Thursday, October 29, 2009

RESPA 2010 Update - Understanding “Changed Circumstances”

The intent of the new GFE regulation is to require a FIRM cost estimate.  Once issued a GFE cannot change unless there are “changed circumstances.”  This eliminates the “bait and switch”.

The original information cannot be a basis for the change, unless it is later found inaccurate.  If there is a changed circumstance, then it can only change that aspect of the costs that it affects; i.e.: title problem > title insurance or credit score > interest rate.  Any changes have to be issued within 3 days of discovery – by whoever discovers the change.  The lender or broker can revise the GFE, so communication is crucial.  Retain documents that relate to the change for 3 years.

Not Changed Circumstances
Maybe, depending
·         * Any accurate information provided prior to GFE borrower
·         * Broker issued GFE inconsistent with wholesaler’s
·         * No property address at application
·         * Broker changes from one investor to another
·         * Market changes
·         * Borrower delays closing
·         * Original vendor goes out of business
·         * Acts of God, war, disaster, emergency
·         * Borrower changed: credit quality, loan amount, property value
·         * New information
·         * MIP/PMI factors changed
·         * Credit policy/Regulatory change
·         * Incorrect legal address initially supplied
·         * Undisclosed title or property issues
·         * Borrower changes occupancy status
·         * Borrower selects POA closing
·         * AVM – “No hit”
·         * Credit score change