“Recently Prime Alliance Solutions has received several inquiries around the topic of “Partial Credits” for Borrower Closing Costs, which might be paid for by the Lender. The questions center on how these might be shown on the GFE. As we all know by now, all Borrower Charges must be shown on the GFE regardless of who has offered to pay for them.  Lenders are questioning how to show a Credit to offset the borrower’s charges should another party such as a Lender, Seller, or Other Party offer to pay for some of the borrower’s charges.

We presented a question to HUD to help determine how they categorize the transaction when the Lender or Selling is paying a portion of the Borrower’s closing costs. The response below indicates that this is a “Partial Credit”, and not a “No Cost Loan” as defined by HUD.

For a “No Cost Loan” all of the Lender’s Origination Charges on the GFE must be -0- in Box 1 and 2 and Line A must be -0- or show a credit equal to all Borrower Charges.

For a “Partial Credit” loan where the Borrower is paying some but not all of their Closing Costs HUD indicated that NO CREDIT is to show on the GFE. Credits may show on the HUD if a Lender, Seller, or Other Party pays for certain closing costs.

Based on HUD’s response, we will continue with our current approach to these types of Credits. Please see our 9.2 Release instructions below. Partial Credits based on HUD’s response should not appear on the GFE.

Questions to HUD:

• How would you recommend showing a Partial Credit towards Borrowers charges such as a Lender offering to pay for the Borrower’s Appraisal Fee? We understand the Appraisal Fee charge must show on the GFE as a Borrower Charge and the Lender’s Origination charges are going to be shown in Box A, so where and how does the credit show?  

RESPONSE: Lender credits related to the rate quoted are shown in Block 2 Box 2 and Line 802 of the HUD-1. All other credits by the lender, not related to the rate quoted are shown in the 200’s section on page 1 of the HUD-1.
 
Anthony P. Romano, Esq.
Consumer Protection Compliance Specialist
U.S. Department of Housing
and Urban Development
Office of RESPA and ILS

• Is the definition of a “no cost loan” meaning there will be no “origination cost” and no “charge for Interest Rate” in Box 1 and 2 of the GFE such that Line A would be 0 as in “No Costs from the Lender”?

RESPONSE: See the GFE instructions at www.hud.gov/respa; for example:

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.

For additional details on how to set up a “No Cost” loan in your site Click Here to download the RESPA Partial Credits GFE PDF.”

As always, if you have any questions in regards to this information supplied by Prime Alliance, please contact your PA web administrator Rob Meijer 616-285-5711 x190 rmeijer@cuanswers.com

For those that would like a more detailed presentation frrom Fannie Mae, the link Fannie Mae LQI will take you to a recent seminar on the exact policies and delivery implementation.

As always, if you have any questions do not hesitate to contact your PA web administrator Rob Meijer 616-285-5711 x190 rmeijer@cuanswers.com

Currently, Prime Alliance includes debts with less than 10 months left to pay in the Debt-to-Income ratio calculation. This does not match the value calculated by DU and as of July 26th, will return warning messages when the file is delivered to the Loan Delivery System.

With the release of 9.3.2, debts with less than 10 months to pay are now excluded from the Debt-to-Income calculation, which affects three areas:

• The value calculated by DU and the value sent in the Loan Delivery file will now match, avoiding any warnings or fatal errors upon loan delivery.
• The Loan Summary Screen to show the ratios both with and without the debts with less than 10 months to pay.
• The Transmittal Summary in the Forms Library has been updated to ignore debts with less than 10 months left to pay in the Total Obligations/Income field.

Please note that this change does not apply to Loan Prospector loans, or to Government loans. Therefore, the calculation applies only to Conventional products where Fannie Mae DU has been selected as the Product AUS.

For any questions, contact your Prime Alliance web administrator, Rob Meijer

616-285-5711 x190 or rmeijer@cuanswers.com

The main idea behind the new GFE is the concept of the initial “snapshot” which sets your base line of fees that are diclosed to the borrower. Any time a fee increases or decreases and you are re-disclosing to the member, a description needs to be added to describe the change in circumstance.

The latest PA release 9.3 includes a number of RESPA related enhancements to improve the creation and modification of the GFE.

In order to educate users on how to handle the changes in the GFE and how to make sure all changes are properly documented and the correct fees flow through to the printed documents, Prime Alliance has produced an extensive recorded presentation, which includes a convenient index to direct you to specific topics.

You can view the presentation by clicking here.

If you have any questions or issues, as always do not hesitate to contact me personally at 616-285-5711 x190 or rmeijer@cuanswers.com

Thanks, and have a productive week!

Rob Meijer

If any questions still arise, please do not hesitate to contact me for assistance.

Thanks, Rob

616-285-5711 x190 or rmeijer@cuanswers.com

If you are using Prime Alliance as your mortgage originating platform, then you have probably been in touch with me before.  On future postings here in the Lender Community I plan on addressing current general issues that have come up with Prime Alliance, any best practices, hints and tips that I can share with all of you. In addition this forum will be a great location to provide you with links back to Prime Alliance release documentation or available training material.

In the next few months, our clients that use the Participation Lending and Mortgage Servicing functions on our core product CU*Base can also expect many updates.  I hope this new Lender Community will become a useful interactive tool to complement various other modes of communication you are familiar with here at CU*Answers.  As I understand, you will be able to respond to our posts here, and also subscribe to updates. Any feedback will be appreciated, and I am looking forward to submit many postings here. As always, we appreciate your business and feedback.

Our current clients are ATL, Parkside, Aberdeen, New Horizons, District Government Employees, Grand Rapids Family, Focus, FEDCom, Core Plus, and Mass State.

Join your peers for the Collection Round Table: 3rd Quarter!

This is the third session in our quarterly round table series! With each session, attendance grows exponentially and the ideas shared are invaluable. Come learn about current events affecting the collections world. Talk with others in the same field. Share ideas and best practices. Let your voices be heard! This free event has proven to be one you do not want to miss! Read the full announcement here!

Date: April 29, 2010
Time: 9:30 – 12:00 pm ET
Register here: Course # SE.51

Topics include:

• Rate management and the different ways credit unions have disclosed rates to members (including fixed, fixed until you decide to change, true variable, penalty rates for delinquent members, and first year prohibitions)
• Fair interest applications
• Over‐limit fees
• Grace periods
• Member’s ability to repay
• Timely settlement of estates
• Prohibition on credit cards to minors
• Changes on up‐front disclosures
• Periodic statement changes