It’s been a few years since the changes to the RESPA Rule that introduced the Good Faith Estimate (GFE) and tolerances. However even now some real estate professionals are a little confused by them. Tolerances don’t have to be complicated when you have a tool like Easy HUD title closing software to help you out.
You probably already know this but it’s worth reviewing. Lenders must provide a GFE of the actual cost of a loan, including all charges associated with the transaction. When the actual loan is issued it may be permissible to charge more than the GFE depending on which of three categories the charge falls into:
- 0% Tolerance: Fees such as origination charge and transfer taxes cannot exceed the GFE. If they do, then the lender must cover the costs out of pocket. Of course it is always allowable for charges to be lower than the GFE.
- 10% Tolerance: Government recording charges and certain other fees may vary by as much as 10% over the GFE. However one mistake many lenders make is assuming that each charge must be within 10%. Actually this category looks at all 10% Tolerance fees taken together and the sum of charges must not be more than 10% greater than the sum of GFE charges. This means an individual fee can be more than 10% above the GFE as long as the total is not.
- No Tolerance: Any other fees, including homeowner’s insurance and daily interest charges, can come in higher than the GFE at no penalty to the lender. Often these are values such as escrow deposits where any excess will be returned to the borrower anyhow.
How Easy HUD Settlement Statement Software Helps
Keeping track of the different tolerances can be confusing, especially in the 10% Tolerance category. Unfortunately making a mistake can have serious consequences. Billing a borrower for charges outside of the tolerance limits laid out in the HUD program could be viewed as fraud regardless of whether or not it was due to an innocent mistake.
Easy HUD automatically creates a GFE-HUD comparison sheet so you can see all fees and tolerances on a single screen. You can add additional line items as needed, ensuring you have a complete report. You are less likely to make errors and less likely to get into trouble as a result.
Easy Soft’s law practice management software has been helping legal and real estate professionals run their practices more efficiently and more safely for over 25 years. Contact us to find out more about our products.