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“GFE 2010” Training Preparing the new Good Faith Estimate (GFE)

“GFE 2010” Training Preparing the new Good Faith Estimate (GFE).

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“GFE 2010” Training Preparing the new Good Faith Estimate (GFE)

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  1. “GFE 2010” TrainingPreparing 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

  2. FIRST MORTGAGE

  3. Topics of Discussion • Benefits of the new GFE • Completing the New GFE 2010 • Other Issues FIRST MORTGAGE

  4. 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)

  5. GFE Completing the “new’ Good Faith Estimate (GFE) 2010

  6. 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

  7. 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)

  8. GFE Sample First Mortgage Corporation Henny Doe 3230 Fallow Field Drive Diamond Bar, CA 91765 123 Anywhere Street Los Angeles, CA 91765 800-888-1231 July 1, 2010 FMCloans@firstmortgage.com 7/1/2010 at 5 pm PST 7/16/2010 at 5 pm PST 30 7

  9. 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.

  10. 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 200,000.00 X X 3 mo 1251.99 1451.99 X X 72.55 X X 161,799 10

  11. GFE Sample (bottom of page 1) X X X X X 1151.19 1,700.00 2,923.75 4,623.75

  12. 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

  13. 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

  14. 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

  15. Retail Scenario #1 Sample Retail Scenario: • Loan Amount: $200,000 • Interest Rate: 5% • Origination Point: 1% = $2,000 • Administrative Fee: $500 Retail Disclosure

  16. 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

  17. Retail Scenario #2No 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

  18. Retail Scenario #3With Discount Points 1,500.00 2,000.00 2,000.00 X 5.50% 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

  19. 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

  20. 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

  21. 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 5.25 $5,000 -$5,000 -$500

  22. 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).

  23. 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)

  24. GFE Sample (top of page 2) 1,700.00 1,700.00 275.00 Appraisal Fee Courier Fee 30.00 410.00 Credit Report Fee 20.00 Tax Service Fee 85.00 625.00 FIRST MORTGAGE

  25. GFE Sample (page 2 continued) 0.00 0.00 50.00 599.06 313.69 X X 30.00 30.00 1 02/01/2010 FIRST MORTGAGE

  26. GFE Sample (bottom of page 2) 896.00 Hazard Insurance 872.00 Flood Insurance 24.00 2,923.75 4,623.75 FIRST MORTGAGE

  27. 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.

  28. GFE Sample (page 3) FIRST MORTGAGE

  29. GFE Sample (page 3 Tradeoff Table) 180,000.00 180,000.00 180,000.00 6.00 6.25 5.75 1,151.19 1,180.29 1,122.43 29.10 28.75 650.00 1,800.00 4,623.75 3,973.75 6,423.75 FIRST MORTGAGE

  30. 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

  31. “GFE” IMPLEMENTATION DATE New GFE will apply to all loans for which creditor receives an application on or after January 1, 2010

  32. MISCELLANEOUS Flow Chart FAQ’s

  33. RETAIL RESPA Flow Chart

  34. 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 “re-disclosed 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...

  35. FIRST MORTGAGE RETAIL TRAINING Q&A WHOLESALE TRAINING Q&A

  36. 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.

  37. 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.

  38. FMC Training & Support • First Mortgage is committed to providing ongoing trainings on the new RESPA Reform • RESPA Overview Training / Completing the GFE DONE • Completing the HUD-1 Settlement Statement DONE • Point Training – You need Point Version 7.2 DONE • FirstBase Training – FMC internal LOS system DONE • FMC Process Training – DONE • HUD is seeking legislation to determine how to assess penalties for non-compliance 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

  39. 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!

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