On April 7th, we posted a blog about disclosing VOE/VOD fees on the GFE. This blog was incorrect and we have since removed it from the website. We actually wrote this blog before we received clarification from HUD (last Summer!) and it simply didn’t get posted until two weeks ago. I’m sorry for any confusion this previous blog created.
Here’s an email I received from David Friend at HUD pertaining to this topic:
The VOE/VOD fee question (FAQ # 5, GFE – Block 3) deals with instances where the employer or account holder charges a fee for the verification, since this is not a universal practice and could change from transaction to transaction, the charge might or might not be incurred due to the business practices of third parties.
The IRS charge related to Form 4506T is always charged. If the loan originator needs to obtain the tax transcript in accordance with its underwriting, as established by practices and procedures adopted by the loan originator, the amount of the charge is known and can accurately be determined at the time the GFE is issued.
One of the factors we are evaluating in these questions can be found in the preamble to the new rule at 73 FR 68219, which states “The final rule seeks to balance the borrower’s interest in receiving an accurate GFE early in the application process to enable the borrower to shop effectively, with the lender’s interest in maintaining flexibility to address the many issues that can arise in complex processes such as loan origination.”
Here, the balance for the charge for the tax transcript favors integration for the borrower to effectively shop, since the need for the tax transcript, and its attendant cost, can be accurately ascertained by the loan originator at the time the GFE is issued.
The VOE/VOD fee question in (FAQ# 5, GFE – Block 3) is based on the determination that flexibility to address issues is more important when the loan originator is faced with a situation where individual employer or account holder charges for information in its possession, since the charge (and if it is even charged) varies between each employer or account holder. This factor is not present in situations where the loan originator controls the need for the tax transcript, and the costs for that service are known or can be averaged across multiple transactions.
David L. Friend, Esq.
Office of RESPA and Interstate Land Sales
Department of Housing and Urban Development
Ironically, HUD issued clarification on this same topic in their April RESPA Roundup:
IV. 4506-T (Tax Transcript fees)
The fee for obtaining a tax transcript using IRS Form 4506-T, “Request for Transcript of Tax Return” is an administrative charge that is part of processing and underwriting that should be disclosed as part of Block 1, “Our Origination Charge,” on the GFE regardless of whether the charge is paid to a third party or directly to the IRS.
David’s banking career began as a field examiner for the FDIC in 1990. He later became a Compliance Officer and Loan Officer for a small bank. In 1993, he established Banker’s Compliance Consulting. Along with his amazingly talented Team, he has written numerous compliance articles for prestigious banking publications and has developed compliance seminars that Banker’s Compliance Consulting produces.
He is an expert in compliance regulations. He is also a motivational speaker and innovative educator. His quick wit and sense of humor transforms the usually tiring topic of compliance into an enjoyable educational experience. David is on the faculty of the American Bankers Association National Compliance Schools and has served on the faculty of the Center for Financial Training for many years. He also is a frequent speaker at the ABA’s Regulatory Compliance Conference. He is also a trainer for hundreds of webinars, is a Certified Regulatory Compliance Manager (CRCM) and has been a BankersOnline Guru for many years. The American Bankers Association honored David with their Distinguished Service Award in 2016.
David and his wife Karen have three adult children, four grandchildren (none of whom live at home!) and two cats (of which Dave is allergic … the cats, not the children!). They recently moved to an acreage outside of Lincoln, Nebraska where he gets to play with his tractor. When possible David can be found fishing, making sawdust in his shop, or playing the guitar and piano. He also enjoys leading worship at his church.