* * * * HARD CORE REAL ESTATE TALK * * * *
UPDATE: Thursday April 30th, 2009, 8:13 a.m.: As of this morning, I have received four telephone calls from agents to discuss the content of this post. There is interest out there although apparently not sufficient to get the dang thing featured.
I've sent the various HUD-1s involved to my attorney and put a budget of $1,500 on preparing a letter asking for an opinion from the Department of Veteran's Affairs. I'll post again when and if we get a response.
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I CLOSED A SALE IN LOVETTSVILLE THIS A.M. FOR A LOVELY NEWLY MARRIED COUPLE. It's their first home together and what a prize property right in my neighborhood in Lovettsville, Virginia. We found a wonderful home on 10 acres with a pond already stocked with fish. The newlyweds love the house. She loves the deck and the barn that's horse ready. He loves the 3 car detached garage. The daughter loves the horses that live next door.
AS WITH ALL CLOSINGS, I pester the loan officer for the HUD-1 until I get one. The title company cannot produce it until they get the instructions from the lender.
So, about 11:00 a.m. yesterday a.m., I received the HUD-1. THIS IS NOT RIGHT, I SAID OUT LOUD. The lender fees are on the Seller's side of page 2 of the HUD-1. No problem, right???
WRONG!!!
PAID FROM | PAID FROM | |||
BORROWER'S | SELLER'S | |||
HUD-1 Line | Charge For | Paid To | FUNDS AT | FUNDS AT |
SETTLEMENT | SETTLEMENT | |||
808 | Underwriting Fee | XYZ Mortgage Company | 200 | |
809 | Document Review Fee | XYZ Mortgage Company | 295 | |
810 | Tax Service Fee | XYZ Mortgage Company | 76 | |
On page 1 of the HUD-1 I see:
HUD-1 Line | ||
207 | Seller Subsidy-$11,000 total* | 10,426 |
*incl. Lines 808-810 |
The instructions from the mortgage company to the title company deducted the lender fees from the Seller Subsidy.
HOW DOES YOUR MORTGAGE COMPANY INSTRUCT THE TITLE COMPANY TO CHARGE THE LENDER'S FEES when the buyer is buying a home with VA benefits??
Actually, there is no dispute in my mind. Lender fees cannot be charged to the Buyer. To me, that means that the VA borrower cannot be charged the "Lender Fees" directly as an item PAID FROM BORROWER'S FUNDS AT SETTLEMENT. Nor can they be paid by the borrower through a circuitous route by deducting these lenders fees from the Seller's Subsidy to the Buyer.
SMOKE AND MIRRORS. If these fees (lender's fees) cannot be charged to the borrower, they cannot be charged to the borrower. By deducting these fees from the Seller's Subsidy, the buyer is paying these fees. While not a direct charge on the buyer's side of the HUD-1, but through a reduction of the Seller's Subsidy, the buyer is still paying these lender fees.
I WOULD NOT PERMIT MY BUYERS TO PAY THESE LENDER FEES. So, I contacted the title company to verify that these fees were charged to the BUYER through the seller's subsidy. Indeed, "that's the way they do it". "the way they do it" doesn't mean anything to me. So, I "advised" them that the lender fees had to, not only be on the seller's side of the HUD-1, but they needed to be "charged to the seller", not to the buyer through the back door.
THIS RULE HAS NEVER BEEN AMBIGUOUS TO ME. However, I haven't sold much resale real estate in the past few years and then only in MD. I checked with several other lenders and they come down about 50/50 as to how it is handled. It appears to be a matter of company policy.
So, while I was fully prepared to pay the lender fees, the lender decided to eliminate the charges altogether. Smart move. I got a revised HUD-1 and approved it immediately.
Walk-through went smoothly. Settlement went smoothly. Now Lenn has a new challenge.
JUST HOW DOES THE DEPARTMENT OF VETERAN'S AFFAIRS INTEND FOR THESE FEES TO BE CHARGED???
I've send documents to my attorney and asked him to prepare a letter to the Veteran's Admin. I want an opinion letter so I can share the information with the brokers in my network.
WHAT DO LOAN OFFICERS, REAL ESTATE AGENTS AND BROKER MEMBERS OF ACTIVE RAIN THINK??
I respect your opinions and am very interested in the industry treatment of these fees.
Courtesy, Lenn Harley, Broker, Homefinders.com, 800-711-7988, E-mail.
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