Hey Mortgage Lenders and Mortgage Brokers! Do You Know When You Are No Longer Bound To Your Good Faith Estimate?

Under the new RESPA regulations, the loan originator is bound, within the tolerances, to the settlement charges and terms listed on the GFE provided to the borrower unless a new GFE is provided prior to settlement. If a loan originator provides a revised GFE consistent with the new regulations, the loan originator must document the reason that a new GFE was provided. Loan originators must retain documentation of any reasons for providing a new GFE for no less than three years after settlement. See 24 C.F.R. § 3500.7(f) at http://bit.ly/QRYSY. But when can you provide a new GFE?

According to the new RESPA FAQs updated October 7, 2009 (pgs. 13–14) at http://bit.ly/msSSY, HUD lays out the following scenarios indicating when a loan originator is no longer bound by the GFE provided to the borrower:

i) A mortgage broker issues a GFE that a lender does not accept and the lender does not receive the application within three days of the date the broker received the application.
A: This does not constitute a changed circumstance.

ii) If a GFE is issued without a property address, the later identification of a property address.
A: If a loan originator issues a GFE without identifying a property address, the subsequent identification of the property address is not considered a changed circumstance.

iii) The borrower does not proceed to closing quickly upon final approval or does not act diligently in providing information to the lender.
A: The particular facts of each situation must be examined to determine if the facts constitute a changed circumstance.

iv) GSE, FHA or Mortgage Insurance program changes.
A: This could constitute a changed circumstance if the loan originator did not have notice of the GSE, FHA or other mortgage insurance program change prior to the issuance of the GFE.

v) The property address provided by the applicant, turns out to not be the correct, legal address.
A: This could constitute a changed circumstance.

vi) After the GFE is issued, parties are added to or removed from title or the property is moved into or out of trust.
A: These situations could be considered changed circumstances.

vii) During or as part of the transaction, it is determined that the property use may change, such as from owner-occupied to rental property.
A: This could constitute a changed circumstance. It should be noted that business purpose loans are not covered by RESPA. See 24 C.F.R. §3500.5.

viii) After the GFE is issued, it is determined that a party will be using a POA to sign, which may require additional work and additional fees.
A: This could be considered a changed circumstance.

ix) Credit policy is required to change after the GFE is issued due to regulatory changes such as fees charged by government agencies for recording fees or taxes change after the GFE is issued.
A: This could constitute a changed circumstance if the loan originator did not have notice of the regulatory change prior to the issuance of the GFE.

x) The loan does not close by the close date in the original Purchase Agreement or Construction Agreement provided to the lender.
A: The particular facts of each situation must be examined to determine if the facts constitute a changed circumstance.

xi) The vendor originally selected to perform a settlement service goes out of business or stops offering the service.
A: The particular facts of each situation must be examined to determine if the facts constitute a changed circumstance.

xii) AVMs are commonly used for the property type and loan amount requested, but the AVM request comes back with a ―no hit, necessitating the use of a more expensive valuation method.
A: This could constitute a changed circumstance.

xiii) After the GFE is issued, it is determined that an additional service such as an additional pest, structural or other inspection, upgraded appraisal, certification, survey or other requirement is required by the loan originator in connection with the transaction.
A: This could constitute a changed circumstance.

xiv) The borrower‘s credit score changes.
A: This could constitute a changed circumstance.

xv) A mortgage broker issues a GFE based on one lender‘s loan products and origination fees, but places the loan with a different lender.
A: No, this would not constitute a changed circumstance.