Late GFEs – Are They Insane?

The April 2011 edition of RESPA Roundup has put compliance officers and lenders in a tailspin about Good Faith Estimates.  You may have read our May newsletter but we have an update from HUD – one you won’t like either.  Let’s start in the beginning.

The Roundup stated:

III. Loan originator fails to issue GFE

If a loan originator fails to deliver a GFE in clear violation of 24 CFR § 3500.7(a) and (b), the loan originator will have significant potential tolerance violations at settlement. See RESPA § 3500.7(e).

Where the loan originator has not provided the consumer with a GFE, when completing the HUD-1 comparison chart the loan originator’s instructions to the settlement agent must indicate that the settlement agent must fill in the GFE columns with $0 and the HUD-1 columns with the actual charges from Page 2 of the HUD-1. If this results in one or more tolerance violations, the loan originator may cure the tolerance violation(s) by reimbursing the borrower the amount by which the tolerance was exceeded at settlement or within 30 calendar days after settlement.

As with other compliance areas, loan originators should adopt policies and procedures to ensure that GFEs are delivered timely, in accordance with the requirements of RESPA.

The heading states, “fails to issue” and the second paragraph states, “has not provided the consumer with a GFE” which make it sound clear they are addressing situations where the lender didn’t provide a GFE, but then they reference §3500.7(a) which requires a GFE to be provided within 3 business days.  The last sentence of the guidance also states, “delivered timely”.

We fully agree that if a bank does not provide a GFE for a loan, then $0’s should be entered in the GFE column of the HUD tolerance table. But what if a GFE is simply delivered late?  We emailed HUD and received the following response:

From: “Friend, David L.” <David.L.Friend@hud.gov>

Date: April 25, 2011, 3:44:32 PM CDT

Subject: RE: Loan Originator Fails to Issue GFE?

Late GFEs are not covered by the guidance provided in the RESPA Roundup. Please contact your prudential regulator concerning how they review and treat GFEs provided more than 3 days after a loan originator receives information sufficient to constitute an application.

David L. Friend, Esq.

Office of RESPA and Interstate Land Sales

Department of Housing and Urban Development

But wait!  Apparently the left hand doesn’t know what the right hand is doing at HUD.  A few days later, we received the following email from Andrew Fay (David Friend’s boss):

From: “Fay, Andrew B” <Andrew.B.Fay@hud.gov>

Date: April 29, 2011 10:05:35 AM CDT

Subject: RE: Loan Originator Fails to Issue GFE?

Please note that if a loan originator fails to deliver a GFE within the 3 day time limit required by 24 CFR 3500.7(a) or (b), the settlement statement comparison chart must be completed with $0’s in the GFE column.

Andrew Fay

Supervisory Investigative Coordinator

Office of RESPA and Interstate Land Sales

Department of Housing and Urban Development

202.708.0502 (phone)

202.708.4559 (fax)


Mr. Fay is clearly stating that a late GFE requires the bank to cure at settlement as if no GFE was provided.  This is nuts!  I also believe it contradicts RESPA and HUD is out of bounds with this interpretation.  Appendix A tells us to compare “the GFE” to actual settlement charges.  It doesn’t say “if a GFE is late, you can’t use it”.

I have forwarded this information to the American Bankers Association and they are (attempting to) communicate with HUD on this issue.  We will keep you informed.

The moral of the story is “get those GFEs out on time”!

David Dickinson

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