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May 22, 2012 at 4:43 pm #2467janet praterParticipant
-The following issues arose during a recent audit, but would like a second opinion as the regs are rather fuzzy in regard to application and definition of certain terminologies. (Note: these questions have also been posed to HUD; so far no response)
1. Is a charge required to be disclosed on the GFE/HUD if not “typically” charged to the Borrower in our institution? Our Bank absorbs the flood and credit report charges in all cases.
2. FAQ HUD-1 1100 series #16 clarification: In terms of a cost (partial or otherwise) (i) paid by the seller on behalf of the borrower vs (ii) a separate charge to the seller each instance being disclosed differently on the HUD as referenced in #16 please advise as to the proper disclosure format, (i) or (ii), of the following scenarios: GFE disclosed entire settlement fee as paid by borrower – at closing borrower pays half and seller pays half. GFE disclosed half of settlement fee as paid by borrower – at closing borrower pays half and seller pays half.
3. Block 1 – #2, #7, #9 clarification “lender inspection”: Is the “lender inspection fee” considered to be a lender “Origination charge” if the service is performed by a third party and/or not performed at origination, rather staged during the term of the loan? This lender inspection fee is actually a follow up appraisal inspection for construction that has been completed and the borrower cannot select the provider. Thank you.June 4, 2012 at 4:55 pm #2914jholzknechtKeymaster
Sorry about the slow reply, but these are some very tough questions. They are not directly addressed in Regulation X or in the Frequently Asked Questions. These are best estimates. You may want to run these by your friendly local examiner.
1. In HUD’s Frequently Asked Questions the following answer appears in Question 32 under the heading GFE-General.
The loan originator must list all required third party services on the GFE and HUD-1 regardless of whether the charge is paid by the borrow, the seller, loan originator or any other party, except for administrative and processing charges. If any party other than the borrower is paying for the service that was on the GFE (such as an appraisal fee), the charge remains in the borrower column on the HUD-1. A credit from the paying party to the borrower to offset the charge should be listed on the first page of the HUD-1 in Lines 204 – 209 and, if the service was paid by the seller, Lines 506 – 509 respectively.
A credit for the appraisal fee (or other fee) could also be offset by a credit disclosed as a negative number in Line A of the GFE and listed as a negative number in Line 803 of the HUD-1.
2. a. GFE disclosed entire settlement fee as paid by borrower – at closing borrower pays half and seller pays half.
The total charge appears on Line 1101 with a credit on page 1 of the HUD-1. The credit to the borrower appears in Line 204 – 209, and a charge to the seller must be listed in Lines 506 – 509.
2. b. The GFE disclosed half of settlement fee as paid by borrower – at closing borrower pays half and seller pays half.
The separate charge to the seller for conducting the settlement is listed in the seller’s column in Line 802. The borrower’s charge for conducting the settlement is itemized outside the borrower’s column in Line 1102.
3. Generally lender inspection fees appear in Block 1 of the GFE and line 801 of the HUD-1. There are two issues here. Does the fact that a third party performs the service impact the disclosure? Does the fact that the fee is paid after disclosure impact the disclosure?
There is no specific mention of a lender’s inspection fee performed by a third party in HUD’s guidance. But the guidance does mention other services performed by a third party, such as document preparation, that are included in Block 1 and Line 801. It appears that the lender’s inspection would be treated in the same fashion.
Fees paid after closing are generally listed on the HUD-1 as POC. Such fees are not included in the borrower or seller columns but are shown outside the column and indicated as POC (B – borrower, S – Seller).
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