Appendix C to Part 1024 - Instructions for Completing Good Faith Estimate (GFE) Form
12:8.0.2.1.19.5.1.1.51 : Appendix C
Appendix C to Part 1024 - Instructions for Completing Good Faith
Estimate (GFE) Form
The following are instructions for completing the GFE required
under section 5 of RESPA and 12 CFR 1024.7 of the Bureau
regulations. The standardized form set forth in this Appendix is
the required GFE form and must be provided exactly as specified;
provided, however, preparers may replace HUD's OMB approval number
listed on the form with the Bureau's OMB approval number when they
reproduce the GFE form. The instructions for completion of the GFE
are primarily for the benefit of the loan originator who prepares
the form and need not be transmitted to the borrower(s) as an
integral part of the GFE. The required standardized GFE form must
be prepared completely and accurately. A separate GFE must be
provided for each loan where a transaction will involve more than
one mortgage loan.
General Instructions
The loan originator preparing the GFE may fill in information
and amounts on the form by typewriter, hand printing, computer
printing, or any other method producing clear and legible results.
Under these instructions, the “form” refers to the required
standardized GFE form. Although the standardized GFE is a
prescribed form, Blocks 3, 6, and 11 on page 2 may be adapted for
use in particular loan situations, so that additional lines may be
inserted there, and unused lines may be deleted.
All fees for categories of charges shall be disclosed in U.S.
dollar and cent amounts.
Specific Instructions Page 1
Top of the Form - The loan originator must enter its
name, business address, telephone number, and email address, if
any, on the top of the form, along with the applicant's name, the
address or location of the property for which financing is sought,
and the date of the GFE.
“Purpose.” - This section describes the general purpose
of the GFE as well as additional information available to the
applicant.
“Shopping for your loan.” - This section requires no loan
originator action.
“Important dates.” - This section briefly states
important deadlines after which the loan terms that are the subject
of the GFE may not be available to the applicant. In Line 1, the
loan originator must state the date and, if necessary, time until
which the interest rate for the GFE will be available. In Line 2,
the loan originator must state the date until which the estimate of
all other settlement charges for the GFE will be available. This
date must be at least 10 business days from the date of the GFE. In
Line 3, the loan originator must state how many calendar days
within which the applicant must go to settlement once the interest
rate is locked. In Line 4, the loan originator must state how many
calendar days prior to settlement the interest rate would have to
be locked, if applicable.
“Summary of your loan.” - In this section, for all loans
the loan originator must fill in, where indicated:
(i) The initial loan amount;
(ii) The loan term; and
(iii) The initial interest rate.
For reverse mortgage transactions:
(i) The initial loan amount disclosed on the GFE is the amount
of the initial principal limit of the loan;
(ii) The loan term is disclosed as “N/A” when the loan term is
conditioned upon the occurrence of a specified event, such as the
death of the borrower or the borrower no longer occupying the
property for a certain period of time; and
(iii) The initial interest rate is the interest rate indicated
on the legal obligation.
The loan originator must fill in the initial monthly amount owed
for principal, interest, and any mortgage insurance. The amount
shown must be the greater of: (1) The required monthly payment for
principal and interest for the first regularly scheduled payment,
plus any monthly mortgage insurance payment; or (2) the accrued
interest for the first regularly scheduled payment, plus any
monthly mortgage insurance payment. For reverse mortgage
transactions where there are no regular payment periods, the loan
originator must disclose “Not Applicable” or “N/A” for the initial
monthly amount owed for principal, interest, and any mortgage
insurance.
The loan originator must indicate whether the interest rate can
rise, and, if it can, must insert the maximum rate to which it can
rise over the life of the loan. The loan originator must also
indicate the period of time after which the interest rate can first
change.
The loan originator must indicate whether the loan balance can
rise even if the borrower makes payments on time, for example in
the case of a loan with negative amortization. If it can, the loan
originator must insert the maximum amount to which the loan balance
can rise over the life of the loan. For Federal, State, local, or
tribal housing programs that provide payment assistance, any
repayment of such program assistance should be excluded from
consideration in completing this item. If the loan balance will
increase only because escrow items are being paid through the loan
balance, the loan originator is not required to check the box
indicating that the loan balance can rise. For reverse mortgage
transactions, the loan originator must indicate that the loan
balance can rise even if the borrower makes payments on time and
the maximum amount to which the loan balance can rise must be
disclosed as “Unknown.”
The loan originator must indicate whether the monthly amount
owed for principal, interest, and any mortgage insurance can rise
even if the borrower makes payments on time. If the monthly amount
owed can rise even if the borrower makes payments on time, the loan
originator must indicate the period of time after which the monthly
amount owed can first change, the maximum amount to which the
monthly amount owed can rise at the time of the first change, and
the maximum amount to which the monthly amount owed can rise over
the life of the loan. The amount used for the monthly amount owed
must be the greater of: (1) The required monthly payment for
principal and interest for that month, plus any monthly mortgage
insurance payment; or (2) the accrued interest for that month, plus
any monthly mortgage insurance payment. For reverse mortgage
transactions, the loan originator must disclose that the monthly
amount owed for principal, interest, and any mortgage insurance
cannot rise.
The loan originator must indicate whether the loan includes a
prepayment penalty, and, if so, the maximum amount that it could
be.
The loan originator must indicate whether the loan requires a
balloon payment and, if so, the amount of the payment and in how
many years it will be due. Reverse mortgage transactions are not
considered to be balloon transactions for the purposes of this
disclosure on the GFE.
“Escrow account information.” - The loan originator must
indicate whether the loan includes an escrow account for property
taxes and other financial obligations. The amount shown in the
“Summary of your loan” section for “Your initial monthly amount
owed for principal, interest, and any mortgage insurance” must be
entered in the space for the monthly amount owed in this section.
For reverse mortgage transactions where the lender will establish
an arrangement to pay for such items as property taxes and
homeowner's insurance through draws from the principal limit, the
loan originator must indicate that an escrow account is included
and the amount shown in this section must be disclosed as
'N/A.'
“Summary of your settlement charges.” - On this line, the
loan originator must state the Adjusted Origination Charges from
subtotal A of page 2, the Charges for All Other Settlement Services
from subtotal B of page 2, and the Total Estimated Settlement
Charges from the bottom of page 2.
Page 2
“Understanding your estimated settlement charges.” - This
section details 11 settlement cost categories and amounts
associated with the mortgage loan. For purposes of determining
whether a tolerance has been met, the amount on the GFE should be
compared with the total of any amounts shown on the HUD-1 in the
borrower's column and any amounts paid outside closing by or on
behalf of the borrower.
“Your Adjusted Origination Charges”
Block 1, “Our origination charge.” - The loan originator
must state here all charges that all loan originators involved in
this transaction will receive, except for any charge for the
specific interest rate chosen (points). A loan originator may not
separately charge any additional fees for getting this loan,
including for application, processing, or underwriting. The amount
stated in Block 1 is subject to zero tolerance, i.e., the
amount may not increase at settlement.
Block 2, “Your credit or charge (points) for the specific
interest rate chosen.” - For transactions involving mortgage
brokers, the mortgage broker must indicate through check boxes
whether there is a credit to the borrower for the interest rate
chosen on the loan, the interest rate, and the amount of the
credit, or whether there is an additional charge (points) to the
borrower for the interest rate chosen on the loan, the interest
rate, and the amount of that charge. Only one of the boxes may be
checked; a credit and charge cannot occur together in the same
transaction.
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 (see Block 1 instructions 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.
For a mortgage broker, the credit or charge for the specific
interest rate chosen is the net payment to the mortgage broker from
the lender (i.e., the sum of all payments to the mortgage
broker from the lender, including payments based on the loan
amount, a flat rate, or any other computation, and in a table
funded transaction, the loan amount less the price paid for the
loan by the lender). When the net payment to the mortgage broker
from the lender is positive, there is a credit to the borrower and
it is entered as a negative amount in Block 2 of the GFE. When the
net payment to the mortgage broker from the lender is negative,
there is a charge to the borrower and it is entered as a positive
amount in Block 2 of the GFE. If there is no net payment
(i.e., the credit or charge for the specific interest rate
chosen is zero), the mortgage broker must insert '0' in Block 2 and
may check either the box indicating there is a credit of '0' or the
box indicating there is a charge of '0.'
The amount stated in Block 2 is subject to zero tolerance while
the interest rate is locked, i.e., any credit for the
interest rate chosen cannot decrease in absolute value terms and
any charge for the interest rate chosen cannot increase. (Note: An
increase in the credit is allowed since this increase is a
reduction in cost to the borrower. A decrease in the credit is not
allowed since it is an increase in cost to the borrower.)
Line A, “Your Adjusted Origination Charges.” - The loan
originator must add the numbers in Blocks 1 and 2 and enter this
subtotal at highlighted Line A. The subtotal at Line A will be a
negative number if there is a credit in Block 2 that exceeds the
charge in Block 1. The amount stated in Line A is subject to zero
tolerance while the interest rate is locked.
In the case of “no cost” loans, where “no cost” refers only to
the loan originator's fees, Line A must show a zero charge as the
adjusted origination charge. In the case of “no cost” loans where
“no cost” encompasses third party fees as well as the upfront
payment to the loan originator, all of the third party fees listed
in Block 3 through Block 11 to be paid for by the loan originator
(or borrower, if any) must be itemized and listed on the GFE. The
credit for the interest rate chosen must be large enough that the
total for Line A will result in a negative number to cover the
third party fees.
“Your Charges for All Other Settlement Services”
There is a 10 percent tolerance applied to the sum of the prices
of each service listed in Block 3, Block 4, Block 5, Block 6, and
Block 7, where the loan originator requires the use of a particular
provider or the borrower uses a provider selected or identified by
the loan originator. Any services in Block 4, Block 5, or Block 6
for which the borrower selects a provider other than one identified
by the loan originator are not subject to any tolerance and, at
settlement, would not be included in the sum of the charges on
which the 10 percent tolerance is based. Where a loan originator
permits a borrower to shop for third party settlement services, the
loan originator must provide the borrower with a written list of
settlement services providers at the time of the GFE, on a separate
sheet of paper.
Block 3, “Required services that we select.” - In this
block, the loan originator must identify each third party
settlement service required and selected by the loan originator
(excluding title services), along with the estimated price to be
paid to the provider of each service. Examples of such third party
settlement services might include provision of credit reports,
appraisals, flood checks, tax services, and any upfront mortgage
insurance premium. The loan originator must identify the specific
required services and provide an estimate of the price of each
service. Loan originators are also required to add the individual
charges disclosed in this block and place that total in the column
of this block. The charge shown in this block is subject to an
overall 10 percent tolerance as described above.
Block 4, “Title services and lender's title insurance.” -
In this block, the loan originator must state the estimated total
charge for third party settlement service providers for all closing
services, regardless of whether the providers are selected or paid
for by the borrower, seller, or loan originator. The loan
originator must also include any lender's title insurance premiums,
when required, regardless of whether the provider is selected or
paid for by the borrower, seller, or loan originator. All fees for
title searches, examinations, and endorsements, for example, would
be included in this total. The charge shown in this block is
subject to an overall 10 percent tolerance as described above.
Block 5, “Owner's title insurance.” - In this block, for
all purchase transactions the loan originator must provide an
estimate of the charge for the owner's title insurance and related
endorsements, regardless of whether the providers are selected or
paid for by the borrower, seller, or loan originator. For
non-purchase transactions, the loan originator may enter “NA” or
“Not Applicable” in this Block. The charge shown in this block is
subject to an overall 10 percent tolerance as described above.
Block 6, “Required services that you can shop for.” - In
this block, the loan originator must identify each third party
settlement service required by the loan originator where the
borrower is permitted to shop for and select the settlement service
provider (excluding title services), along with the estimated
charge to be paid to the provider of each service. The loan
originator must identify the specific required services
(e.g., survey, pest inspection) and provide an estimate of
the charge of each service. The loan originator must also add the
individual charges disclosed in this block and place the total in
the column of this block. The charge shown in this block is subject
to an overall 10 percent tolerance as described above.
Block 7, “Government recording charge.” - In this block,
the loan originator must estimate the State and local government
fees for recording the loan and title documents that can be
expected to be charged at settlement. The charge shown in this
block is subject to an overall 10 percent tolerance as described
above.
Block 8, “Transfer taxes.” - In this block, the loan
originator must estimate the sum of all State and local government
fees on mortgages and home sales that can be expected to be charged
at settlement, based upon the proposed loan amount or sales price
and on the property address. A zero tolerance applies to the sum of
these estimated fees.
Block 9, “Initial deposit for your escrow account.” - In
this block, the loan originator must estimate the amount that it
will require the borrower to place into a reserve or escrow account
at settlement to be applied to recurring charges for property
taxes, homeowner's and other similar insurance, mortgage insurance,
and other periodic charges. The loan originator must indicate
through check boxes if the reserve or escrow account will cover
future payments for all tax, all hazard insurance, and other
obligations that the loan originator requires to be paid as they
fall due. If the reserve or escrow account includes some, but not
all, property taxes or hazard insurance, or if it includes mortgage
insurance, the loan originator should check “other” and then list
the items included.
Block 10, “Daily interest charges.” - In this block, the
loan originator must estimate the total amount that will be due at
settlement for the daily interest on the loan from the date of
settlement until the first day of the first period covered by
scheduled mortgage payments. The loan originator must also indicate
how this total amount is calculated by providing the amount of the
interest charges per day and the number of days used in the
calculation, based on a stated projected closing date.
Block 11, “Homeowner's insurance.” - The loan originator
must estimate in this block the total amount of the premiums for
any hazard insurance policy and other similar insurance, such as
fire or flood insurance that must be purchased at or before
settlement to meet the loan originator's requirements. The loan
originator must also separately indicate the nature of each type of
insurance required along with the charges. To the extent a loan
originator requires that such insurance be part of an escrow
account, the amount of the initial escrow deposit must be included
in Block 9.
Line B, “Your Charges for All Other Settlement Services.”
- The loan originator must add the numbers in Blocks 3 through 11
and enter this subtotal in the column at highlighted Line B.
Line A + B, “Total Estimated Settlement Charges.” - The
loan originator must add the subtotals in the right-hand column at
highlighted Lines A and B and enter this total in the column at
highlighted Line A + B.
Page 3 “Instructions”
“Understanding which charges can change at settlement.” -
This section informs the applicant about which categories of
settlement charges can increase at closing, and by how much, and
which categories of settlement charges cannot increase at closing.
This section requires no loan originator action.
“Using the tradeoff table.” - This section is designed to
make borrowers aware of the relationship between their total
estimated settlement charges on one hand, and the interest rate and
resulting monthly payment on the other hand. The loan originator
must complete the left hand column using the loan amount, interest
rate, monthly payment figure, and the total estimated settlement
charges from page 1 of the GFE. The loan originator, at its option,
may provide the borrower with the same information for two
alternative loans, one with a higher interest rate, if available,
and one with a lower interest rate, if available, from the loan
originator. The loan originator should list in the tradeoff table
only alternative loans for which it would presently issue a GFE
based on the same information the loan originator considered in
issuing this GFE. The alternative loans must use the same loan
amount and be otherwise identical to the loan in the GFE. The
alternative loans must have, for example, the identical number of
payment periods; the same margin, index, and adjustment schedule if
the loans are adjustable rate mortgages; and the same requirements
for prepayment penalty and balloon payments. If the loan originator
fills in the tradeoff table, the loan originator must show the
borrower the loan amount, alternative interest rate, alternative
monthly payment, the change in the monthly payment from the loan in
this GFE to the alternative loan, the change in the total
settlement charges from the loan in this GFE to the alternative
loan, and the total settlement charges for the alternative loan. If
these options are available, an applicant may request a new GFE,
and a new GFE must be provided by the loan originator.
“Using the shopping chart.” - This chart is a shopping
tool to be provided by the loan originator for the borrower to
complete, in order to compare GFEs.
“If your loan is sold in the future.” - This section
requires no loan originator action.
[76 FR 78981, Dec.
20, 2011, as amended at 78 FR 80105, Dec. 31, 2013]