National Media Claims Lenders Skirting New RESPA Good Faith Estimate Through Loan "Worksheets" And "Fee Estimates"

Services for Real Estate Pros with Vetstein Law Group, P.C., TitleHub Closing Services LLC

(As a lender/buyer closing attorney--file this under "Don't Shoot The Messenger! And Blame HUD, Not Me!")

The Los Angeles Times and other media outlets are claiming that lenders' use of loan cost worksheets and estimates are a "sidestep" of the new RESPA mandated Good Faith Estimate which went into effect on January 1.  HUD officials say they plan to conduct a review of the growing use of “worksheets” and “fee estimate” forms by mortgage lenders providing quotes to home buyers and refinancers.

The new closing cost rules under the Real Estate Settlement Practices Act (RESPA) significantly changed the manner in which lenders are required to estimate loan and closing costs.  Many charges cannot deviate at all, or at most by a 10%, from the Good Faith Estimate to the closing.  That’s in stark contrast to earlier rules, which essentially allowed some lenders to quote low estimates of total costs, with no responsibility for the final dollar charges at closing, HUD contended.

Lenders -- many of whom feel the new GFE is the single worst form the government has ever dumped on the mortgage industry -- respond that since the new GFE has a number of major deficiencies, such as not providing a total monthly cost payment, seller paid items and most importantly, total cash-to-close, it justifies the worksheets/estimates. 

Lenders, what are your complaints with the new GFE and do think providing these worksheets will ultimately help consumers?  Do you use them? Are the criticisms about the worksheets unfair? Did HUD get it wrong with the new GFE? (I think I know the answer to that!). What can HUD do to improve it?

There is nothing explicit in the new RESPA rules prohibiting the use of these cost worksheets/estimate. However, since this is on HUD's radar, if lenders insist on using a worksheet, my recommendation to them is explain clearly to the customer, preferably with a written disclosure right on the estimate, that this is not binding and not a substitute for the new GFE. That way, if HUD comes knocking on the door, you've covered yourself.

My goal with this post is to get the conversation going on the new GFE, not to rail against the mortgage industry. I'm on your side! As Jerry Maguire said, "Help me, help me, help you!"

On a related note, as buyer's counsel I now insert a rider provision into the P&S providing that the seller agrees to an extension (up to 7 days) of the closing date due to any RESPA/GFE related delays.

For more RESPA information, please visit my main blog, The Massachusetts Real Estate Law Blog.

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Comments (155)

Amy Anthony-Coile
WR Starkey -Classic City Team - Athens, GA

This is a great post.  Our industry is flawed in general right now! It seems it gets harder and harder to do our job.  We can thank those who chose to do things the WRONG way for making our jobs tougher. For those of us who have managed to survive, Congratulations! More change is coming. The GFE2010 is a perfect example. Our LOS system makes it an even bigger nightmare. Thanks CALYX point who can't seem to answer questions about why things won't carry over from initial fees to the 2010 worksheet so it actually equals the same number and makes sense to your customer.   We actually have the old good faith estimate in our system renamed initial fee worksheet that we are showing our customers. It has " cash to close, payment, and seller contributions on there" It actually makes sense to the consumer. This is by choice, its not mandatory. You may want to implement this in your practice to simplify your appointments.  If you use Calyx- I would suggest it. It is a bit of a headache getting it to match up with the 2010 though because not everything carries over perfectly especially on government and USDA loans. It is just quirks in the system. They can't seem to answer why. I just have to manually enter them which is frustrating. THese are mainly the 1300 items and on Georgia the 6.50 (I have one lender who says it has to be in block 3 and Calyx automatically has it populating to block 1).  Great Post.  Well Done.

Jan 25, 2010 12:26 AM
zeta cross

Sounds like government's good intentions are not working as well as they should. I really like the idea of a disclosure on the worksheet. There is nothing worse than a client getting a $1000 or more surprise right before closing. From talking to reliable, experienced mortgage people that I work with, it seems the worksheets and estimates are necessary--not vehicles for getting around the new govt. form.

Jan 25, 2010 01:44 AM
Mark Warner
RealEspace - Plano, TX

I don't have a problem with the fee estimates as long as there is full disclosure. The problem remains wherein the consumer still is left guessing on what rate is best for them.

Jan 25, 2010 02:48 AM
Richard Vetstein
Vetstein Law Group, P.C., TitleHub Closing Services LLC - Framingham, MA

Gerard, no worries my friend.  I don't think anyone thought you were trying to "adverstise" anything.  We're all on the same team here and trying to sort through these new changes.

Best of luck,



Jan 25, 2010 05:55 AM
Wayne L. Brown
Franklin Advantage Inc. - Alpine, CA


I sincerely hope that you are successful in getting HUD to recognize the flaws in the new form.

I know the intention was there, but this new form really has holes, and jeopardizes a lender in some cases for fees that we would never normally have to quote since they are outside fees.  I am not talking about Title, but section 6 items which would include pest, property inspections, roof certs, et al.

I know that the Assistant HUD Secretary has recently joined AR, so maybe you can scroll the past blogs as he introduced himself last week while announcing updated HUD changes to FHA.

I for one will be using a worksheet in addition to any good faith.  The current form is a head on collision waiting to happen.

Let's hope that you can help in this area.

Best Regards

Jan 25, 2010 06:45 AM
Kevin Hancock
Evergreen Home Loans - Poulsbo, WA
The Hancock Mortgage Team

I'm not a huge fan of the form, but I was working with a repeat client recently and had a long conversation with him about the new RESPA rules.  After reviewing all of the major changes, he said there wasn't anything there that he, as a Borrower, didn't like.

If the result of all of these RESPA changes is that Borrowers are more comfortable, then its worth it.  If Borrowers are not satisfied, more change will come.

Jan 25, 2010 07:09 AM
Kabir Mahadeva
Asheville, NC
Alpha Mortgage, NMLS #182829


Good job stirring up the bean pot!  The daily AR e-mail omitted the words "National Media Claims..." in its link to this blog.  No wonder people got unhappy.

Lenders can do preapprovals without a property, no GFE is required until a property is identified. 

Realtors, if you want your clients to get thoroughly preapproved (with income and assets documented) then refer them to a reputable lender *before* a property is selected.  Then the lender can actually get the documentation from the borrower and run the scenario through automated underwriting if applicable.

The 6 pieces of information are inadequate to do a preapproval because the borrowers *do not* have to provide income or asset documentation, so lenders who will preapprove on on this basis are shooting themselves in both feet.

The new GFE will actually reduce shopping because reputable lenders will not provide a binding contract to just anyone.  Or they won't do it quickly enough to blow out the possible competition.

My most recent borrowers told me up front that they were shopping with just one other lender who is a member of a well-known civic organization along with the borrower. 

I said "That's great!  Bring me their GFE, we'll compare it to ours, and if they're offering a better deal, I'll tell you to take their loan."  They never got a GFE from the other lender, even though it was promised for the next day.  They made a commitment to work with me because I did whatever I said I would do.  And I answered questions and returned their calls and e-mails very promptly.

I frame the additional information I provide to my clients by explaining that the GFE is not enough to make a big decision, and that I owe it to them to provide all facets of the transaction.  If that is skirting then I'm guilty by reason of insanity. 



Jan 25, 2010 07:13 AM

To Richard #160 & Gerard #159:

Gerard, Count me as one who does think you were trying to toot your own horn rather than adding to the discussion.  "You can be completely confident that working with a B of A loan officer that your client will get a great loan! We have low rates, we never, ever charge origination fees, low lender fees and we can't get overage/rebate at all." Hmm, sounds a bit like advertising to me.  (by the way I could beat or match any rate/point structure you care to offer, however you want to call it)

All of the professional mortgage brokers here do their very best to provide their customers with the most accurate information possible.  And 9 times out of 10 they will provide a far more accurate Estimate than any bank will.  To suggest that B of A is better than mortgage brokers because of their new "clarity committment" is insulting. And putting a fancy name on the same basic form we have been using for years is coming to the party a little late if you asked me.

Jan 25, 2010 02:39 PM
Patrick Obluck

I have heard many stories of buyers showing up to closing and needing thousands more than what was originally quoted.  I am not talking about a slight varience in title or third party fees that a broker may have no control over, however, a broker raisng fees simply because the buyer has to pay them or become homeless.  The GFE SHOULD prevent this.  There will alwys be those that will find away around the system and unfortunately, the rules are set up for that to happen.

As far as using a separate worksheet, think of this scenario: You are getting ready to remodel your kitchen and call in 3 contractors that each give you a bid of $25,000, $30,000 and $35,000 with the only break out being total cost of materials and total cost of labor.  There is no list of what materials are being used, what is all being replaced, who is doing the labor, or how much time it would take.  Would you not want more information to be able to shop intelegently? 

Now imagine financing the largest purchase you will make and not being able to have these details.  They are broken out on the HUD at close of escrow, why not have them broken out when you have time to shop?

Jan 26, 2010 02:58 AM
Roger Howell
Fairway Independent Mortgage Corporation NMLS #2289 - Boise, ID
We do business the Fair way!

It not a matter of the lenders "skirting the new regs", it a matter of providing the information the client needs and is not being provided by the new regs.

The 2 most important questions asked by a client is "how much is my payment and how much money to I need to bring to closing."


Jan 26, 2010 04:32 AM
Wayne B. Pruner
Oregon First - Tigard, OR
Tigard Oregon Homes for Sale, Realtor, GRI

I am shocked that a gov't form is not complete right from the get go. I thought I hezrd there was going to be a 4 month period to work out the kinks? I do like the rider provision idea.

Jan 27, 2010 12:40 PM
Jim Smith

Lets not forget about MDIA, folks!!

MDIA requires adherance to strict line by line tolerances on the TIL.  The new GFE doesnt allow for the lender to see those.  Thats why the lender I work for is REQUIRING the Itemization worksheet upon submission along with the new GFE.

The new GFE is a stunningly bad piece of regulation that will have the unintended consequence of RAISING costs to the borrower.  We have already see it in just these last few weeks.

Jan 28, 2010 12:16 AM
Bela Toledo, CPA
McMichael & Toledo, CPAs - Grants Pass, OR

I would guess that any lender still in business understands what information consumers need to have - like their total cash-to-close and their actual monthly mortgage payment - and we will continue to provide this critical information to our clients even though the new RESPA regulations no longer require it. 

As I have stated elsewhere, these regulations were clearly written by people who have never actually originated a loan.  Even a newbie loan officer would take one look at the new GFE and ask "where is the cash to close?" and "where is the monthly PITI payment?"  More experienced folks will also wonder "why are we disclosing the sellers portion of title insurance?" and "what about the property tax prorates?" 

Any lender who is not providing additional worksheets and/or estimates is doing their clients a disservice, and I'm certain that was not the intent of these reforms.

Jan 28, 2010 04:45 AM
Chris Richter
Wintrust Mortgage - Chicago, IL

If you were selling a minivan, you'd definitely try and focus the consumer on money down and payment. This is a little more important.  No one wants a minivan or a 2/28 ARM, but you'll take the minivan when it is $0 down and only $x a month.

The GFE outlines settlement charges and certain loan terms like that 2 year ARM.

A fee paid by the seller is a settlement charge.  Financed UFMIP is still a settlement charge.  A seller credit does not change settlement charges.  Cash to close and settlement charges are two different numbers.  Is there anyone here who actually tells a buyer that a seller credit or financing UFMIP lowers their settlement charges?

Are "Fee Estimates" wrong?  YES, if it leads a consumer into being misled because Lender A is showing a cash to close worksheet when Lender B is showing settlement charges.  If you don't regulate the 'estimates,' you are precisely where we were before the changes.

Jan 29, 2010 02:17 AM
Jana Holmstrup
Jana Holmstrup - CCO - Kings Mortgage Services, Inc. - Visalia, CA

Ah - hah!  Except Lender A is actually showing BOTH amounts.  Total Estimated Settlement Charges IS on the Worksheet along with the Cash to Close and Payment.  IMO there is nothing misleading about full disclosure.

Jan 29, 2010 03:52 AM
Chris Richter
Wintrust Mortgage - Chicago, IL

In a best case world, there is nothing misleading about full disclosure. Laws are designed for worst case world. 

Why not just create a standardized loan summary?  It's not a GFE, but it would answer every complaint from people who like to comingle unrelated financial figures AND prevent the worst case broker from printing cash to close in 18pt font and costs in 8pt font.


Jan 29, 2010 04:58 AM
Lee Barroll
SWBC Mortgage - Brentwood, TN

If a loan officer was disclosing correctly before than the new GFE is not that big of a deal.  Comminicating excpectaions to the client can be donw with a combination of the 1003 and the new GFE.  But the consumer does not undersatnd the changes.  The consumer is used to getting a GFE which gave the itemized settlement charges, the cast to close and the rate and payment.  I believe the new process is cumbersome.  HUD should have cleaned up the mess rather than trying to reinvent the wheel. 

Feb 01, 2010 03:36 AM
Bruce C.

I have been doing this same exact job for 25 Years.  I have 30,000 clients of which none, not a single one of them has ever filed a complaint against me or my company or ever complained about the funds needed for closing or the interest rate they got at closing.  We call our good faith estimates, good faith exacts.   Many of my estimates have been within pennies and usually over the amout estimated to close based on the day the client closes.

The Good Faith Estimate is my language.  My clients understand that language.  They don't understand the piece of garbage that HUD came up with.  Government leave us alone.  If someone is lying or cheating or misrepersenting them selves, arrest them and presecute them.  Other than that, get the hell out of our lives and go prosecute real criminals that I could point out to you in seconds.  Leave me and my succdessful business model alone.  

I will never bow to the tyranny that has struck our industry. However, I never did sub prime loans and never cheated my clients by giving them bad loans to begin with.  My conscience is clear and my books are open.  I am going to communicate with my clients and disclose whatever documents are required, but HUD will never stop me from communicating with my clients what is needed or what their monthly payment is.  Get Barney Frank and Andrew Coumo out of our lives.  What's that?

If we prosecute crooks, friends of Barney and Andrew go to jail.  Line them up and go get the crooks.  Leave us alone. 


Feb 02, 2010 02:05 AM
Bill McKee
Connect Realty - Clackamas, OR

The solution to all this GFE issue:  we need is more government.  We need MORE people making the forms conform to government issued mandates. We the people are terribly ignorant, and we must be protected by a government class-  a class of people far more qualified to know what a consumer should be forced to know.. and what a professional should provide in terms of actionable information.  In truth, perhaps the federal government should just take over the lending business.  That's a solution that would make access to and distribution of capital "fair". Sure, some might think that would restrict competition, innovation and raise costs... and some think that focusing power like this would naturally lead to potential for entrenched "cronie" powers to take over the segment.  If you happen to not agree with a government policy or edict, too bad.  You no longer qualify for a loan.. anywhere. 

Ah, cronie government-

We are enjoying much better government these days.  After all the pay has made it MUCH more attractive to join that club!  for example, in the past 24 months, the number of federal employess earning in excess of $150,000/year has increased from only 30,382 to 66,538.. about 119% growth!! 

The explosion of federal employees earning six-figure salaries increased the average federal worker’s pay to $71,206 in 2009, which is 76.5 percent higher than the average salary of $40,331 for workers in the private sector.  Here's more - learn about how government is being groomed to help us all improve!

Government is GOOD!

The GFE reform certainly justifies the increasing salaries for our loyal Government, don't you think?



Feb 21, 2010 03:01 AM
Jim Sutch

Show me another business where the salesman has to spell out to the customer exactly how much his company is making. When you buy a $80K car, does the goverment insist the car dealer disclose exactly how much they are profitting?!

The new GFE is a total joke!

Our company has been in business 24 years. We have had 5 seminars on filling out the new GFE 2010. We use Calyx Point. What a joke that is. The Work sheet does not properly interface with the GFE 2010.

Why does it take a 1 hour seminar to explain ( to seasoned loan officers ) how to fill this thing out? Let alone explain it to a customer!

It is one huge step backward. Wake up people!!!!!!!!!

Mar 04, 2010 08:13 AM

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