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   ARTICLE   |   From Scotsman Guide Residential Edition   |   March 2011

Get Techie with Your GFE Compliance

Struggling with the new good-faith estimate? Finding the right tech solution can help

Since Real Estate Settlement Procedures Act (RESPA) requirements for good-faith estimates (GFEs) took effect last year, mortgage-loan originators across the board have reported spending much more time processing their GFEs. Mortgage lenders, meanwhile, have invested hundreds of thousands — in some cases, millions — of dollars in new technology systems. Even so, data must be continuously updated at considerable expense.

When you consider the added time and costs to prepare GFEs, in addition to  the fines for tolerance violations, partnering with a technology vendor could be a good business decision.

A technology partner can ease your GFE burden and save you time by providing needed information quickly and easily. It can do the same for lenders, who can save precious monetary resources they might otherwise need to spend on technology and its maintenance.

Also, if the technology vendor assumes the risk, brokers and loan originators could avoid fines for tolerance violations.

Here are some things brokers and originators should consider when evaluating potential technology companies.

A complete solution

The company should have a comprehensive database of service providers for block Nos. 3 through 8 of the GFE. Loan originators should be able to choose from at least three providers per category — including title insurance, settlement services, closing attorneys, home inspections, pest inspections and land surveys.

Because title-insurance rates vary across the country, there should be rate cards for the policies by region, as well as title endorsements, and details about whether additional fees from the rate cards are included or must be added to the GFE.

In addition to the standard categories, loan originators should look for more-obscure services, such as septic inspections, land surveys and geotechnical engineering. Find out if trip charges for inspection services are estimated or calculated in real-time using a geocoded mapping service. This may sound insignificant, but these charges add up.

Logic and customization

A technology vendor’s business logic and rules should be customizable and should require minimal setup on the part of loan originators or mortgage brokers. For example, the rules may stipulate the entity responsible for paying for a service or a certain percentage of a service by region, such as with buyer-seller splits. Or they may be able to customize for private rate cards negotiated between lenders and service providers.

Loan originators should be able to save time by receiving accurate fee quotes without having to provide detailed property information every time. Title endorsements required by Freddie Mac and Fannie Mae also should be automatic for appropriate transactions.

Geographic coverage

For mortgage companies working nationally, lists kept by technology service providers should encompass every county in the U.S. and should include at least three providers per category per county. Only then can anti-steering regulations be avoided.

The technology platform should provide accurate transfer taxes and recording fees for block Nos. 7 and 8 on the GFE. This includes dynamic inputs and calculations, including which party pays the transfer taxes.

There should be versatility to cover unusual situations such as Consolidation, Extension and Modification Agreement recordings in New York state. Because transfer taxes and recording fees change frequently throughout the year, the system should have a monitoring function so loan originators are notified and can provide redisclosures to borrowers if necessary.

Live rates

Instead of quoting inflated safe rates, which can result in inflated GFEs, loan originators should expect service providers to provide the actual rates themselves. This allows the generation of accurate and competitive GFEs.

Ease of use

The technology platform should allow loan originators to streamline their work flows, access point-and-click service-provider lists and have a monitoring feature that alerts them about changes automatically. Also, look for seamless integration with your loan-origination system.

Compliance guarantee

Finally, technology vendors should demonstrate confidence in their data by providing a compliance guarantee. With that, loan originators should review the fine print carefully. That includes the terms and conditions, restrictions, and financial limitations.

•  •  •

When evaluating potential technology partners, consider the price, features, usability, richness of data, complexity of rate engines and whether there is a compliance guarantee. You should look for a company that has a solid reputation based on the caliber of its management team, experience in the industry, and the credibility of well-established alliances and partners.

Remember, the original intent of revising RESPA was to make closing costs more transparent and predictable for homebuyers. For mortgage professionals, the process may have been painful, but thanks to advances in technology, compliance doesn’t have to be burdensome or expensive.


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