GFE – late – Does this make it a no fee loan?

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    Good evening!

    We continue to grapple with what to do if the bank sends a late GFE (GFE after the 3 days have passed) – do we just send it late and take the violation for it being late, or are we required to give it but also list all the fees on the GFE column of the HUD-1 as $0 essentially making it a “no fee” loan? Specifically, if we have to list the fees all as $0 on the GFE side, what about our internal fees like our origination fee – could we simply list it as $0 on the GFE column but also list it as $0 on the HUD side and simply not charge it?

    Here is why the question is coming up – in HUD’s RESPA Roundup from April 2011, they stated:

    III. Loan originator fails to issue GFE
    If a loan originator fails to deliver a GFE in clear violation of 24 CFR § 3500.7(a) and (b), the loan originator will have significant potential tolerance violations at settlement. See RESPA § 3500.7(e).

    Where the loan originator has not provided the consumer with a GFE, when completing the HUD-1 comparison chart the loan originator’s instructions to the settlement agent must indicate that the settlement agent must fill in the GFE columns with $0 and the HUD-1 columns with the actual charges from Page 2 of the HUD-1. If this results in one or more tolerance violations, the loan originator may cure the tolerance violation(s) by reimbursing the borrower the amount by which the tolerance was exceeded at settlement or within 30 calendar days after settlement.

    As with other compliance areas, loan originators should adopt policies and procedures to ensure that GFEs are delivered timely, in accordance with the requirements of RESPA.

    We sent the following question to HUD in 2010 (prior to that Roundup) because they said the same thing as they did above, but for late GFEs in a RESPA telephone conference they held with FDIC, and we received the answer below back from them. Because of our disagreement with HUD’s answer, we’ve posed the question to FDIC twice, but they haven’t responded with an answer from Washington yet (asked in 2010 and 2012).

    Our Question: It sounded like one of the presenters said that if you don’t issue the GFE timely (within 3 days of receiving the application), that the only option was to give a free loan – I believe it was said you would put all of the fees as zeros on the GFE column of the HUD-1 comparison chart. Couldn’t we instead, still give the GFE anytime before closing? I understand that we’d still have to take the violation for §3500.7, but I don’t see anywhere in the regulation or FAQs that says if you miss the 3 days, you have to make a fee free loan. I can see having to put zeros if you never issued the GFE, but not just for issuing it late.

    HUD’s Answer: The listing of $0 in the comparison chart will show the tolerance violations associated with the origination of the loan pursuant to 24 CFR 3500.7(e). The loan originator then will have an opportunity to cure the tolerance violations identified within 30 days pursuant to 24 CFR 3500.7(i). If the loan originator does not cure the tolerance violation, there will be an additional violation of 3500.7(e). The violations for not providing a GFE under 24 CFR 3500.7(a)(1) [or (b)(1) in the case of a loan originated by a mortgage broker] and the violation for having loan terms on at the time of closing that do not match the loan terms on the GFE [24 CFR 3500.7(f)] cannot be cured since a GFE was not provided in accordance with the requirements of 24 CFR 3500.7.
    David L. Friend, Esq.

    Office of RESPA and Interstate Land Sales

    Department of Housing and Urban Development

    Our Followup Question: Your answer seems to refer to if the GFE is not provided at all. What if it is provided, but not timely (i.e. on the 4th day)?

    HUD’s (David Friend’s) Followup Answer: If the loan originator has not provided a GFE within the 3 business days, subsequent disclosure of the GFE cannot be the basis for the GFE amounts on the HUD-1 since the GFE was not issued in accordance with 24 CFR 3500.7. This is also true of any revised GFE issued pursuant to a changed circumstances more than 3 days after the loan originator receives information sufficient to constitute a changed circumstance.

    I know it would seem we just need to follow what HUD said, but it’s not in any formal HUD commentary, and I’m getting a lot of push-back from lenders on this. Not to mention the question of which fees do we have to then actually list on the HUD – can we simply not charge our internal fees on the HUD and just list third party fees so that is all we are putting in the tolerances (or does this then open up a fair lending can of worms because then it looks like we charge some people an origination fee but not others)?

    THANK YOU for your help!



    The RESPA Roundup is something that you have to comply with. There are a couple of ways that you can approach this. The RESPA Roundup doesn’t explicitly say that if you deliver the GFE late, that you have to list the fees as $0 on the HUD, in the comparison chart. It mentions that if a GFE is not delivered at all, that the fees would then have to be treated in that manner.

    Some hold the belief that since it references the section of the regulation that talks about being delivered within three business days from the date of application, that not delivering it in a timely manner also would constitute listing the fees on the comparison chart as $0. If you want to be ultra conservative, you could abide by this approach and you should not be criticized by regulators. That being said, if you choose to take the approach that you don’t have to do so, as long as a GFE was given (timely or late), then you still may not be criticized, but realize that it is a possibility. It depends on your institutions appetite for risk in this area.

    I personally think you’ve got a good argument, or at least could make some good points, by saying that you don’t have to list the items as $0 on the comparison chart, as long as a GFE was delivered.

    As for your questions not being answered yet, if you asked HUD, I doubt, you’ll ever get an answer as RESPA is the CFPB’s baby now. You might not get an answer from them either at this point, as they are making some massive changes to RESPA, and we can only hope those changes will make things clear than what we have to deal with at this point.

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