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Changed Circumstance/APR Tolerance

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  • #2341
    WBkmj
    Participant

    Changed Circumstance Question:
    I am reviewing a loan where the loan amount increased by $4,100 between the GFE and HUD. The reason for the increase was an FHLB penalty for a loan that was being paid off by the new loan and taxes that were paid to the county clerk. Is this a changed circumstance? Page 20 of the RESPA Review and Update says a changed circumstance may include information about the amount of the loan, but then the next section says it does not include the mortgage loan amount sought. This confuses me.

    APR Tolerance Question:
    On the same loan listed above, the APR decreased by .14, which is over the 1/8 tolerance. I have found information which says it is okay if the change results from the finance charge. In this case, however, the finance charge remained the same. Is this loan out of tolerance and if so, how do we correct it?

    Thanks for your help.

    #2684
    JGo9
    Participant

    This is taken straight from RESPA 3500.2(b)

    Changed circumstances means: (1)(i) Acts of God, war, disaster, or other emergency;

    (ii) Information particular to the borrower or transaction that was relied on in providing the GFE and that changes or is found to be inaccurate after the GFE has been provided. This may include information about the credit quality of the borrower, the amount of the loan, the estimated value of the property, or any other information that was used in providing the GFE;

    (iii) New information particular to the borrower or transaction that was not relied on in providing the GFE; or

    (iv) Other circumstances that are particular to the borrower or transaction, including boundary disputes, the need for flood insurance, or environmental problems.

    (2) Changed circumstances do not include:

    (i) The borrower’s name, the borrower’s monthly income, the property address, an estimate of the value of the property, the mortgage loan amount sought, and any information contained in any credit report obtained by the loan originator prior to providing the GFE, unless the information changes or is found to be inaccurate after the GFE has been provided; or

    (ii) Market price fluctuations by themselves.

    The FHLB penalty sounds like something to me that might not have been relied upon at the time the GFE was completed as that’s not something you see with most loans (at least not in my neck of the woods). The taxes on the other hand sounds pretty common, unless you are talking about back taxes which the loan officer probably would not have know about at the time the GFE was completed. I would equate this to something like flood insurance. At the time a GFE is normally given you typically don’t a flood determination and would have no way of know that the flood insurance is required. Thus you wouldn’t list on the initial GFE. Once you found out about the property being in a flood zone after pulling your flood determination that would be considered a change circumstance which would allow you to redisclose.

    If this describes your situation in the way the facts came out then I would think that you would have a changed circumstance. Now remember that you only have 3 business days to redisclose from when you became aware of the changed circumstance to time of the essence.

    On the other hand if you knew or reasonably should have known about these charges before the GFE was completed then you don’t have a changed circumstance and sounds like you’ll be dealing with a cure.

    APR Tolerance Question:
    It does sound like you have a tolerance violation. To correct it you would need to redisclose; assuming you’ve not closed the loan yet.

    I hope this helps!

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