Are we completing our Good Faith Estimates (GFEs) correctly? This is a question that I frequently receive from credit unions even though we are almost two years removed from the required implementation of the new GFE. And as it turns out, many credit unions are still not completing them correctly. So, with the anniversary approaching, I thought now would be a good time to review some common mistakes made on a very common form. As the title of today’s post indicates, this is the beginning of a series of posts describing common mistakes and instructions on how to complete the GFE correctly.
Today’s common mistake: “Your Adjusted Origination Charges”
On page 2 of the GFE, the first section that must be completed is the “Your Adjusted Origination Charges” section which encompasses Blocks 1, 2 and Line A. Typically credit unions don’t have any problem with Block 1 or Line A, but they often get hung up on Block 2. Frequently credit unions will leave this section blank because they are under the impression it does not apply to that particular transaction.
Appendix C to the Real Estate Settlement Procedures Act (RESPA) provides detailed instructions on completing the GFE, including what to do when the credit union does not impose a charge for the interest rate chosen on the loan. Specifically, the instructions state:
For transactions without a mortgage broker, the lender may choose not to separately disclose in this block any credit or charge for the interest rate chosen on the loan; however, if this block does not include any positive or negative figure, the lender must check the first box to indicate that “The credit or charge for the interest rate you have chosen” is included in “Our origination charge” above, must insert the interest rate, and must also insert “0” in Block 2. Only one of the boxes may be checked; a credit and charge cannot occur together in the same transaction.
What does this mean you may ask? Well, it means you still need to complete Block 2 even if there is no charge or credit for the interest rate provided. For further information and to see the detailed instructions on completing the GFE, visit this link.
Stay tuned for more GFE common mistakes!