Financing in Concord>Question Details

Caden, Home Buyer in Concord, CA

Lenders refusing GFE because of new RESPA rules.

Asked by Caden, Concord, CA Thu Jan 14, 2010

I just accepted a counter offer on a REO property and now waiting for the executed contract from the seller. Because I agreed to somewhat tightapproval date, I wanted to select my lender while I wait for the executed contract. I requested GFE’s from the two lenders who had pre-approved me for a loan. Both are refusing to issue a GFE until they see get the executed contract and I actually apply for a loan. They said that it’s because of the new RESPA rules and all they can provide with more informal “loan scenario”. This loan scenario is non-binding and can change at anytime, which means it’s worthless. Both lenders already have my SS #, had pulled my credit report, my paystubs, my tax returns, my bank statements, and a copy of the counter offer (which has the property address) I signed.
Can I start loan applications with the two lenders at the same time and drop one after I get to compare the GFE without any penalty? Someone had said that you could do that but I might have to pay fo

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I am not surprised that it is someone like B of A. It is the big banks that are having a harder time trying to deal with this, because they have the most at stake in terms of fines. They may not want loan officers to issue them. The HUD rules give the 6 items, plus it says "any other items deemed necessary by the loan originator." The loan originator, B of A, can make a decision on what they what item #7 to be.
0 votes Thank Flag Link Thu Jan 14, 2010
As a person trying to refinance, I want to know the costs of the loans available to me before I commit. Rates change daily but I want to look at the fees. I also want to choose the leader with low fees and few junk fees. The way I did this in the past was to compare GFE between lenders.

The rules outlines in RESPA changed and it is not possible to get a GFE before paying an application fee. This means comparison of fees is now impossible. This means the borrower is blind, or is forced to rely on verbal statements.

A loan is like any other purchase. Something of value is exchanged for payments. Why would anybody pay an application fee, and then discover the costs of what they are buying after the fact? This RESPA rule removes the ability to bargain, it removes an early full disclosure and makes consumers pay more.

Very poor
1 vote Thank Flag Link Fri Nov 12, 2010
Dave,
I agree with your comment, however, if Caden asked me for a GFE, and after he reviewed my GFE compared to another lender, and he then chose to work with me, I am bound by that GFE I gave him. I do not then get to go back and get "more accurate" fees and update my GFE, unless something significant changes about the transaction.

Caden,
I will also say that HUDs new regulations are not crystal clear. So a lot of the discusison you are seeing here is becasue every mortgage company has had to find their own way to intrepret the new regulations and figure out how to execute new policies and procedures to meet the expectations of HUD. I would suggest to you to go with the lender that has been the most up front with you and the one you know will be able to get the loan done for you. We are all navigating new waters while still trying to do the best job for our clients.

I am sure you will choose the right lender for you!
Julie
1 vote Thank Flag Link Thu Jan 14, 2010
Erica, here is your first sentence "GFEs do apply to a specific house and loan program whereas good faiths do not". What exactly do you think the letters GFE stand for? I also don't see anyone talking about an appraisal. As I said, the lender can add whatever they want to the 6 items, which Caden has said he has provided. He may not know what their #7 is, and the loan officer he is working with may not tell him.
Also, if I know that a client of mine also wants to put in application with another lender, I don't want to deal with them. I don't care if they speak to other loan officers, get GFE's from them, whatever. If they do not trust that I will do the best for them, they can apply elsewhere, because although there might be other people who will be as good and as honest, I am confident that they will not find anyone better or more honest.
0 votes Thank Flag Link Fri Jan 15, 2010
Caden,
GFEs do apply to a specific house and loan program whereas good faiths do not. I don't see how the appraisal issue even comes up. I have never heard of an appraisal being ordered at the stage you're talking about. If you need help I would be happy to recommend a good lender.
Best of Luck,
Erica
Web Reference: http://www.jscarealty.com
0 votes Thank Flag Link Fri Jan 15, 2010
To Lew: Both banks have all 6 required information. They are still refusing to issue a GFE. B of A is one of the lenders. From my research on different sites, I see that I am not the only one who is having this issue with B of A.
0 votes Thank Flag Link Thu Jan 14, 2010
Julie, sorry but I don't agree with you. Our information has it that it is a change in circumstance. The reason I say it is not worth anything is that someone can issue a GFE on an unlocked rate and doesn't show points. Once the rate is locked, all of a sudden they have to redisclose and there are points. The GFE will tell them how close to closing the rate has to be locked, but if they are that close to closing, are they going to switch to another lender?
Also, I work for a company that is large enough that we will get audited. I feel that the abuses are more often with loan officers from small companies who no one is going to bother with. It is going to be the same thing with the new licensing requirements and passing the test. There will be ways that small shops will get around that by licensing only 1 person, and putting all loans in their name.
0 votes Thank Flag Link Thu Jan 14, 2010
Thanks, everyone. Very helpful information. Too bad I happen to shop for a loan when things are getting ironed out.

It looks like I would have to fill out multiple loan applications to be able to compare actual GFE's.
0 votes Thank Flag Link Thu Jan 14, 2010
Robin, I respectifully disagree. For the first time, the GFE IS worth the paper it is written on. That is the whole point of these new regulations. And yes, this is true even if the rate is not locked. Certainly, until locked, the rate can change. But one of the main points of this GFE is the fees are no longer suppsed to swing dramatically based on rate, and certainly they are not to increase. Finally, locking in a rate different that what was quoted on the GFE does not necessarily constitute a change circumstance...and the areas on the GFE that can be changed are minimal.

Caden,
I thank you for asking your question in this forum. I think many of us are enjoying the information exchange. I know I am!

Julie Thall
jthall@rpm-mtg.com
0 votes Thank Flag Link Thu Jan 14, 2010
Caden, each lender or mortgage company is coming up with their own policy on this. Seeing as they have the other information, a property address and a proposed selling price, they should be able to issue a GFE. However, some companies have put in their own guidelines, such as the fact that they have to upload your file to DU (desktop underwriting) before they issue it. If they choose to give you a GFE, and your rate is not locked, which they really can't do, and the price is not approved by the bank, it would constitute a change in circumstance anyway so they could issue you a new GFE. When you try to compare the GFE's in a case like this where the rate is not locked, they may not be worth the paper they are written on.
0 votes Thank Flag Link Thu Jan 14, 2010
Under the new RESPA rules that went into effect on January 1st, no lender will provide a good faith estimate unless you have:

- provided your full name
- provided your income information (paystubs, W2s)
- your social security number so we can pull a credit report
- a property address
- an estimate of the value of the property
- a loan amount
- and any other information deemed necessary.

The reason is if a GFE is issued, then the fees are "locked in" for 10 days. HUD states that if a GFE has been issued, then that means you have provided all of the required information. If you have not provided all of the information, and if a lender issues a GFE anyway, and it's later determined that one or more pieces of information that was supposed to be provided (but wasn't) and is erroneous from what you stated, and if because of the ommitted information that the lender should have known results in a higher fees for your mortgage, the the lenders have to "eat it." The lenders can not pass the increased cost onto you. Lenders could potentially be put in a position of providing a mortgage to you at a loss.

Result? If you don't provide the information, you won't get a GFE. If you want a GFE so you can compare costs, you will have to provide the information listed above.
0 votes Thank Flag Link Thu Jan 14, 2010
Yes you can run two loan applications at the same time but you'll probably have to pay for two credit reports. I would recomend that you get the informal non-binding GFE from both and just go with the one who has the best. They aren't supposed to issue the GFE until they have a copy of the contract. The GFE figures for lender fees are binding once issued and the information in your accepted contract can affect these fees along with some other fees from service providers which are only allowed to deviate 10% in the aggregate. By the way, once you get the lenders GFE you probably won't understand it. You can send your thanks to some government bureaucrats at the Treasury Dept., Federal Reserve, and HUD. The new GFE was supposed to make things more understandable. Oops! Good Luck. http://www.johnshellington.com
0 votes Thank Flag Link Thu Jan 14, 2010
Hey Caden ~

I am a mortgage broker and just wanted to confirm what Julie said below. Her explaination is right on!

The new GFE is causing a lot of confusion not only for consumers but even for the mortgage industry during this roll out period. The bottom line is ... the new rules will be better for the consumer as the "bait and switch" game will no longer be possible (at least from those who want to keep their licenses).

All the Best,
Barbara
0 votes Thank Flag Link Thu Jan 14, 2010
Danny,
Very well said!
Julie
0 votes Thank Flag Link Thu Jan 14, 2010
The new RESPA-compliant GFE cannot be provided at any time. A complete loan app must have been taken as defined by HUD including the 6 elements others have indicated. Lenders are prohibited from using the fully binding 2010 GFE until then. However, once a complete app is received, lender has 3 days to deliver the Good Faith Estimate.

Since this is all brand new and lenders are now held fully accountable for inaccuracies, I suspect most of us are being super cautious in delivering a binding GFE. There's still a lot of confusion and most are still getting up to speed on what can and cannot be done to remain RESPA-compliant. I think HUD's intentions are noble and the changes are headed in the right direction of standardization and full disclosure. In the end, the hope is that this will flush out and put an end to deceptive practices in fee disclosures. It's by no means perfect, but we'll have to all work thru it.

My suggestion would be to determine who you're most comfortable with and commit to working w/ them. I'd advise against bailing from one or the other for a tiny difference in rate/fees. As the saying goes, you typically get what you pay for...and with such a large financial decision, holding out for the lowest price provider may come back to haunt you. Good luck.
0 votes Thank Flag Link Thu Jan 14, 2010
Caden, the form itself answers some of your questions, and a lot of Julie's comment about needing title company fee information only applies if the lender selects and you use that one.

The form's at http://www.hud.gov/offices/hsg/ramh/res/gfestimate.pdf
0 votes Thank Flag Link Thu Jan 14, 2010
The lender must issue a GFE once they have the address,, they can not hold out for the contract per HUD guidlines.

Six items are needed per RESPA

1.) Borrower's name
2.) Borrowers monthly income
3.) Borrowers SS#
4.) Property Address
5.) Estimate of Property value/purchase price
6.) Mortgage loan amount

They appear to have all six items needed if the have a copy of the contract and counter even if not signed and only have 3 days to get you a GFE. Remind them of the 3 day requirement..... Refer to the HUD link below.
0 votes Thank Flag Link Thu Jan 14, 2010
Caden,
Unfortunately, most of what you have written is true. HUD does not want us issuing a GFE until we have an official application. We do not have an official application until we have 6 elements, once of which is the property address. We do not have a property address until we have the ratified purchase contract. It is an extremely frustration situation.

The reason for this is that this GFE, which stands for Good Faith Estimate, it actually more of a Good Faith Commitment, as of January 1st, 2010. Most of the fees we quote are binding, and we cannot quote binding fees until we understand what has been agreed to in the purchase contract.

The new GFE is designed to protect you, by forcing us as lenders to be much more accurate with your fees, right from the start. For example, it is impossible for us to quote accurate title and escrow fees until we know who the title and escrow company is. These new regulations will just change how you shop for a loan, and it will likely length the escrow periods, but in the end, it will mean no surprises when you sign your loan docs.

The good news is that you can start loan applications with two lenders at the same time, get both GFEs and then decide. They cannot order an appraisal for you until you have accepted their GFE, by siging an "Intent to Proceed" form. The only thing you will be out, with the lender you do not choose, is your credit report fee.

Good luck! And congratulations on the house!
Julie Thall
0 votes Thank Flag Link Thu Jan 14, 2010
My understanding is that the new GFE is to be provided only after an actual loan application, but a pre approval is not tied to a particular home so I don't think the two appraisal fees is an issue.

See my blog post on this topic at http://www.trulia.com/blog/dave_sutton_windermere_walnut_cre…
0 votes Thank Flag Link Thu Jan 14, 2010
My question got cut off: Someone had said that you could do that but I might have to pay for 2 appraisals. It seems unfair to me that you have to pay 300-500 just to select a lender.
Also, a general question why is HUD trying to make rate shopping hard for consumers?
0 votes Thank Flag Link Thu Jan 14, 2010
According to the Consumer Protection Bureau, you do not have to pay for an appraisal or any other fees to get a GFE. http://www.consumerfinance.gov/askcfpb/146/what-is-a-good-faith-estimate-what-is-a-gfe.html
Flag Thu Aug 28, 2014
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