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socrateaser, Lawyer
Category: Legal
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Experience:  Retired (mostly)
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I am about to refinance a loan, today. The Bank has changed

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I am about to refinance a loan, today. The Bank has changed the GFE numbers (origination fee and credit to buyer) shortly before the closing day without me approving it. I can't make them change it back. What are my options and the relevant law?
Hi! I will be the professional that will be helping you today. I look forward to providing you with information to help solve your problem.

Good afternoon. I certainly understand the situation and your concern.

Since you obtained your loan after January 1, 2010, the following items listed on the Good Faith Estimate (GFE) CANNOT increase:

The “Origination Charge” listed in Block 1
If your interest rate is locked, the “Credit or charge (points) for the specific interest rate chosen” in Block 2
If your interest rate is locked, your “Adjusted Origination Charges” listed in Box A
The Transfer Taxes listed in Block 8
The following items listed on the most recent Good Faith Estimate you received cannot increase in total by more than 10 percent at closing:

Services listed in Block 3, which are services for which your lender chooses the provider
Title services and lender’s title insurance charges listed in Block 4, if you use a company identified by your lender
Owner’s title insurance listed in Block 5, if you use a company identified by your lender
Charges listed in Block 6, if you select a company listed for those services in Block 6
Government recording charges listed in Block 7
The following items can change:

Charges for any services that you obtain from a company not listed by your lender
Title services, lender’s title insurance, and owner’s title insurance if you do not select a company identified by your mortgage originator
Your initial escrow deposit listed in Block 9
Your daily interest charges listed in Block 10
Your homeowner’s insurance listed in Block 11

As such, if the lender has changed something which they were not allowed to, they need to change it back. If they do have a right to, then the decision is up to you if you want to proceed. You certainly have a legal right to ask why these numbers changed and if you do not want to refinance with this lender, walk away.

Please let me know if you have any follow up questions or need any clarification on something which I stated above. Also, remember to rate my service before exiting the site, so I can receive credit for my help. I hope you found it to be Excellent! Only rate my answer when you are 100% satisfied. If you feel the need to click either of the two lower ratings to the left, please stop and reply to me. I want to make sure your experience with the site was as pleasurable as possible and that you are satisfied with the help I provided.
Customer: replied 3 years ago.

My question was only about origination fee and credit to buyer. I am aware about other charges that can change up to 10% (it is right on the HUD statement) and that some cannot change. My question was about the relevant law and procedure that they should have followed. I submitted the application on 5/1 and they updated the numbers around Sep 20th. I am now concentrating on origination fee only. Can they change it w/o a specific process? They content they send me an updated FedEx with a new GFE numbers and I received it on 9/24. FedEx tracking number supports that but unfortunately I do not have this FedEx. Assuming that it is true -- was it a sufficient process for them to follow? It was just two weeks before the closing, well into the process. They have a "justification" that I refuse to accept but I don't want to go into much details here--just want to know the law on the process itself.

Thank you for the clarification. Allow me to opt out and another Expert can certainly help with this question. Please hold on.

Sorry for the delay. Different contributor here. This is a difficult question, which most attorneys are not able to answer. However, I believe I can assist you in your understanding of the applicable law.

Federal law (24 C.F.R. 3500.7(f)) controls the modification of a GFE during the real estate settlement process. In particular, a GFE can only be modified outside of the tolerance levels in the event of "changed circumstances," which are defined by 24 C.F.R. 3500.2(b) as:
  • (1)(i) Acts of God, war, disaster, or other emergency;
  • (ii) Information particular to the borrower or transaction that was relied on in providing the GFE and that changes or is found to be inaccurate after the GFE has been provided. This may include information about the credit quality of the borrower, the amount of the loan, the estimated value of the property, or any other information that was used in providing the GFE;
  • (iii) New information particular to the borrower or transaction that was not relied on in providing the GFE; or
  • (iv) Other circumstances that are particular to the borrower or transaction, including boundary disputes, the need for flood insurance, or environmental problems.
  • (2) Changed circumstances do not include:
  • (i) The borrower's name, the borrower's monthly income, the property address, an estimate of the value of the property, the mortgage loan amount sought, and any information contained in any credit report obtained by the loan originator prior to providing the GFE, unless the information changes or is found to be inaccurate after the GFE has been provided; or
  • (ii) Market price fluctuations by themselves.
As you can see from the above, the origination charge must be based upon one or more of the specified changed circumstances, otherwise it is illegal and you can complain to HUD or sue the lender for damages under RESPA Section 5, which is also the federal Truth in Lending Act, and provides for damages generally of between $1,000-$4,000.

Note also that a GFE must be delivery to the borrower within three days of the date of the discovery of any changed circumstances. 24 C.F.R. 3500.7.

Please let me know if my answer is helpful and if I can provide further clarification or assistance.

And, thanks for using!
socrateaser, Lawyer
Category: Legal
Satisfied Customers: 38901
Experience: Retired (mostly)
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