As the days wear on, we are learning more and more about HUD’s 2010 Good Faith Estimate. Yes, we’ve had the 2010 GFE to review for quite some time and HUD has offered several updates on their RESPA FAQs…however it seems to be taking a lot of practice, trial and error and communicating with fellow mortgage professionals and HUD to try to interpret what is intended and/or allowed with this new document.
HUD’s last revision to the FAQs made it loud and clear, in my opinion, that they want the Good Faith Estimate to be a tool for rate shopping… however unless the borrower has a bona fide property an address, this may not be possible. Why? As it currently stands, HUD will not allow later identification of a property address to create a “changed circumstance”. A “changed circumstance” (as defined by HUD) is required in order for a mortgage originator to be allowed to issue a revised Good Faith Estimate…otherwise, the mortgage originator is bound by that Good Faith Estimate until it expires (10 business days if the borrower does not express an intent to proceed with the application).
Per the most recent HUD RESPA FAQs from January 28, 2010 on page 17 regarding what qualifies for a changed circumstance:
Q&A 8ii: If a loan originator issues a GFE without identifying a property address, the subsequent identification of the property address, in and of itself, is not considered a changed circumstance.
If a mortgage originator issues a good faith estimate without a property address, they do so at considerable risk as the later identification of a property address does not constitute a changed circumstance. For example, a GFE was issued with the property address TBD and Block 8 = $0. The borrower later identifies a property and Block 8 should have been $2,000, but the originator cannot issue a revised GFE and is bound to the original GFE. Excise tax in most parts of King County is 1.78% of the sales price which would be a very bitter pill for a mortgage originator to swallow.
As a side note, it’s still hit and miss if lenders are disclosing seller paid excise tax on their Good Faith Estimates in Washington State. I’m hearing that some are making the mistake of not showing the owners title policy since it is also seller paid–this if flat out wrong–the owners title policy (even though it is paid by the seller) must be disclosed on the 2010 GFE.
I’m hoping for a revised FAQ soon (funny thing to hope for) where HUD may reconsider or clear this up. If they truly want home shoppers to be able to use the Good Faith Estimate to shop for a mortgage before they’ve signed a purchase and sales agreement…they need to provide us with more clarification…and soon!