by Timothy Raty, DocuTech Corporation – Mortgage Compliance Specialist
On August 10, 2011, technical changes applicable to 24 CFR §§3500 et seq. (“Regulation X”) will be put into effect(see 76 FR 40612). These technical changes are due both to ambiguities that were inadvertently included when Regulation X was amended in November, 2008 (see 73 FR 68204) and incorrect citation references that were either changed due to the Dodd-Frank Wall Street Reform Act (Pub. L. 110-203) or which were originally cited incorrectly.
Of particular interest to the mortgage industry are the changes applicable to the Good Faith Estimate (GFE) and Housing and Urban Development Settlement Statement (HUD-1). One of the most important changes was made to the instructions for completing the HUD-1, which are found in 24 CFR Pt. 3500, App. A. This change was made toclarify how settlement charges that were listed on the GFE, but which was not purchased or provided, are to be disclosed on the HUD-1.
Previous to this change, there was ambiguity on the lender’s part as to whether to disclose these charges in corresponding lines in page 2 and the comparison tables on page 3 of the HUD-1 or not. The new changes clarify that only charges actually provided or purchased should be listed on page 3. In addition, any service that was not obtained, but which was disclosed in the GFE, should also not be listed on page 2 of the HUD-1.
Two other important changes apply to the GFE. The first of these changes is to 24 CFR §3500.7(a)(4) & (b)(4), which is now clarified to state that before a lender or a mortgage broker can accept a fee (other than a credit report fee), the applicant borrower must express an intent to continue the loan process after he has received the GFE.
The second important change (or series of changes) apply to 24 CFR §3500.7(f). These changes include:
- Substitution of the adjective “new” for “revised” in connection with “GFE”. This change was made to clarify that a GFE is not new when re-disclosed, but revised.
- Clarification that the GFE (whether original or revised) does not expire until 10 business days after being provided to the borrower and the borrower does not express an intent to continue the loan process (or until such time as the originator chooses that extends beyond this period). This change was made due both to language in Subsection (f) that implied that the GFE was good until settlement and that this timing requirement only applied to original GFEs.
- Clarification that increased charges can only be included in a revised GFE to the extent that the increase was due to either changed circumstances or changes requested by the borrower.
- Clarification that whenever a borrower’s interest rate is locked, a revised GFE, which sets forth any changed rate-lock terms, must be provided to the borrower within 3 business days.
- Changing “new home purchases” to “new construction home purchases” in Subsection (f)(6) to clarify that this Subsection applies to construction homes, not to homes that are simply new to the purchaser.
Other changes include a correction to a transposed number in Appendix A (Line 601 of the HUD-1, which was mistakenly listed as Line 610) and citation references in §§3500.2(1)(ii)(D) and 3500.8(c).
These changes are expected to help alleviate both the doubts of mortgage lenders as they try to conform to Federal regulations and the amount of questions concerning Regulation X that are being sent to the Department of Housing and Urban Development repeatedly.