Touchy one for you here! From time to time we get a call and out of the blue a new caller will ask us to send them a GFE - Good Faith Estimate (of Settlement Charges).
A recent caller begin to turn rude and unruly and demanded to speak with me - by job position not name - and soon got their wish. This particular buyer had not completed or even begun an application and were calling about a real estate investment property. The originator sent the caller to my extension where they left a message and I'm not sure if they were trying to be calm but it did not appear to be the case!
Some calls require a little research but this one required only seeing that the caller was not in our system meaning they had not begun an application. So why were they demanding a GFE at that time? Simply they feel they have learned that the GFE is the answer to everything and the way to shop for a loan. In truth it is a way to shop for a loan but to be valid must be done in order.
When I contacted the caller they began recounting federal laws to me and how I and my company are in violation of federal law by not sending her a GFE on her demand. The conversation was not going to get any prettier so I asked if she had started an application with us. "No", was the answer. Have you identified a property? "Yes." Are you planning on occupying this property yourself? "No. It is an investment property." Will you be making a down payment on this property? "They tell me I have to pay down 10%." Has another lender sent you a GFE? "Yes." And what was the interest rate they showed you? "6.25%" And the amount of pre-paid interest days? "0".
She was not going to like my response but I provided it as calmly as possible. Ma'am, the estimate of good faith you have is worthless. The interest rate is an impossible rate on an investment property, they have not estsimated pre-paid interest which indicates to me there are likely other fees not included - a very commonn trick for lenders/brokers who send GFE's on demand prior to accepting an application on a new purchase. I'm also going to assume they did not send a TIL (Truth In Lending) which is required to accompany a GFE. Furthermore, until you have completed an application for an identified property you intend to occupy there is no law requiring a GFE and TIL be sent to you. You have not completed an application and you are calling regarding an investment property.
Expecting her to get livid and start saying words like "report you" and "my attorney" I was surprised to hear her say, "Really? Where can I find out more about this?"
So I sent her the link: http://www.hud.gov/offices/hsg/sfh/res/resindus.cfm
Where FAQ number 31 says, "When the potential borrower furnishes a substantial amount of financial information for prequalification, but no particular property has been identified, must the good faith estimate be furnished to the borrower?
No. A submission by a borrower to a lender that does not identify a property is not an application and thus does not trigger the Good Faith Estimate requirement. However, HUD encourages providing information to the borrower on settlement costs as soon as it can be estimated, so that the borrower may be better able to shop. "
So do we send GFE's and TIL's? YES! Even on investment property where it is not covered by RESPA. We send the GFE and TIL as a part of our Early Disclosure package even when a property has not been identified but we have accepted a full application and examined the borrower's credit. We re-disclose when a property has been identified or if the loan program must be changed for any other reason.
Why do we not send a GFE and TIL to every caller? Do we have something to hide? We do not send a GFE and TIL to every caller arbitrarily because if we don't know anything about the borrower we cannot possibly provide an accurate estimate. What we WILL do is quote our fees. Interest rate, pre-paid interest, attorney fees, etc., are not fixed numbers and depend on many other conditions.
When should you expect a "re-disclosure"? If, for reasons of credit, condition of the subject property, or some other event causes the broker or lender to be required to change the loan program they should send you a new GFE and TIL. For example if you were pre-qualified for an FHA loan but were not able to meet the qualifications for any reason and your lender or broker had to move you to a FNMA loan solution they should send you a new GFE and TIL at that time.
Novation Mortgage does not like surprises - especially last minute ones. We have a long standing policy, even on non-covered loans, of sending a new GFE and TIL any time there are any new discoveries during the process. We also prefer to review the GFE and TIL within a couple of days of closing to make sure the buyer knows exactly what to expect at the closing table ... almost to the penny.
If you are at the closing table and your loan is a gross mismatch from your GFE and TIL you have the ability to stop the process, call your lender and get the issue resolved. If they cannot resolve the issue and it is unacceptable to you LEAVE. Walk away. What many borrowers do not know is the broker/lender is supposed to approve the HUD-1 proper to closing. Many times the borrower will see the HUD-1 before the broker or lender. We've actually had closing agents completely leave off our fees and close the loan and let the borrower leave the closing table. We didn't see the HUD-1 until hours after the closing. Of course that was a government contracted (HUD) closing attorney. ASK THE CLOSING AGENCY IF THEY HAVE SENT THE HUD-1 to your Loan Originator BEFORE you sign the documents or have a heart attack about the fees your lender may not have approved.
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