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HUD's response to my VA question

By
Services for Real Estate Pros with McMichael & Toledo, CPAs

Well, I got a response from HUD, but it wasn't the most helpful thing in the world. It looks like they haven't thought about, and don't intend to think about, the way their new rules interact with the existing rules of other federal agencies like the VA. This is unfortunate since these interactions are critical to the way things actually work in the real wold. Of course, the problem may be that the people making the rules don't actually work in the "real world" of mortgage finance.

Here is the exact quote in answer to my questions from my last post:

"It is recommended that you discuss the VA guidelines with their office, HUD cannot interpret regulations promulgated by another federal agency."

It's very frustrating when you have two federal agencies making rules that are in direct conflict with one another and that somehow both have to be applied in the same transaction. I wonder if I should take this question to VA... or will they just respond that they don't interpret HUD's regulations?

Amy Wood
Guaranty Trust - Murfreesboro, TN

Bela, my supervisior sent out a memo about seller paid closing.  You will put it on the closing cost like with an asterisk and at the bottom of the page you will write the seller will be paying x amount of dollars for this charge.  This is how Guaranty Trust will handle this....Good Luck!

Amy in TN

Dec 30, 2009 04:33 AM
Bela Toledo, CPA
McMichael & Toledo, CPAs - Grants Pass, OR

Amy,

HUD is actually fairly clear on that point, which is good because it will happen on lots of loans that are not VA loans.  I do thin you'll want to be caareful about putting asterisks and adding info to the form.  HUD is pretty clear about the ways you can and cannot alter the GFE.  Anyway, here is what they say about seller paid costs:

"Origination charges that are paid by the seller at settlement are not disclosed on the GFE, i.e. underwriting, processing, administration, etc.  In addition, regardless as to whether the seller, borrower or lender is paying “owners title policy”, the amount must be disclosed in Block 5 on the GFE, and shown as a credit on the HUD-1 if the fee is paid by the seller or lender."

My big concern, and the one they didn't address, was with the non-allowable costs on a VA refinance where there is no seller to pay them.  You can only charge 1% on a VA loan and you have to cover things like underwriting, processing, escrow, etc., all without using rebate pricing.  This is where the conflict is and this is what they were responding to with their non-answer. 

Have you guys figured out how to handle a VA refi?

 

Dec 30, 2009 04:45 AM
Judy Smith
Coastal Title, Inc. - Daphne, AL

I called VA and was told that they are waiting on an official bulletin out of Washington, but in the meantime the following is their official response:

"The VA policy toward fees and charges has not changed and probably will not change as a result of the new RESPA requirements.  However, what will probably have to be done to accommodate the VA limitation on fees the veteran borrower can pay will be to include an addendum explaining or itemizing the fees that make up the total of line 801.  If the borrower is paying a true "1% origination fee" plus other fees such as doc prep, underwriting or other unallowable fees, then there must be a credit shown to offset those fees that are not allowable.  Allowable fees like the flood cert and MERS fees are acceptable to be included in line 801 but again, they must be itemized so that VA is able to identify what fees the borrower is being charged."

I must say they were very understanding and helpful and really trying to figure this out like we all are.

 

 

Jan 05, 2010 06:43 AM
Bela Toledo, CPA
McMichael & Toledo, CPAs - Grants Pass, OR

Definitely a better response than I got from HUD.  At least they are trying to give some guidance as to how to handle these things in the real world.  Charging the non-allowable fees under "origination charges" and then refunding at least enough to cover them through rebate would be a great solution, especially since that is essentially what we've been doing the whole time.

Jan 05, 2010 08:04 AM
Anonymous
Judy Brooks

On VA loans - are you including the income (ysp) to the broker in Line 1 on page 2 of the new GFE and then showing a credit on the HUD in 802 (equal to line 2 page 2 on the GFE)?  How are you interpreting showing the income to the broker paid as ysp on Exhibit A (from circular 26-20-01).

Appreciate any input!!!   Thanks

Judy

 

 

Jan 27, 2010 09:49 AM
#5
Bela Toledo, CPA
McMichael & Toledo, CPAs - Grants Pass, OR

No, what I think they're saying is to include the nonallowable fees in line 1 and then show the credit from the YSP on line 2 (also 802 on the HUD) along with a separate itemization that breaks down those nonallowable fees that are being paid out of the YSP. 

Also, if you want more clarification I found William White, who's name and e-mail address are on that circular, to be very helpful and quick with his responses.  Good luck!

Jan 28, 2010 04:26 AM