****Compliance Update - Please Read****
Hello Geneva Family,
I want to share with everyone a few trends and changes we are seeing with investors and regulators in the industry. Some we are watching, but the following snake bites need everyone’s attention as soon as possible. I apologize in advance for the long email but sit down, bring out your inner compliance nerd, and read it all. 😊
Disclosure of SELLER PAID real estate commission on the Closing Disclosure - The Washington Banking department has had this requirement for some time, but now we have investors requiring it as well. The TRID manual contradicts itself on this issue and the majority of all states and investors do not require this disclosure. Unfortunately, now that we have investors requiring this disclosure, we have no choice to comply. Please make sure your title company pre-CD reflects the sales commissions so that the closers can add these. Please note: this DOES NOT need to be disclosed on the Loan Estimate, only the Closing Disclosure.
Origination Fee on DPA Loans – As the Loan Originator, setting up your file in Encompass to DPA specifications is up to you. We are seeing DPA programs that do not allow Origination or Discount “Points.” This means that you cannot disclose the Geneva $1495 fee as a percentage of the loan and the fee must be moved down to processing and underwriting. Remember, the Disclosure Desk personnel are the not the experts on DPA programs….you are. Please make sure your files are set up correctly to avoid a cure. Justin Brown, aka McLovin, has set up a “DPA GENERIC” closing cost template for first mortgages to help you remember to put these fees in the correct place.
Appraisal Fees and Cures – We are seeing more and more appraisal fee cures. It is Geneva’s policy to disclose a $1000 appraisal fee on the initial disclosures. If you feel that is too high of an estimate and reduce it, you will be responsible for the cure if the cost comes in higher. We have tried to get Appraisal Cures waived in the past by providing a Change of Circumstance that explains that the cost increased because of a low quote from the AMC. The investors are not buying it and we are issuing cures. Also if you are doing a loan on a very expensive home, please get an estimate from one of our AMC’s before you order disclosures. Best Practice: disclose a higher fee for appraisals.
Finance Charge Violations and Cures – I am seeing more and more investors suspending loans for this and making us cure it. With all the changes to disclosure rules over the years, one would think that this very old TILA rule somehow whould have been addressed with TRID. Well it hasn’t, at least not specifically. This is what you need to know…if you add or increase a finance charge (a charge that affects APR, including prepaid interest) after the initial CD has been issued, you will have a cure if the increase is over the tolerance. If the loan is a purchase, the tolerance threshold is $100, if it is a refinance, the tolerance threshold is $35.00. Here is an example, let’s say the title company adds a $50.00 Recording Service Fee to their pre-CD after you have already issued the CD. This fee is an APR fee so if you do not redisclose this, you now have a Finance Charge Violation. If the loan is a purchase, you are within the tolerance of $100 so no refund is required, if you have a refinance you are over and the entire fee will have to be refunded. Best Practice: Do not request a CD until you have the title companies final fees and if you have a change after the CD is issued, please order a Revised CD and CD COC.
Revised Closing Disclosures – In general, we are seeing that CD’s are being ordered too early. Just because you have a preliminary loan approval does not mean you should be ordering a CD. PLEASE check your conditions on the file to see if there may be mandatory changes required such as buying down the rate or changing the loan amount. Geneva’s policy on Revised CD’s is this, we will issue one Revised CD and CD COC while your loan is in process. If there is another change, we will only issue another revision when you have the Clear to Close Approval. At that point, if you do not have major changes, it will only be a one day wait to close.
VA 1%, Texas 2%, and 3% ATR/QM Fee Cap Loans – It is very important that you run fee cap tests on your files PRIOR TO QUOTING OR LOCKING THE RATE. Let’s say for example that you have a VA refinance and the loan amount is $100,000. You quote the borrower this fantastic interest rate at par or maybe they are paying some discount points to get it. You then order disclosures only to find that you cannot give the borrowers the rate you promised because the fees on the file exceed the 1% cap. Remember, our $1495 origination fee is included in this VA calculation so right off the bat you are over on a $100,000 loan. Title company junk fees such as wire, courier, CPL, notary, Escrow, Settlement, etc. are all included and so is the termite inspection. Essentially, the fees on the file are going to dictate how much of an origination fee you can charge and if you will need to price the loan with lender credit. Best practice: Get a good fee quote from the title company, calculate your fee limits and use the Mavent report to confirm you are within tolerance, and then lock your rate.
Seller Paid APR Fees – Since we are on the topic of the fee caps mention in #6 above, did you know that on a purchase transaction, fees itemized in the seller’s column of the 2015 Itemization screen will exclude them from all three of the tests above? Yes, it is true, so the best practice when setting up your loan (especially a low loan amount) is to move the origination and discount points to the seller’s column and reduce your lump sum credit accordingly.
Hope this helps everyone, the Geneva Ops Team wants you to have smooth transactions and close more loans! If you have any questions, please email me at firstname.lastname@example.org.
Tina L. Rose
Chief Compliance Officer