One of the core changes RESPA made to the home purchase process was the GFE, or Good Faith Estimate, which gives an idea of how much the buyer and seller will have to pay out of pocket. The GFE is only an estimate and the final charges may differ from the HUD-1 settlement statement but only by a certain percentage. The problem lies in the fact that if your estimate is off by a large amount then it’s going to cost you.
What If The Estimates Are Wrong?
RESPA rules separate out the GFE into three categories: 0% tolerance, 10% tolerance and no tolerance. 0% tolerance fees are transfer taxes and similar predictable fees that can’t be higher on the final HUD 1 statement. 10% tolerance fees such as government recording charges can be as much as 10% higher than the estimate. No tolerance charges would include homeowner’s insurance or daily interest charges, and there is no limit as to how much higher these fees can be.
So what if you calculate the transfer taxes wrong and the actual taxes are much higher? The buyer and seller cannot be held responsible for incorrect estimates outside of the tolerances established by RESPA. That means the agent or attorney responsible for making the estimate is going to have to pay the fees, and that could really hurt your business.
Get It Right the First Time
One of the reasons to use HUD settlement statement software like Easy HUD is to simplify the GFE process. You can prepare a preliminary HUD with estimated fees and fill in your GFE estimates. When the HUD is finalized, the GFE worksheet allows you to enter POC charges alongside your GFE estimates. The software automatically pulls the actual fees from the HUD form giving you a RESPA-compliant GFE-HUD comparison.
The form makes it easy to spot any charges that exceed the allowed tolerances. The 10% tolerance charges are totaled since individual charges can exceed 10% as long as the total of charges falls within the tolerance. You can add manual lines for other fees that need to be put into one of these three GFE categories.
Easysoft’s attorney practice management software is all about helping you get it right the first time. Simple GFE-HUD comparisons are just one of the many ways Easy HUD saves your firm time and money. Contact us to find out more about Easy HUD.