Thursday, June 30, 2011

helping a consumer with a Good Faith Estimate error

I was recently contacted by a new title insurance consumer, a homebuyer, who asked if I had worked with the mortgage lender he had selected.  I didn't recognize the name of the company but assured him that we work with many diverse lenders and would help this lender with the nuances of Western Pennsylvania customs in real estate, if needed.  This homebuyer then said he had talked with some local lenders but had selected this remote lender because the interest rates were all about the same, however this lender had quoted significantly lower closing costs.

I offered to give him a specific quote for title services and also explained our Choose and Save Program.  We compared my quote with what was on his GFE.  I noticed that the mortgage lender had disclosed title services at a level equal to our C & S and that's unusual because lenders tend to allow for optionals fees - such as settement fees and courier in their GFE quotes.  The great thing about the RESPA 2010 GFE is that mortgage lenders tend to give conservative quotes and that's a good thing for consumers.

At any rate, since this lender gave what I thought was a lowball quote, I asked about other related costs on the GFE and we discovered that the government recording fees were a low quote as was the transfer tax.  This remote mortgage lender had underquoted the transfer tax by half and as you know - there is no tolerance for error in the transfer tax.

The homebuyer said he had used the GFE to make his decision and had already applied to this mortgage lender.  He decided to go ahead and place his Choose and Save order using our web site and said he would contact the lender about the transfer tax.

A few days later the homebuyer - now my customer - forwarded an email he had received from his loan officer.  The loan officer reminded him that he had correctly quoted the transfer tax in an email but for some reason the wrong figure was placed on the GFE.  The homebuyer had copied his real estate agent on our emails and he asked us both for advice.  He agreed after going back to review emails that the loan officer had mentioned the correct figure in an email, however he had used the GFE as his decisionmaking tool.  The real estate agent deferred the response to me and this is what I said:

As we discussed, the purpose of the GFE as a consumer tool is to assist the consumer in selecting a mortgage lender.  The new uniform GFE which was introduced in January of 2010 has certain regulatory requirements for accuracy which include some at zero tolerance and some at 10% tolerance for errors. 

The transfer tax section is ZERO tolerance unless there is a changing circumstance which created an error beyond the control of the lender.  For instance, if the sales agreement had contain an error in the location of the real estate which resulted in a transfer tax misquote, then the lender could re-disclose.  If the lender simply gave the consumer the wrong information, then the RESPA rules call for the lender to pay the difference.

These new tough guidelines were instituted because we had a huge under disclosure problem which caused many consumers to select lenders who were less than truthful or competent in disclosure.  HUD raised the bar with penalties to protect consumers.

Here is the contact information for RESPA.  These folks can answer questions and may even contact your lender for you.

This is a classic case of a consumer selecting one lender over another because of a misquote.  As you said in our discussion the other day, the interest rates were pretty much the same and you selected this lender because the closing costs were lower.

We are all human and make mistakes.  An honorable company would handle this type of mistake within the law - make good on the regulatory requirement and give you great service.  A different type of company will give you grief.  I would go to a managerial level to see how the company wants to handle your file.  The loan officer may not speak for their compliance officer.  As a business owner and manager I would want to handle this matter myself rather than have an employee cause a RESPA complaint without my knowledge.

It is your transaction and so you need to decide whether or not to stick with this lender.  We'll work with whatever decision you make.

The good news is that his mortgage lender had already reviewed the case and decided to make good on the regulatory tolerance cure even before he got back to his loan officer.  The lender will pay roughly $1700 into the transaction to resolve this RESPA matter.  This is an honorable mortgage lender and a smart consumer!  ;)

1 comment:

MN Short Sale Agents said...

The great thing about the RESPA 2010 GFE is that mortgage lenders tend to give conservative quotes and that's a good thing for consumers..
Thanks for sharing..