faith Estimate Disclosure Must be disclosed within 3 business days from Application (GFE General FAQ 25) Application is defined as submission of Borrower s financial information in anticipation of a credit decision (RESPA Final Rule Title 24, Section (b) Borrower Name Monthly Income Social Security Number/Tax Identification Number (GFE General FAQ 14) Property Address Estimated Value of Property Loan Amount Any other information deemed necessary by the Loan Originator If GFE is issued, it is presumed that Loan Originator received an application and all information deemed necessary to issue GFE (GFE General FAQ 23 & 24)

14 GFE Page One Originator Identifying Information GFE Page One Originator Identifying Information Originating Company Name, whomever is issuing the GFE (GFE Page 1, GFE Name of originator, FAQ 2) Individual Originator/Loan Officer Name (optional) (GFE Page 1, GFE Name of originator, FAQ 1) Originating Company Address Originating Company Phone Number Individual Originator/Loan Officer

15 GFE Page One Borrower and Property Information Date of GFE GFE Page One Borrower and Property Information All Borrower s Names Subject Property Address Date of GFE Date GFE is issued If GFE is re disclosed, this date should reflect the date the Revised GFE was issued

16 GFE Page One Explanation of Purpose and Shopping for Loan GFE Page One Important Dates Item 1 Expiration Date for interest rate and items affected by rate

17 GFE Page One Important Dates Item 1 Expiration Date for interest rate and items affected by rate No restriction on amount of time interest rate must remain available (GFE Important Dates FAQ 1) Interest rate can be available for any period of time Originator chooses, including for example, a period of time within one day or for several days (GFE Important Dates FAQ 1) When interest rate is locked, date disclosed should be interest rate lock expiration date (GFE Important Dates FAQ 4) If rate lock not offered at all, Originator should reflect N/A or Not Available (GFE Important Dates FAQ 5) GFE Page One Important Dates Item 2 Expiration date of shopping period

18 GFE Page One Important Dates Item 2 Expiration date of shopping period (GFE Expiration FAQ 1) Must be available for at least ten (10) business days (GFE Important Dates FAQ 2) If revised GFE is provided due to changed circumstances or borrower requested changes, shopping period of previous GFE has ended and borrower has already expressed an intent to proceed, complete this date with the same date reflected in the previous GFE (GFE Important Dates FAQ 12) Line 1 and Line 2 are independent of each of other (GFE Important Dates FAQ 14) GFE Page One Important Dates Item 3 Rate Lock Period this does not mean rate is locked

19 GFE Page One Important Dates Item 3 Rate Lock Period this does not mean rate is locked Number of days the interest rate lock period is good through (GFE Important Dates FAQ 4) If rate lock not offered at all, Originator should reflect N/A or Not Available (GFE Important Dates FAQ 6) If revised GFE is provided due to changed circumstances or borrower requested changes, Line 3 must be completed with information that was on the preceding GFE, unless rate lock was basis of issuance of revised GFE (GFE Important Dates FAQ 7) May not enter range of rate lock options (GFE Important Dates FAQ 11) GFE Page One Important Dates Item 4 Lock required prior to settlement

20 GFE Page One Important Dates Item 4 Lock required prior to settlement Originator must state how many calendar days prior to settlement the interest rate would have to be locked, if applicable (RESPA Final Rule Appendix C) If revised GFE is provided due to changed circumstances or borrower requested changes, Line 3 must be completed with information that was on the preceding GFE, unless rate lock was basis of issuance of revised GFE (GFE Important Dates FAQ 7) If interest rate is locked, then Originator should complete this item with Not applicable or N/A (GFE General FAQ 30) GFE Page One Summary of Your Loan

21 GFE Page One Summary of Your Loan Initial Loan Terms GFE Page One Summary of Your Loan Red Flag Items

22 GFE Page One Escrow Account Information GFE Page One Escrow Account Information If escrows are waived, mark box labeled NO (GFE Escrow account information FAQ 1) If escrows are not required or held by Lender, mark box labeled NO (GFE Escrow account information FAQ 1) If escrows are required and will be collected, mark box labeled YES (GFE Escrow account information FAQ 1) Payment reflected should match amount shown in Summary of Loan for initial monthly payment with mortgage insurance does not include tax and homeowner s insurance (GFE Escrow account information FAQ 1 & 2)

23 GFE Page One Summary of Your Settlement Charges Totals for Block A & B are brought forward from GFE Page 2 Your Adjusted Origination Charges

24 Block 1 Our Origination Charge All Charges that Originator will receive for compensation (GFE Block 1 FAQ 2, 4, 7 & 9) Administrative Fee Application Fee Broker Fee Commitment Fee Courier/Delivery Fee Document Preparation Fee (even if paid to third party) (GFE Block 1 FAQ 5 & 6) In house Appraisal Lender Inspection Fee MERS Fee Origination Fee Processing Fee Underwriting Fee Verification Fee Wire Fee Service Fees paid directly to Originator Miscellaneous Fees Yield Spread Premium (for mortgage brokers) Block 1 Our Origination Charge Originator is defined to include: Loan Officer/Loan Originator Mortgage Banker Mortgage Broker Warehouse Correspondent Wholesale Investor Any creditor involved in the new loan transaction (GFE General FAQ 5 & GFE Block 1 FAQ 1)

25 Block 1 Our Origination Charge Equals Line 801 on HUD 1 Zero Tolerance Bucket Amount cannot increase absent changed circumstances (GFE Block 1 FAQ 3 & 8) GFE Block 1 = HUD Line 801 = 0% Tolerance Bucket Block 2 Your credit or charge (points) for the specific interest rate chosen

26 Block 2 Your credit or charge (points) for the specific interest rate chosen Three Box Options Box 1 No Credit and No Charge Box 2 Credit Box 3 Charge Must complete interest rate Must complete dollar figure, if applicable Only One Box Option can be marked at a time A credit and charge cannot occur together in same transaction (GFE Block 2 FAQ 2) Block 2 Your credit or charge (points) for the specific interest rate chosen Box 1 No credit and no charge Par for Mortgage Bankers, Warehouse Correspondents No credit and no charge for Mortgage Bankers, Warehouse Correspondents Mortgage Brokers not allowed to mark this box

27 Block 2 Your credit or charge (points) for the specific interest rate chosen Box 2 Credit Yield Spread Premium for Mortgage Brokers (GFE Block 2 FAQ 6 & 7) Par for Mortgage Brokers May check either credit or charge Must enter zero (0) No cost Loan (GFE Block 2 FAQ 1) Fees being paid through interest rate Credit given by Originator used to offset all fees May result in a negative number in Block A to cover third party fees listed in GFE Blocks 3 11 as appropriate Block 2 Your credit or charge (points) for the specific interest rate chosen Box 3 Charge Discount Par for Mortgage Brokers May check either credit or charge Must enter zero (0) Buydown (GFE Block 2 FAQ 3) Escrow Waiver Fee (GFE Block 2 FAQ 8 & 9)

28 Block 2 Your credit or charge (points) for the specific interest rate chosen Equals Line 802 on HUD 1 Zero Tolerance Bucket Amount cannot change absent changed circumstances while interest rate is locked Any credit for rate chosen cannot decrease (GFE Block 2 FAQ 4) Credit can increase since it would benefit borrower Any charge for rate chosen cannot increase Charge can decrease since it would benefit borrower GFE Block 2 = HUD Line 802 = 0% Tolerance Bucket Block A Your Adjusted Origination Charges Block 1 +/ Block 2 = Block A May be a negative number if Credit in Block 2 that exceeds Charge in Block 1

29 Block A Your Adjusted Origination Charges Equals Line 803 on HUD 1 Zero Tolerance Bucket Amount cannot change absent changed circumstances while interest rate is locked Amount is carried forward to Block A on GFE Page 1 GFE Block A = HUD Line 803 = 0% Tolerance Bucket Block A Your Adjusted Origination Charges Block 1 +/ Block 2 = Block A May be a negative number if Credit in Block 2 that exceeds Charge in Block 1

30 Par Example Block 2, Box 1 Credit Example Block 2, Box 2

31 Charge Example Block 2, Box 3 Your Charges for All Other Settlement Services

32 Block 3 Required Services that We Select Block 3 Required Services that We Select All Charges for services that Originator requires use of a particular provider (GFE Block 3 FAQ 1, 2, 3 & 4) Appraisal Fee Conventional Upfront PMI Credit Report Fee Final Inspection Fee Flood Certification Fee FHA Upfront MIP MCC Fee Tax Service Fee USDA Guarantee Fee VA Funding Fee (GFE Block 3 FAQ 1)

33 Block 3 Required Services that We Select Equals Line 804, 805, 806, 807, 800s on HUD 1 10% Tolerance Bucket aggregate total Amount cannot increase absent changed circumstances Fees payable to third party other than Originator Does not include Title Service Fees If individual service listed Must have dollar amount of fee disclosed or Must have zero (0) or N/A disclosed GFE Block 3 = HUD Line 804, 805, 806, 807, 800s = 10% Tolerance Bucket Block 4 Title Services and Lender s Title Insurance All Charges for services that Title/Settlement Agent requires and Title Insurance Costs to protect the Lender Attorney Fee Closing Fee Courier Fee (GFE Block 4 FAQ 2) E Doc Fee Escrow Fee Handling Fee Lender s Title Insurance Premium (GFE Block 4 FAQ 1) Lender s Title Endorsement Premium Notary Fee (GFE Block 4 FAQ 3) Settlement Fee (GFE Block 4 FAQ 4, 5 & 7) Tax Certificate Fee Texas Guaranty Fee Title Binder/Commitment Fee (GFE Block 4 FAQ 6) Title Examination/Search Fee Wire Fee

34 Block 4 Title Services and Lender s Title Insurance Equals Line 1101, 1102, 1104, 1100s* on HUD 1 10% Tolerance Bucket aggregate total Unlimited Tolerance Bucket if Borrower chooses a title/settlement agent not on the list Amount cannot increase absent changed circumstances Fees payable to third party other than Originator Should reflect one title/settlement agent on service provider list if Originator allows borrower to shop for service GFE Block 4 = HUD Line 1101, 1102, 1104, 1100s= 10% Tolerance Bucket *1100s any third party fees that are a part of GFE Block 4 may be itemized outside the columns in the 1100 series of HUD1 Page 2 Block 5 Owner s Title Insurance All Charges for Title Insurance Costs to protect the Borrower (GFE Block 5 FAQ 3 & 4) Owner s Title Insurance Premium Owner s Title Endorsement Premium Texas Policy Guaranty Fee for Owner s Policy Required on all Purchase transactions (GFE Block 5 FAQ 1) No matter what is common and customary for your area No matter who ultimately pays for the policy at closing (GFE Block 5 FAQ 2) If non purchase transaction, Originator should reflect N/A

35 Block 5 Owner s Title Insurance Equals Line 1103 on HUD 1 10% Tolerance Bucket aggregate total Unlimited Tolerance Bucket if Borrower chooses a title/settlement agent not on the list Amount cannot increase absent changed circumstances Fees payable to third party other than Originator Should reflect one title/settlement agent on service provider list if Originator allows borrower to shop for service GFE Block 5 = HUD Line 1103 = 10% Tolerance Bucket Block 6 Required Services that You Can Shop For

36 Block 6 Required Services that You Can Shop For All Charges for services that Originator requires but that Borrower can chose the service provider (GFE Block 6 FAQ 1) Pest Inspection Survey Block 6 Required Services that You Can Shop For Equals Line 1301, 1300s on HUD 1 10% Tolerance Bucket aggregate total Amount cannot increase absent changed circumstances Fees payable to third party other than Originator Does not include Title Service Fees If individual service listed Must have dollar amount of fee disclosed or Must have zero (0) or N/A disclosed Should reflect one provider on service provider list if Originator allows borrower to shop for service GFE Block 6 = HUD Line 1301, 1300s = 10% Tolerance Bucket

37 Block 7 Government Recording Charges All Charges for recording loan and title documents upon settlement that are normal borrower costs Assignment Recording Fee County Recording Fee Deed Recording Fee Government Recording Deed of Trust/Mortgage/Security Instrument Recording Fee Power of Attorney Recording Fee Release Recording Fee State Recording Fee Block 7 Government Recording Charges Equals Line 1201, 1202, 1200s on HUD 1 10% Tolerance Bucket aggregate total Amount cannot increase absent changed circumstances Fees payable to third party other than Originator GFE Block 7 = HUD Line 1201, 1202, 1200s = 10% Tolerance Bucket

38 Block 8 Transfer Taxes All Charges for state and local fees on mortgages and home sales that are normal borrower costs City/County Deed Tax City/County Mortgage Tax State Deed Tax State Mortgage Tax State required fee paid to Government or Governmental Agency Block 8 Transfer Taxes Equals Line 1203, 1204, 1205, 1200s on HUD 1 0% Tolerance Bucket Amount cannot increase absent changed circumstances Fees payable to third party other than Originator GFE Block 8 = HUD Line 1203, 1204, 1205, 1200s = 0% Tolerance Bucket

39 Block 9 Initial Deposit for Your Escrow Account Block 9 Initial Deposit for Your Escrow Account All Charges that lender requires borrower to place into a reserve or escrow account at settlement to be applied to recurring charges that lender pays on behalf of borrower Earthquake Insurance Homeowner s Insurance Flood Insurance Mortgage Insurance Property Taxes Walls in Insurance Windstorm/Hail Insurance

40 Block 9 Initial Deposit for Your Escrow Account Equals Line 1101 on HUD 1 Unlimited Tolerance Bucket Check appropriate boxes in Block 9 to indicate what items are included in the initial deposit for the escrow account Does not include amount to bring property taxes current at closing GFE Block 9 = HUD Line 1001 = Unlimited Tolerance Bucket Block 10 Daily Interest Charges

41 Block 10 Daily Interest Charges The charge for the amount of interest on new loan due from date of settlement until first day of next month or first day of normal payment cycle Total amount estimated due at closing* Must reflect Daily Per Diem Amount Must reflect Number of Days to be collected* Must reflect Estimated Date of Settlement *If loan will be a short pay/interest credit then amount may be reflected as a credit Block 10 Daily Interest Charges Equals Line 901 on HUD 1 Unlimited Tolerance Bucket GFE Block 10 = HUD Line 901 = Unlimited Tolerance Bucket

42 Block 11 Homeowner s Insurance Block 11 Homeowner s Insurance All Charges for insurance borrower must purchase to protect the property from loss or damage (GFE Block 11 FAQ 1) Earthquake Insurance Premium Homeowner s Insurance Premium Flood Insurance Premium (GFE Block 11 FAQ 2) Mortgage Insurance Premium Property Taxes Premium Walls In Insurance Premium Windstorm/Hail Insurance Premium

43 Block 11 Homeowner s Insurance Equals Line 903, 900s on HUD 1 Unlimited Tolerance Bucket Fees payable to insurance agent/company List each type of insurance required Does not include title insurance Each type of insurance listed Must have dollar amount of fee disclosed or Must have zero (0) or N/A disclosed Purchase transactions amount indicated is typically one year s premium for each insurance type Refinance transactions may not be required unless policy does not have enough premium paid in advance to meet investor guidelines GFE Block 11 = HUD Line 903, 900s = Unlimited Tolerance Bucket Block B Your Charges for All Other Settlement Services Block 3 + Block 4 + Block 5 + Block 6 + Block 7 + Block 8 + Block 9 +/ Block 10 + Block 11 = Block B Amount is carried forward to Block B on GFE Page 1

44 Block A+B Total Estimated Settlement Charges Equals Line Block A + B on GFE Page 2 Amount is carried forward to Block A+B on GFE Page 1 GFE Page Three Understanding which Charges can Change at Settlement

45 GFE Page Three Understanding which Charges can Change at Settlement O% Tolerance Fees cannot increase at settlement GFE Block 1, 2, A and 8 Individual Block tolerance, not an aggregate total Cure required if tolerance violation Must be done within 30 calendar days of closing Must be reflected on HUD1 as cure GFE Page Three Understanding which Charges can Change at Settlement 1O% Tolerance Total of fees can increase up to 10% GFE Block 3, 4, 5, 6, and 7 Aggregate Total tolerance Cure for amount over 10% required if tolerance violation Must be done within 30 calendar days of closing Must be reflected on HUD1 as cure

46 GFE Page Three Understanding which Charges can Change at Settlement Unlimited Tolerance Fees can increase at settlement GFE Block 9, 10 and 11 GFE Block 4, 5, and 6 if Borrower chose service provider NOT on the list No cure required GFE Tolerance Buckets Understanding which Charges can Change at Settlement Estimated Fees disclosed at application on GFE vs. Actual Fees collected at closing on HUD1

47 GFE Tolerance Buckets Understanding which Charges can Change at Settlement HUD1 Lines on Page 2 have a cross reference to GFE Block Number GFE Tolerance Buckets Understanding which Charges can Change at Settlement HUD1 Page 3 contains a side by side comparison chart of Estimated Fees disclosed on GFE to Actual Fees collected at closing on HUD1 Page 2

48 GFE BLOCK NUMBER The Bucket List HUD LINE NUMBER or HUD SERIES TOLERANCE BUCKET Block % Block % Block A 803 0% Block 3 804, 805, 806, 807, 800s 902, 900s 10% Block 4* 1101, 1102, 1104, 1100s 10% Block 5* % Block 6* 1301, 1300s 10% Block , 1202, 1200s 10% Block , 1204, 1205, 1200s 10% Block Unlimited Block Unlimited Block , 900s Unlimited *If provider not on the List *Unlimited GFE Tolerance Buckets Understanding which Charges can Change at Settlement If Amount exceeds tolerance limitation, it is the responsibility of Originator to cure. (Section 4 & 5 Right to cure and tolerance violations, FAQ 1 15) Cure can be made by: Offsetting any increase with a credit/reimbursement Reducing Fee Cure Timeframe At closing and notated on HUD1 Within 30 calendar days of closing and revised HUD1 issued

49 GFE Page Three Using the Tradeoff Table GFE Page Three Using the Tradeoff Table Trade off Table was designed to help Borrower understand relationship between interest rate and settlement charges. 3 Columns This Loan Same Loan with Lower Settlement Charges Same Loan with Lower Interest Rate

50 GFE Page Three Using the Tradeoff Table Column 1 This loan in this GFE Must be completed by Originator (GFE Tradeoff table, FAQ 1) GFE Page Three Using the Tradeoff Table Column 2 This same loan with lower settlement charges Does not have to be completed

51 GFE Page Three Using the Tradeoff Table Column 3 This same loan with a lower interest rate Does not have to be completed GFE Page Three Using the Tradeoff Table Columns 2 and 3 Not required to be completed (GFE Tradeoff table FAQ 1) Consumer testing suggested consumers were suspicious of Originators if these columns were not filled in If completed by Originator Must have alternate loans reflected available Must be able to issue GFE on alternate loans if requested by consumer Must use same loan amount Must be identical to loan terms disclosed in GFE except for interest rate and interest rate dependent charges (GFE Tradeoff table FAQ 2)

52 GFE Page Three Using the Shopping Chart GFE Page Three Using the Shopping Chart Shopping tool for consumer to use to compare GFEs from various mortgage loan providers Originator not required to complete any of the columns Some loan origination software may complete the This loan column automatically for the consumer

53 GFE Page Three Using the Shopping Chart GFE Page Three If Your Loan is sold in the future Final statement on GFE No signature lines No date of receipt

54 Service Provider List Service Provider List Must be provided by Originator if they allow Borrower to shop for services (GFE Written list of providers FAQ 1 & 6) Must be provided simultaneously with GFE (GFE Written list of providers FAQ 1) On separate sheet of paper Must contain enough identifying information for Borrower to contact service provider name, address, phone number May add disclosure stating that Originator is not endorsing service providers (GFE Written list of providers FAQ 11) Must contain at least one provider for any service for which Borrower can shop Title/settlement agent in Blocks 4 and 5, if Originator allows Borrower to choose (GFE Written list of providers FAQ 10) Any third party services listed in Block 6 May list an affiliate as service provider Must distribute AfBA disclosure along with list (GFE Written list of providers FAQ 9) NOT considered a violation of RESPA Section 8 per HUD

55 Service Provider List If Borrower chooses a Service Provider On the List 10% Tolerance Bucket aggregate total NOT on the List Unlimited Bucket (GFE Written list of providers FAQ 3) If List not provided or no provider listed for services in Block 4, 5 or 6 Subject to 10% Tolerance Bucket aggregate total Originator does not get benefit of Unlimited Bucket if they have not allowed Borrower to shop for services Provider must be Qualified service provider or Originator can reject Able to provide service in Borrower s area (GFE Written list of providers FAQ 7) GFE Items Not Disclosed Cash to Close Credits from Seller or Third Parties Down Payment Loan Payoffs Loan Type FHA/VA/Conventional Lien Position First or Second Purchase/Sales Price Total PITI Monthly Mortgage Payment

56 GFE Fees Not Disclosed Home Warranty Fee (HUD series FAQ 1) HOA Transfer Fee (HUD series FAQ 5) Current HOA Fees Due Current Property Taxes Due POC Designation Real Estate Agency Administrative Fee Real Estate Agent s Commission Real Estate Agency Transaction Fee No longer refers to terms such as YSP or Discount GFE Items that cannot be Added to Form Date or Signature lines (GFE General FAQ 28) Intent to Proceed Acknowledgment Additional Pages (General FAQ 14, GFE General FAQ 27) Cannot change any text in the GFE form (General FAQ 6) No other form can be called Good Faith Estimate No other form can be called Addendum to GFE Note: Additional forms can be used but cannot be referred to as addendum to GFE or labelled GFE

57 GFE Changed Circumstances Once GFE is issued, there are Circumstances under which Loan Terms or Charges can change which may result in Re disclosure of GFE (GFE Changed Circumstances FAQ 1 14) Refer to RESPA Final Rule Refer to RESPA Frequent Asked Questions (FAQs) GFE Changed Circumstances Acts of God, war, disaster or other emergency Information particular to Borrower or Transaction that was relied on in providing the GFE that changes or is found to be inaccurate after GFE was issued Credit Quality Loan Amount Property Value Other information relied upon in providing the GFE New Information particular to Borrower or Transaction that was not relied on in providing the GFE Boundary Disputes Environmental Problems Flood Zone Determination shows in Flood Zone

58 GFE Changed Circumstances If GFE was issued, there is a presumption that Originator relied upon the following information: Borrower s name Borrower s monthly income Property Address Property Value Loan Amount desired by consumer Credit Report Information obtained by Originator Cannot use any information collected or presumed to have used (see above) prior to issuing GFE as basis for a changed circumstance to justify re disclosure of GFE Unless Originator can demonstrate that: There was a change in that particular information The particular information provided was inaccurate They did not rely on that particular information when issuing GFE GFE Changed Circumstances May only re disclose changes directly related to the changed circumstance Originator cannot increase charges unless directly related to changed circumstance, all other charges must remain the same A changed circumstance does not justify changing the entire GFE

59 GFE Changed Circumstances Rule of Three (3) 3 Business Days to Redisclose If Originator chooses to re disclose, must do so within 3 business days of receiving information sufficient to establish changed circumstance 3 Years to Retain If Originator chooses to re disclose, must retain documentation and justification proving changed circumstance for at least 3 years after settlement GFE Changed Circumstances Floating GFE issued Rate is not locked When rate is locked, revised GFE must be issued Any interest rate dependent charges or loan terms may be changed Borrower Requested Changes Even if rate is locked, revised GFE may be issued Only terms or fees affected by requested changes may be changed

60 GFE Changed Circumstances Loan Level Price Adjustment (LLPA) may constitute a changed circumstance (GFE Block 2 FAQ 5) Risk based adjustment derived from specific attributes to individual loan LTV, FICO, Occupancy Disclosed in Block 2 on Page 2 of GFE as credit (Box 2) or charge (Box 3) for specific interest rate chosen Changed Circumstance may permit re disclosure of GFE changing fees affected by LLPA GFE Important Things to Know Cannot charge any fee except Credit Report Fee before providing GFE Cannot require verification of information before providing GFE Two loans Two GFEs May use separate form to evidence consumer s intent to proceed May use separate form to evidence consumer s acknowledgment of receipt of GFE Average Charges Option

61 GFE Important Things to Know New Construction New Home Purchase (GFE New construction FAQ 2) To Be Constructed Under Construction Use and occupancy permit has not been issued If closing will not occur for more than 60 calendar days from time GFE is provided Originator may provide disclosure to Borrower stating that at any time up until 60 calendar days prior to closing, the Originator is allowed to re disclose the GFE in the absence of changed circumstance (GFE New construction FAQ 1) GFE Important Things to Know Revised GFE must be re issued when rate is locked within 3 days of locking in interest rate (GFE General FAQ 19) Broker Lock or Pocket Lock is when a Mortgage Broker permits borrower to lock rate BUT does not lock rate with Investor/Lender (GFE General FAQ 17) If Investor/Lender accepts GFE issued by Broker, then Investor/Lender is subject to Broker s disclosed GFE (GFE General FAQ 17 & 29) Loan Terms, including rate All Settlement Service charges disclosed on GFE, including Block 1, 2 and A Service Provider List

62 GFE Important Things to Know Seller Responsible Fees (GFE Seller paid items FAQ 1, 2) Fees that are typically Seller Costs or normally paid by Seller Do not have to be disclosed on GFE Will be reflected in Seller Column on HUD1 Page 2 Exception to above rule: Owner s Title Policy must always be disclosed on GFE no matter if seller responsible fee GFE Important Things to Know Borrower Responsible Fees (GFE Seller paid items FAQ 1, 2) Fees that are typically Borrower Costs or normally paid by Borrower* Must be disclosed on GFE, no matter who ultimately pays for the fees at closing Will be reflected in Borrower Column on HUD1 Page 2, no matter who ultimately pays for the fees at closing If fee is being paid by seller, lender or third party, shown in Borrower Column on HUD1 Page 2 and a credit is shown on Page 1 of HUD *Exception Owner s Title Policy must always be disclosed on Purchase transactions

63 OMB Approval No Good Faith Estimate (GFE) Name of Originator Originator Address Borrower Property Address Originator Phone Number Originator Date of GFE Purpose Shopping for your loan Important dates Summary of your loan Escrow account information Summary of your settlement charges This GFE gives you an estimate of your settlement charges and loan terms if you are approved for this loan. For more information, see HUD s Special Information Booklet on settlement charges, your Truth-in-Lending Disclosures, and other consumer information at If you decide you would like to proceed with this loan, contact us. Only you can shop for the best loan for you. Compare this GFE with other loan offers, so you can find the best loan. Use the shopping chart on page 3 to compare all the offers you receive. 1. The interest rate for this GFE is available through. After this time, the interest rate, some of your loan Origination Charges, and the monthly payment shown below can change until you lock your interest rate. 2. This estimate for all other settlement charges is available through. 3. After you lock your interest rate, you must go to settlement within days (your rate lock period) to receive the locked interest rate. 4. You must lock the interest rate at least days before settlement. Your initial loan amount is Your loan term is Your initial interest rate is Your initial monthly amount owed for principal, interest, and any mortgage insurance is Can your interest rate rise? Even if you make payments on time, can your loan balance rise? Even if you make payments on time, can your monthly amount owed for principal, interest, and any mortgage insurance rise? Does your loan have a prepayment penalty? Does your loan have a balloon payment? A B A + B Your Adjusted Origination Charges (See page 2.) $ Your Charges for All Other Settlement Services (See page 2.) $ Total Estimated Settlement Charges $ $ years % $ per month c No c Yes, it can rise to a maximum of %. The first change will be in. c No c Yes, it can rise to a maximum of $ c No c Yes, the first increase can be in and the monthly amount owed can rise to $. The maximum it can ever rise to is $. c No c Yes, your maximum prepayment penalty is $. c No c Yes, you have a balloon payment of $ due in years. Some lenders require an escrow account to hold funds for paying property taxes or other propertyrelated charges in addition to your monthly amount owed of $. Do we require you to have an escrow account for your loan? c No, you do not have an escrow account. You must pay these charges directly when due. c Yes, you have an escrow account. It may or may not cover all of these charges. Ask us. Good Faith Estimate (HUD-GFE) 1

64 Understanding your estimated settlement charges Some of these charges can change at settlement. See the top of page 3 for more information. Your Adjusted Origination Charges 1. Our origination charge This charge is for getting this loan for you. 2. Your credit or charge (points) for the specific interest rate chosen c The credit or charge for the interest rate of % is included in Our origination charge. (See item 1 above.) c You receive a credit of $ for this interest rate of %. This credit reduces your settlement charges. c You pay a charge of $ for this interest rate of %. This charge (points) increases your total settlement charges. The tradeoff table on page 3 shows that you can change your total settlement charges by choosing a different interest rate for this loan. A Your Adjusted Origination Charges $ Your Charges for All Other Settlement Services 3. Required services that we select These charges are for services we require to complete your settlement. We will choose the providers of these services. Service Charge 4. Title services and lender s title insurance This charge includes the services of a title or settlement agent, for example, and title insurance to protect the lender, if required. 5. Owner s title insurance You may purchase an owner s title insurance policy to protect your interest in the property. 6. Required services that you can shop for These charges are for other services that are required to complete your settlement. We can identify providers of these services or you can shop for them yourself. Our estimates for providing these services are below. Service Charge 7. Government recording charges These charges are for state and local fees to record your loan and title documents. 8. Transfer taxes These charges are for state and local fees on mortgages and home sales. 9. Initial deposit for your escrow account This charge is held in an escrow account to pay future recurring charges on your property and includes c all property taxes, c all insurance, and c other. 10. Daily interest charges This charge is for the daily interest on your loan from the day of your settlement until the first day of the next month or the first day of your normal mortgage payment cycle. This amount is $ per day for days (if your settlement is ). 11. Homeowner s insurance This charge is for the insurance you must buy for the property to protect from a loss, such as fire. Policy Charge B A Your Charges for All Other Settlement Services $ + B Total Estimated Settlement Charges $ Good Faith Estimate (HUD-GFE) 2

65 Instructions Understanding which charges can change at settlement This GFE estimates your settlement charges. At your settlement, you will receive a HUD-1, a form that lists your actual costs. Compare the charges on the HUD-1 with the charges on this GFE. Charges can change if you select your own provider and do not use the companies we identify. (See below for details.) These charges cannot increase at settlement: g Our origination charge g Your credit or charge (points) for the specific interest rate chosen (after you lock in your interest rate) g Your adjusted origination charges (after you lock in your interest rate) g Transfer taxes The total of these charges can increase up to 10% at settlement: g Required services that we select g Title services and lender s title insurance (if we select them or you use companies we identify) g Owner s title insurance (if you use companies we identify) g Required services that you can shop for (if you use companies we identify) g Government recording charges These charges can change at settlement: g Required services that you can shop for (if you do not use companies we identify) g Title services and lender s title insurance (if you do not use companies we identify) g Owner s title insurance (if you do not use companies we identify) g Initial deposit for your escrow account g Daily interest charges g Homeowner s insurance Using the tradeoff table In this GFE, we offered you this loan with a particular interest rate and estimated settlement charges. However: g If you want to choose this same loan with lower settlement charges, then you will have a higher interest rate. g If you want to choose this same loan with a lower interest rate, then you will have higher settlement charges. If you would like to choose an available option, you must ask us for a new GFE. Loan originators have the option to complete this table. Please ask for additional information if the table is not completed. Your initial loan amount Your initial interest rate 1 Your initial monthly amount owed Change in the monthly amount owed from this GFE Change in the amount you will pay at settlement with this interest rate How much your total estimated settlement charges will be The loan in this GFE $ % $ No change No change $ The same loan with lower settlement charges $ % $ You will pay $ more every month Your settlement charges will be reduced by $ $ The same loan with a lower interest rate $ % $ You will pay $ less every month Your settlement charges will increase by $ $ 1 For an adjustable rate loan, the comparisons above are for the initial interest rate before adjustments are made. Using the shopping chart Use this chart to compare GFEs from different loan originators. Fill in the information by using a different column for each GFE you receive. By comparing loan offers, you can shop for the best loan. Loan originator name Initial loan amount Loan term Initial interest rate Initial monthly amount owed Rate lock period Can interest rate rise? Can loan balance rise? Can monthly amount owed rise? Prepayment penalty? Balloon payment? This loan Loan 2 Loan 3 Loan 4 Total Estimated Settlement Charges If your loan is sold in the future Some lenders may sell your loan after settlement. Any fees lenders receive in the future cannot change the loan you receive or the charges you paid at settlement. Good Faith Estimate (HUD-GFE) 3