There were clarifying amendments made July 11th, 2011 to the Real Estate Settlement Procedures Act (RESPA) sections involving “changed circumstances” and the “GFE Comparison-Page3”. Both amendments are very relevant to all banks and mortgage professionals out there.
The provision currently addresses changed circumstances affecting closing costs and that revisions to charges on the GFE may increase for services listed on the GFE but only to the extent that the changed circumstances actually resulted in higher charges.
The rule though, did not include that the revised GFE may increase charges listed on the GFE only to the extent that changed circumstances affecting the loan, or the borrower’s requested change, actually increased those charges.
This was clarified and amended in the most recent release.
GFE COMPARISON Page on HUD-1 or HUD-1A Settlement Statements
If the borrower doesn’t purchase a settlement service that was listed on the GFE, there should be no charge entered for that service in the corresponding line on Page 2 of the HUD-1, and the estimate of the charge from the GFE should not appear on the comparison chart on Page 3 of the HUD-1.
HUD has determined that the current instructions are not sufficiently clear on this point. Allowing loan originators to include on Page 3 of the HUD-1 charges from the GFE for settlement services that were not purchased could both induce loan originators to discourage consumers from purchasing settlement services (e.g., owner’s title insurance) in order to gain padding in the 10 percent tolerance categories, and encourage loan originators to pad the 10 percent tolerance categories on the GFE with estimates of services that the consumer will not need in the transaction. HUD has previously addressed and clarified this issue in informal guidance.
Therefore, HUD is revising the first paragraph of the instructions for Page 3 of the HUD-1 to clarify that the amounts to be inserted in the comparison chart are those for the services that were purchased or provided as part of the transaction, and that no amount should be included on Page 2 of the HUD-1 for any service that was listed on the GFE, but which was not obtained in connection with the transaction. (for more information see Lenderscomplianceblog.com)
I believe this amendment is good and answers obvious questions that from time to time would come in. Many times banks were using the change of circumstances to change other items, this is not supposed to happen any longer. Moreover, a service that is not needed (ie – a specific endorsement) can be removed from the GFE Comparison portion of page 3 which will prohibit the extra % difference that borrowers have grown used to seeing. Banks sometimes appeared to overdislcose, this may not be the case as much any longer…