Lender GFE abuse
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Do you represent buyers who receive more than one good faith estimate (GFE) from a single lender?
- Sometimes. (40%, 21 Votes)
- Never. (36%, 19 Votes)
- Often. (24%, 13 Votes)
Total Voters: 53
Lenders have found another way to cheat the system and leach higher fees from buyers using the good faith estimate (GFE). [See first tuesday Form 204-5]
The GFE, given to buyers within three days of submitting their home loan application, is prohibited from exceeding 10% of the final closing costs, otherwise lenders pay the difference. However, some lenders purposefully over quote their estimates to ensure the final number is within the required 10% range.
A recent survey of 205 closing agents by the American Land Title Association reported nearly 75% of agents have observed lenders over quote their GFEs and pad them with estimates for general services like “document preparation” and “warehouse fees” which don’t make it to the final statement. More than half of the agents surveyed reported being pressured to cut their own fees in order for the lender to make it within the 10% buffer.
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About The Author
Carrie B. Reyes
is lead writer in charge of the Real Estate Practice and Due Diligence and Disclosures books.
why wouldn’t an originator overdisclose, especially on a potential purchase where the fees are out of his or her control?? The Borrower doesn’t lose anything ( may actually gain) and the originator doesn’t gain anything( fees are what they are)
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AND yes Lenders can and do send out multiple GFE’s—it’s part of new improved regulations. (Change in circumstance…sound familiar?
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We used to make the GFE very high back in the 80′s. Then we would tell people that it ” should be less” it was to help them. As a lender,we did not charge the fees. It was other people. Third parties are often going to need more money for more inspections. If there is $5000 of water damage in a bathroom, the deal would not close. I would tell people, if the lender is not going to loan ….you should not buy it. That was ethical.
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Escrow pads their accounts because until the day of closing there are things that can change. Especially if the escrow does not close on the specific date.
A GFE for a loan is no different…There can be things that are overlooked or changes made. It is the job of the loan officer and underwriter to go over the estimate with a fine tooth comb to be sure all is there that should be there, but until the final day there can still be changes. It’s a lot easier to refun money to the borrower than to hit him at closing for more than he anticipated.
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