Transcript Slide 1

“GFE 2010” Training
Preparing the new Good Faith Estimate (GFE)
Desktop Underwriter is a registered trademark of Fannie Mae. Loan Prospector is a registered trademark of Freddie Mac. This presentation is a
summary and is not complete. This information is for mortgage professionals only and should not be distributed to or used by consumers or other
third-parties. Information is accurate as of the date shown below and is subject to change without notice. 7/14/2010
FIRST MORTGAGE
Topics of Discussion
• Benefits of the new GFE
• Completing the New GFE 2010
• Other Issues
FIRST MORTGAGE
Benefits of the new GFE
•
Provide Borrowers with an easy to read standard GFE that clearly answers key
questions:
– What is the term of the loan
– Is the Interest rate fixed or variable
– If prepayment penalties apply
– Are there balloon payments
– Total closing costs
•
Proposed Consumer savings of nearly $700 in total closing costs
– Eliminates surprises of additional cost settlement, and in disclosing the Yield
Spread Premium and Discount Points in Brokered loans, fees are prominently
displayed accurately thereby informing the applicant how better to use this to
their advantage
•
New consolidation encourages Loan Originators to seek lower costs for 3rd party
services and get volume based discounts. By allowing average charges, internal
operations may be simpler and less costly thereby passing the savings to the
applicant.
•
Consolidates closing costs in major categories to prevent junk fees and display total
estimated settle charges prominently on the first page (to assist customer in
comparing loan offers)
GFE
Completing the “new’ Good Faith
Estimate (GFE) 2010
Standardized GFE

Principal Sections on the new GFE:

Important Dates section

Summary of Your Loan

Summary of the Settlement Charges

Understanding Your Estimated Settlement Charges

Your Charges for All Other Settlement Services

Trade-Off Table

Shopping Chart
Loan Scenario
Details of the loan scenario we will use in our presentation:

Conventional fixed

30 year

Interest rate set to 6%

PMI

No prepayment penalty

No balloon payments

Escrow is required

Total origination fees are $1700

No Yield Spread Premium (YSP)
GFE Sample
First Mortgage Corporation
Henny Doe
3230 Fallow Field Drive
123 Anywhere Street
Diamond Bar, CA 91765
Los Angeles, CA 91765
800-888-1231
[email protected]
July 1, 2010
7/1/2010 at 5 pm PST
7/16/2010 at 5 pm PST
30
7
Tips – Important Dates

HUD FAQ: At lock, an updated GFE must be issued with
“Important Dates” sections updated.

Complete Lines 1, 3 and 4 - with the information that
corresponds to the locked rate.

Line 1 – Insert date lock expires instead of when rate is
good through

Line 3 – Insert lock period

Line 4 –May contain “N/A” at this point.

If not locked, input for

CA: 7 days

All other states: 3 days

HUD FAQ: The “interest rate” and “other settlement charges”
dates are independent of each other.

HUD FAQ: If a revised GFE is provided based on a changed
circumstance or borrower-requested change, Line 2 must be
completed by entering a new date at least 10 business days
from the date the revised GFE is provided.
GFE Sample (middle of page 1)
1/10/2010 at 5 pm EST
1/25/2010 at 5 pm EST
45
3
180,000.00
30
6.00
1,151.19
X
X
9.00
January 2011
X
X
X
X
200,000.00
3 mo
1251.99
X
X
X
X
1451.99
72.55
161,799
10
GFE Sample (bottom of page 1)
X
X
X
X
X
1151.19
1,700.00
2,923.75
4,623.75
GFE Sample (top of page 2)
Box 1
Block 1
•
Contains all lender or lender and mortgage broker origination
points, processing fees and administrative fees (All or some of this
line represents the mortgage broker compensation.)
Note:
•
•
•
See Mortgagee Letter 2009-53 which lifts the FHA 1%
origination cap
Origination charges should not be itemized on the GFE
Exception: If a state or governmental program requires the
specific itemization of origination fees, a lender may itemize
on the HUD-1 in the blank 800 lines
Tips - Origination Charges

Sample fees that can be included in Box 1 as part of your
Origination Charges:













Origination Fees
Commitment Fees
Wire Fees
Underwriting Fees
Administrative Fees
Mortgage Broker Fees
Doc Prep Fees (Includes 3rd Party or Attorney Fees)
Application Fee
MERS Registration Fee
Delivery/Courier Fee
Doc Review Fee
Electronic Fee
Any other miscellaneous fees…

VA loans – Include VA non-allowable fees in Box 1 of GFE

Then show on Page 2 of HUD-1 in Line 801

With a credit on Page 1 of HUD-1 in Lines 204-209 for
Transfer Tax, Owner’s policy and non-allowable
GFE Sample (top of page 2)
NOTE: Only 1 box can be checked per loan.
Box 1
Box 1
Box 2
Box 2
Box 3
Box 3
Block 2
•
•
•
Box 1 is only checked by the lender if no additional charges or credits apply
(Retail Use Only)
Box 2
•
Contains lender credits to the borrower to cover origination and/or fees
OR
•
Contains a mortgage broker credit from the lender (or yield spread
premium) and any additional payments made to the broker from the
lender
Box 3 - any loan origination fee or points
Retail Scenario #1
Sample Retail Scenario:
•
•
•
•
Loan Amount: $200,000
Interest Rate: 5%
Origination Point: 1% = $2,000
Administrative Fee: $500
Retail Disclosure
Retail Scenario #1 cont’d…
Changed Circumstance Occurs:
•
•
•
•
•
Loan Amount: $200,000
Appraisal came in lower than expected resulting in a 50 bp loan adjustment
Interest Rate: 5%
Origination Point: 1% = $2,000
Administrative Fee: $500
Retail Disclosure
Retail Scenario #2
No Points
Sample Retail Scenario with No Points:
•
•
•
•
•
Loan Amount: $200,000
Interest Rate: 5.25%
Lender Credit: ($1,000)
Origination Point: 0%
Lender Administrative Fee: $500
Retail Disclosure
$500
x
$1,000
5.25
-$1,000
-$500
Retail Scenario #3
With Discount Points
1,500.00
X
2,000.00
5.50%
2,000.00
3,500.00
Scenario 2: Retail Loan with Discount points




Lender charging $1,500 Origination Fees including Admin Fees
Borrower requested an interest rate of 5.50%
LO locked in an interest rate set to 5.50%
Discount points of $2,000
FIRST MORTGAGE
Wholesale Scenario #1
Sample Wholesale Scenario:
•
•
•
•
•
Loan Amount: $200,000
Interest Rate: 5%
Yield Spread Premium: 1% = ($2,000)
Broker Compensation: $4,000 + $200 Processing Fee = $4,200
Lender Administrative Fee: $300
Wholesale Disclosure
Wholesale Scenario #1 cont’d…
Changed Circumstance occurs:
•
•
•
•
•
Loan Amount: $200,000
Interest Rate: 5%
Yield Spread Premium: .50% = ($1,000)
Broker Compensation: $4,000 + $200 Processing Fee = $4,200
Lender Administrative Fee: $300
Wholesale Disclosure
Wholesale Scenario #2
Sample Wholesale Scenario:
•
•
•
•
•
Loan Amount: $200,000
Interest Rate: 5.25%
Yield Spread Premium: 2.5% = ($5,000)
Broker Compensation: $4,000 + $200 Processing Fee = $4,200
Lender Administrative Fee: $300
Wholesale Disclosure
$4,500
x
$5,000
5.25
-$5,000
-$500
Tips - Origination Charges
Box 1: The origination charge

Can decrease but CANNOT INCREASE from amount disclosed on
initial GFE.
Box 2: Credit or Charge

The credit or charge can change at time of rate lock.

However, only the charge for the specific interest rate chosen may
increase (applicable circumstance addressed below).

YSP (on brokered loans) must be disclosed at time of initial GFE even
if loan is not locked. YSP may not be added or increased when rate is
locked.

Bona fide discount points can increase at time of rate lock if the fee is
reflected as a charge (points) in Box 2.

The charge (points) for the interest rate can be added or
increased at rate lock so long as the fee is not added as a
origination charge (Box 1).
Disclosing Fees
•
All fees typically charged to borrowers regardless of who pays must
be listed on the GFE.
Except
• Owners title, even if typically paid by the seller, must be disclosed
on the GFE in Block 5
Items to Note:
• Fees disclosed, but paid by others are still bound by tolerances
• Block 3 includes all third party settlement services selected by the
broker/lender
– Exception: Document preparation performed by a third party should be
disclosed in Block1 (Our origination charge)
– Exception: Charges for appraisals performed by in-house appraisers
should be disclosed in Block 1 (Our origination charge)
GFE Sample (top of page 2)
1,700.00
1,700.00
Appraisal Fee
275.00
Courier Fee
30.00
Credit Report Fee
20.00
Tax Service Fee
85.00
410.00
625.00
FIRST MORTGAGE
GFE Sample (page 2 continued)
0.00
0.00
50.00
599.06
X
X
30.00
1
313.69
30.00
02/01/2010
FIRST MORTGAGE
GFE Sample (bottom of page 2)
Hazard Insurance
Flood Insurance
872.00
896.00
24.00
2,923.75
4,623.75
FIRST MORTGAGE
Tips – Boxes 4,5,8, etc.
Box 4:

The Escrow fee and the Lenders Policy (ALTA) are to be disclosed based
on what is written on the purchase contract (Box 4). If the contract says the
buyer is to pay 50% of the escrow fee, you only have to disclose the
buyer’s portion of the escrow fee. The seller’s portion should be shown as
a seller credit.
Box 5 & 8:

On purchase transactions, the full amount of the transfer tax (Box 8) and
the Owner’s Policy (CLTA) (Box 5) must be disclosed on the GFE no matter
who is paying it.

Only the buyer’s costs per the purchase contract needs to be included in
the 6% sales concession. Since the transfer tax and the Owner’s Title
Policy are specifically noted in the purchase contract as paid by the seller,
they are not included in the 6% buyers closing cost sales concession. They
are a separate credit in the 204-209 section of the HUD-1.

The Tax Service Fee of $72.00 should not be included in the GFE for any
FHA loans including the CHF ACCESS, CalPERS FHA, etc.
GFE Sample (page 3)
FIRST MORTGAGE
GFE Sample (page 3 Tradeoff Table)
180,000.00
6.00
1,151.19
180,000.00
180,000.00
6.25
5.75
1,180.29
29.10
4,623.75
1,122.43
28.75
650.00
1,800.00
3,973.75
6,423.75
FIRST MORTGAGE
GFE Sample (page 3 Shopping Table)
FMC
180,000.00
30
6.00
1,151.19
45 days
No
No
No
No
No
4,623.75
“GFE” IMPLEMENTATION DATE
New GFE will apply to all loans for which
creditor receives an application on or after
January 1, 2010
MISCELLANEOUS
Flow Chart
FAQ’s
RETAIL
RESPA Flow Chart
Submission Package to UW

For all applications taken on or after January 1, 2010, the following items
must be included in the initial submission package to Underwriting:

Initial GFE

Intent to Proceed

Truth-in-Lending in compliance with MDIA

Change of Circumstance form (if applicable)

Re-disclosed GFE (if applicable)

Intent to Proceed for any re-disclosed GFE (if applicable)

2010 HUD-1 that has all of the initial GFE figures added to page 3

Closing Statement from escrow (if Line 1101 title charges are not broken
down on an addendum to the HUD-1)

If a changed circumstance has taken place, the changed circumstance “redisclosed GFE” is the one that should be sent to escrow for them to input
onto Page 3 of the HUD-1.

Underwriting will not be able to send files to the document department
unless all of the required compliance disclosures are included in the file and
are accurate.

DO NOT WRITE ON THE GFE’s...
FIRST MORTGAGE
RETAIL TRAINING Q&A
WHOLESALE TRAINING Q&A
FAQ
GFE – Seller paid items:

Q: If at the time a GFE is issued, it is known that the seller will pay settlement charges
typically paid by the borrower, how are the charges disclosed on the GFE?

A: All charges typically paid by the borrower must be disclosed on the GFE regardless
whether the charges will be paid for by the borrower, the seller, or other party.

Q: Are charges to the seller listed on the GFE?

A: Charges that typically would NOT be charged to the borrower, but would be charged
to another party such as the seller – do not have to be included on the GFE. If the
borrower typically would incur charges for title services, and lender’s and owner’s title
insurance, the GFE instructions make it clear that those charges are required to be
listed regardless of whether, for example, the contract requires the seller to pay for the
service. If there’s a question about whether the borrower or seller is to pay for a
particular service, the charge for that service should be disclosed on the GFE.
GFE – Seller Credits:

Q: How do we handle seller credits?

A: As far as the GFE is concerned, the fees would need to all show on the buyer’s side
and the seller paid credit would NOT appear on the new GFE at all. For TILA, we must
show the fees paid by the seller to get the APR to calculate accurately.
FAQ cont’d…
GFE – Owner’s Title:

Q: Other lenders are not required to show owner’s title unless it is a FNMA repo; in all
other cases, seller pays for it so why must we disclose?

A: 5% of the country charges the Owner’s Policy to the borrower and since this can be
charged to the borrower, this must be disclosed to all borrower’s on all GFE’s for
purchase transactions. If the seller is paying it, then a seller credit should be shown on
page one of the HUD-1 to offset it but NO seller credit is to show on the GFE. See
RESPA FAQs from HUD issued 12/30/09 for more details.
FMC Training & Support

First Mortgage is committed to providing ongoing trainings on the
new RESPA Reform
1.
RESPA Overview Training / Completing the GFE DONE
2.
Completing the HUD-1 Settlement Statement DONE
3.
Point Training – You need Point Version 7.2 DONE
4.
FirstBase Training – FMC internal LOS system DONE
5.
FMC Process Training – DONE

HUD is seeking legislation to determine how to assess penalties for noncompliance so BE PREPARED!!!

Train your internal teams/staff on the new RESPA rules, GFE, and any new
software requirements

DOCUMENTATION is the key!
FIRST MORTGAGE
FIRST MORTGAGE
On behalf of First Mortgage,
thank you for joining today’s
training and we hope the
information provided will help
you build your business!