When do you see the GFE?
Posted in RESPA reform By Matt Carter, Wednesday, April 2, 2008.This topic was originally submitted as a comment by Kathy Glor on April 2, 2008 - 1:15pm.
Greetings to all, At what point do most of you see the GFE? Typically I do not see one at the table, unless of course the borrower did not sign one prior to closing. If we, the closing agents, are to police the broker-lender/lender, are we not just asking for trouble? Had we said to the borrower's years ago, you are paying way to much for this loan, we would all have been out of business. I have thrown broker's out of my office because of their shady practices, hopefully this will eliminate the need for that. I am all for the enforcement of RESPA, but feel it should have been happenign all along. Kathy PS Diane I love your insight!
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Submitted by Matt Carter on April 2, 2008 - 1:19pm.
This comment was originally submitted as a comment to another post by Diane Cipa on April 2, 2008 - 2:08pm.
Hi, Kathy. Thank you. ;)
We often get a copy of the GFE with the title order and sometimes we never see it. Every lender is different under the present procedures.
I am hopeful that as they already do with predatory pricing, the lending community will be motivated to self-police and resolve discrepancies for the consumer's benefit before the transaction goes into the hands of settlement agents. That means that we'll likely only have to catch those cases that slip through the cracks. If we consider ourselves fiduciaries of the mortgage lender - which I do - then we are an extension of the lender at the table.
Submitted by Joe Dahleen on April 2, 2008 - 3:59pm.
Hi Kathy
The borrower should see the good faith right up front. The typical process the borrower should be presented with a good faith estimate right have they get off the phone with the lender or during the meeting before they walk out the door. Brokers are required by law to disclose upfront and at anytime during the process that the borrower locks their loan.
We also give it again for 24 hour review before the docs are released to title/closing. Then it should be in every closing package again for review.
Our typical process we disclose 5 times on each and every transaction.
1) when they pull their credit on our website - the consumer get a copy of the mortgage credit report, FACTA Notice and Receipt for payment - This is done automatically so one in our office actually has to put hands to key boards.
2) Once credit is pulled we provide a full set of up front disclosures - Also a requirement by law. Ours are paperless. We like to have trees.
3) Rate lock or Float disclosures. Now if we lock we also provide an updated GFE with the numbers to match the lock request and disclosure.
4) 24 hours before closing in our eSigning room.
5) At the table when closing happens.
This way they know up front what is on the docs when they show up to sign. Makes for a much better closing for all parties involved in the transaction.
Submitted by Diane Cipa on April 3, 2008 - 5:33am.
Well, just to clarify. Kathy's comment was pulled from the RESPA discussion. Kathy and I are both settlement agents and her question, I think, was directed to settlement agents. I could be wrong and please correct me Kathy if I am.
Under current RESPA rules there is no requirement to provide a copy of the GFE to the settlement agent. Some lenders provide a copy with the title order and some will provide a copy upon request. We tend to ask for a GFE only when trying to assist a consumer in understanding a closing figure that is out of whack with what they expected.
Joe: You are giving the consumer lots of GFEs and so with some fine tuning you shouldn't have a problem adjusting to the proposed RESPA rules.
Current RESPA guidelines require delivery of a GFE to the consumer within 3 days of mortgage application.
The proposed RESPA guidelines create a specific procedure for when and how you create and deliver a GFE. Because each GFE is binding, the loan originator will need to learn to carefully prepare the GFE and follow it with the appropriate adverse action as needed. As circumstances change in the loan process, the consumer will rely upon a specific method proscribed by HUD for re-disclosure of costs on revised GFEs.
These very specific guidelines will lay the foundation for a final comparison of the GFE to the HUD and the creation of the "closing script" to assure that no quoted fees are in excess of allowable tolerances.
Because current RESPA rules do not bind the originator to the GFE, we settlement agents often have to deal with last minute cash to close issues. The new system will create a more stable closing environment because the lending community will take measures to track and correct quote errors during processing.
Submitted by Kathy Glor on April 3, 2008 - 7:31am.
Joe,
I really think that how you handle the GFE is admirable. I wish all lenders followed your example. It is my hope that there will be self policing. I expect that if these new rules pass the Indiana Land Title Assc., will need to change our license training to include the GFE. I can't imagine what the baby closing agents (those who can't pro-rate without a computer) will do with the GFE and the script. Closer's with lots of experience may also find this a bit overwhelming.
Submitted by Diane Cipa on April 3, 2008 - 7:35am.
Hmmmm....."baby closing agents" should be working under the supervision of an adult professional who understands compliance issues. ;)
Submitted by Kathy Glor on April 3, 2008 - 7:56am.
Ahhh, in a perfect world. I have had closing agents from other title companies call me (their competition) to ask questions about documents they have never seen before. I take their little hands and guide them through it. Not enough of us old school title pro's left out there.
My concern is still that while we may be fiduciaries of the lender, to whom will we report any fees that are ouside of the tolerance's. I would hate to be deemed a difficult closer should I question the charges.
Submitted by Diane Cipa on April 3, 2008 - 8:46am.
It's doubtful that the lender will let a transaction go to closing without vetting the tolerances but if it gets that far, report it to the lender and await instructions. They have the burden of compliance under HUD rules.
Remember that the closing script, which will have data provided by the lender and will compare the GFE and HUD numbers, is part of the HUD. Everyone will be regearing to have this available at least 24 hours in advance. If UCI goes through, the timeline will move up even earlier.
The challenge to real estate sales professionals will be to get their invoices and commission statements to the settlement agent a few days before closing because changing HUDs on the fly will be a bit more cumbersome.
Submitted by Howard A. Lax on April 3, 2008 - 10:49am.
We have a 24 hour rule now for the HUD-1, which does not get us any good information. Diane, you may be a very good title agent that has all of the ducks in a row at closing. However, the average run of the mill agent, including the national agencies that hire local closers, are preparing final docs an hour before the closing in many transactions. You might argue that this has to stop, for more reasons than the HUD rule. I have serious doubts that it will. In addition, the parties often bring issues to the table that result in revisions to the HUD-1 (a POA, a release, an insurance binder or receipt, a homeowners association invoice, a bill for home repairs, etc.). So, there will be a significant number of situations where the lender cannot or will not resolve a difference between the GFE and HUD-1 at the closing. It is not even clear that the lender will have the capacity to provide a revised script at the closing table. Then there is the issue of what you do about the next transaction waiting in the lobby to close while all of the paperwork is revised. Remember that closings are going to take nearly twice as long with the script, so you cannot just shave a few minutes off every closing on your calendar that day. Which closing do you cancel?
Submitted by Diane Cipa on April 3, 2008 - 12:29pm.
Hi, Howard:
The proposed procedure is designed in a way to encourage and motivate self-policing by the industry. Lenders, because they carry the compliance burden, will start working out their quote concerns early in the transaction.
Even if HUD is unsuccessful getting legislative approval for a 3 day advance release of the HUD and even if the MBA and ALTA are unsuccessful in implementing widespread use of the UCI which will force all parties to control the timely release of documents, I expect media attention to raise the level of consumer awareness and therefore encourage the industry to utilize and work with the current 24 hour pre-close HUD review standard.
The collective industry has in its own self-interest the desire to restore public trust. This gives us hope.
In an odd way, one I'll find fun to watch, the collective industry reaction is likely to separate professional providers willing to step up to the plate and create a positive shopping and closing experience for consumers from the predator class of providers who need the tools of clouded disclosure and rushed closings to make their credit kill.
I don't see the script adding any time at all to the closing. In fact, it might help some closers be more efficient.
As a trainer, I love the idea of a script. The fact that everyone has one and has to use it makes it just wonderful.
As an ex-lender, I love that mortgage lenders no longer have to wonder how their product is being described by the closer. They will KNOW. They can be secure that the words will be correct.
This a very doable plan. This is a wonderful fix. HUD is asking us for help. They know that the plan can use some fine tuning and tweaks but on the whole, I say it works.
Submitted by Kathy Glor on April 4, 2008 - 4:26am.
Hi Howard,
I loved your submission to HUD! As a "Closing Agent, Escrow Officer" whatever you want to call what I do, I have a personal set of ethics. I have always requested that I have the lender figures with enough time to have final HUD approval prior to the 24 hour rule. 1 in 5 files I close, meets this criteria. Sad but true. I feel that these figures should be available to the borrower, even if they have not asked for them. Our preliminary figures go to the lender for their TIL as soon as the closing is scheduled, and a lender contact is made available to me. In my local area the bank-lenders prefer to close their own loans, and not just refi's. Their "closing agents" are bank employees and exempt from current state licensing requirements. I am not sure that they realize that they are governed by RESPA, just like us. I do intend to respond to the changes once I have had a chance to digest the 96 pages as it pertains to my skill set. I do enjoy this type of forum, it helps to understand parts of the business that are influenced by different aspects of the proposed changes.
Submitted by Kathy Glor on April 4, 2008 - 4:45am.
Diane,
Your perspective as a ex-lender is extremely helpful to me. I am an old school title pro, title company closing agents never represented the lender, nor the realtor, or the buyer or seller. We lived by the rule, we are a 3rd neutral party. Our instructions consisted of the title commitment, the purchase agreement and the lenders closing instructions. Back in the day, we actually calculated the mortgage payment, this was before lenders had to do the escrow account disclosure. While it was my goal to understand the lender documents in order to explain in laymans terms what they represented. The massive amount of repeatious disclosures were and continue to be counter-productive. If I was in doubt, we would contact the lender right there at the table. I, in no way would try to guess how the lender came to the conculsion that the borrower sitting across from me could afford the loan. Loan Officer's and Bank Reps are always welcome at my table. If there was a concern as to how we explained the lender docs, a lender rep should be at each and every closing. I agree that as a trainer a script is a good idea, but as veteran closer, I kinda feel insulted. How do we prove that everyone at the table understands the words that are coming out of mouths? How do we prove we have read the entire 10 page script? Just asking :)
Submitted by Diane Cipa on April 4, 2008 - 5:56am.
Kathy: You are one of the "good guys" - thanks for doing such a wonderful job. You've raised in interesting point about bank or lender employees closing their own loans. Even in these circumstances, the same RESPA method will be required. Lender employees will still read the script. Speaking of scripts, I listened the other day as a bank employee read a script to me on the phone while I was changing the terms of a credit card. He did a fine job. It was thorough. I learned things that might have been in the fine print and easily overlooked. I don't think this will be hard and consumers won't find it weird. I think they'll like it.
Submitted by Kathy Glor on April 7, 2008 - 11:09am.
Hello Everyone,
Whew, that was some dry reading! This is my "Closing Agent" point of view of the proposed changes (Mr. Lax, I will post the same to HUD) As to the GFE, not something I have ever prepared and can't make a determination on, but do whatever makes my company compliant. As to the script, the items covered, are the bullet points I hit on in closing now. So a script will just move the explaination from each document to the very beginning of the closing. All in all, if the borrower pays attention in closing (which they never do)this should not slow the closing down at all. It will however increase my closing fee. The script can also be used as a reference point when you explain each document. My biggest concern is using the closing agent as tolerence police. As a 3rd neutral party, I should not have to police my customers anymore than I already do.