Scotsman Guide - November 2009 Residential Edition

considered an approval, the terms presented — if accepted within 10 days — are binding on loan originators. If, however, “changed circumstances” occur, then originators may present a new GFE.

Changed circumstances include:

“Acts of God, • war, disasters or other emergencies”;

Modifications • to customer-provided information that impact borrowers’ credit quality;

New information • ; and
Circumstances • particular to the bor-
rowers or the transaction, such as
boundary disputes, flood-insurance
issues or environmental concerns.
« NE W-LOOK continued from page 23

“Nothing that is known
or should have been
known when the GFE
is provided can form the
basis for changed
circumstances.”

Nothing that is known or should have been known when the GFE is provided can form the basis for changed circumstances. Originators should know

borrower information such as name, address, income, property value and loan amount before issuing an estimate.

The rule also requires originators to retain any documentation of changed circumstances causing revision of a GFE for three years.

Tolerance of 10 percent

Fees subject to the 10-percent tolerance for change include:

Required services • the originator selects;

Title services • and lender’s title insurance, if selected by the loan originator or by the borrowers from a list of companies the originator identified;

Owner’s title insurance, • if selected from a list of companies the originator identified;

Required services • borrowers can shop for, if selected from a list of companies the originator identified; and

Government • recording charges.

The 10-percent tolerance applies to the total change associated with these items, not to each item individually. The cost for services borrowers select outside of lists originators provide can change by more than 10 percent.

The final RESPA rule also attempts to clarify when a GFE is required. It notes borrowers must select a property prior to filling out an application, and loan originators must provide a GFE within three business days of the application.

Important Points on GFE

Here are some key terms on the new good-faith estimate (GFE) and their descriptions:

Important dates: • This section indicates the date until which quoted rates and fees will be available.

Summary of your loan: • Located on Page 1 of the new GFE, this section addresses the loan’s rate and terms, as well as any negative amortization, prepayment penalties, balloon payments and escrow requirements.

It also addresses if the loan has a fixed or variable rate.

Tradeoff table: • If completed (not required), this shows the relationship between settlement charges and interest rates.

Shopping chart: • Borrowers can use this tool to compare different loan offers side-by-side.

More information about the Real Estate Settlement Procedures Act: sctsm.in/RESPAhome

The RESPA changes differ from the Mortgage Disclosure Improvement Act changes already in place (sctsm. in/TILArule). They also are separate from the proposed Truth in Lending Act (TILA) changes, which are open to public comment until Dec. 24. You can submit TILA comments at sctsm. in/TILAcm.

•••

The structure and presentation of the new GFE are designed to encourage

borrower shopping for rates, fees and terms. In turn, brokers must have clear pricing structures. Loan originators must give accurate quotes and be able to overcome objections from customers who want an estimate to shop fees without giving their personal information.

While provisions exist for originators to cure any charges over the tolerance levels within 30 days, being prepared for RESPA’s new requirements can save the hassle and expense. •