Beginning with Page 1 of the GFE (
sctsm.in/
HUDGFE), what would appear to be an obvious
section — the name of the originator — isn’t what
it may seem. It’s actually the name of the company
originating the loan that should be used wherever
the form says “originator.” The two exceptions to
this rule are that the phone number may include
a direct extension, and the e-mail address may be
specific to the loan originator. Otherwise, list the
company information wherever the GFE asks for
originator information.
It also would be wise for loan originators to provide a level of detail not required in the “important
dates” section of Page 1. Line No. 1 requires a date
noting how long the interest rate used on the GFE
will be honored. If the interest rate is not locked
when completing the GFE, consider including not
only a date but also a time until which the interest
rate will be available. This practice will be acceptable, according to HUD, which provides no limitation or restriction on the time that must be listed in
line No. 1. On the other hand, the date in line No. 2
must be at least 10 days from the GFE date.
though the loan had a regular 12-month annual
payment cycle. Because the wording in this section specifically mentions the “monthly amount
owed,” the loan information and payments must
reflect monthly values.
If any monthly payments outside of the monthly
amount owed shown in the summary of your loan
section will be held by escrow, the “yes” checkbox in the “Escrow account information” section
must be marked. Amounts held in escrow include
payments for property taxes and other property-related charges.
Only mark the “no” checkbox here if the monthly
loan payment only includes payments related to
principal, interest and mortgage insurance. The
escrow-account-information section directly follows the loan-summary section.
Listing fees
For many mortgage brokers, Page 2 of the new GFE
causes the most questions and the greatest concern. Fortunately, the HUD FAQs provide a step-by-step process for completing this page.
When developing your company’s compliance
policies, consider this: If there is a credit from the
seller, lender or anyone else involved in the transaction, the total estimated settlement charges listed
on the GFE won’t match up with the loan application and may be out of sync with state-required
disclosures, such as the California Mortgage Loan
Disclosure Statement.
“Brokers who charge advance fees
before issuing GFEs also will be
required to refund
those fees to the borrower
before submitting the loan
to the lender.”
Potential Conflict
Rules interpretations can differ between regulators and industry professionals. Here are two such
instances that relate in part to the good-faith estimate (GFE):
• Prepayment penalties: The U.S. Department of Housing and Urban Development has commented
that payment of accrued interest upon payoff of a Federal Housing Administration (FHA) loan is not
a prepayment penalty. Under the Truth in Lending Act (TILA) and Regulation Z, however, the Federal
Reserve Board does consider the payment of accrued interest a prepayment penalty. Some industry
experts also are concerned that regulations regarding higher-priced mortgage loans, which can contain
prohibitions on prepayment penalties, may limit FHA loans.
• Itemizing amount financed: The Federal Reserve has confirmed that disclosure of the GFE will continue to satisfy Regulation Z, despite the GFE containing aggregate values. Under Regulation Z, which
implements TILA, providing the loan disclosures required under the Real Estate Settlement Procedures
Act satisfies the requirements of providing an itemization of amount financed.
— Joshua Weinberg
Line No. 3 typically will reflect the rate-lock
period related to the pricing of the interest rate
used in the scenario disclosed in the GFE. If the
interest rate is locked for 15 days at the time
of disclosure, print “ 15” in that field. If the rate
wasn’t locked at the time of disclosure, but the
estimate was created using rate-sheet pricing
based on a 30-day lock period, “ 30” would go
in that field.
The next section of the GFE is “Summary of
your loan,” addressed well in HUD’s frequently
asked questions (
sctsm.in/GFEfaq). But know
that no changes can be made to the form itself without risk of invalidating the document.
If the loan disclosed in the GFE has a biweekly-payment feature, the GFE must be completed as
For instance, HUD has made it clear that fees
for mortgage brokers and lenders must be combined into a single fee to the borrower. The FAQ
document explains that “all origination charges for
lenders and mortgage brokers, including fees for
administrative and processing services” must be
included in “Our origination charge” at the top of
Page 2 and “should not be itemized separately.”
HUD also has made it clear that there may be either a credit or charge related to the interest of the
loan — but not both. As quoted from the FAQ document, “There may not be a credit for a yield spread
premium and a charge for discount points in the
same transaction.” Brokers must disclose this information in block No. 2 in the “Understanding
your estimated settlement charges” section.
continued on page 20 »
According to HUD, the new GFE was created
to provide consumers a concise view of the total
costs related to obtaining a loan. Therefore, the
disclosure should represent all fees related to
the loan, regardless of who pays the fee or when
the fee is paid. In addition, no fees are allowed
to be collected before issuing the GFE, except
as related to obtaining a credit report. No items
should be marked as paid outside of closing at
the time of disclosure.
The implication here is that if an originator knew
a fee was paid outside of closing upon issuance of
the GFE, the fee must have been paid before issuance — a clear violation. This is true even with revised GFEs.
Completing the HUD-1, however, is different.
Because the HUD-1 reflects an itemization of the
fees and must also indicate who paid the fee, any
fee paid outside of closing must be indicated as
paid outside of closing, in parentheses or both.
In addition, fees paid by anyone other than the
borrowers must be listed on the first page of the
HUD-1 in lines Nos. 204 to 209. According to the
FAQ document, however, “a credit from the seller
to the borrower to offset the charge should be
listed on the first page of the HUD-1 in Lines 204-
209 and Lines 506-509 respectively.”
Joshua Weinberg is a business analyst in charge of compliance, government loan programs and reverse
mortgages for Calyx Software. He has originated loans since 2004. Weinberg works closely with state
and federal regulatory agencies and sits on Mortgage Bankers Association and National Association of
Mortgage Brokers committees. He has worked in retail banking and owned his own mortgage brokerage.
Weinberg lives in Santa Cruz, Calif. Reach him at (408) 997-5525 or joshua@calyxsoftware.com.
Visit www.calyxsoftware.com.
