The Department of Housing and Urban Development late last week issued RESPA guidance to help lenders and settlement service providers fill out the 'Good Faith Estimate' when the Federal Reserve's loan officer compensation rule goes into effect later this week.
The Fed rule changes the way mortgage originators are compensated. Going forward, a loan officer or mortgage broker can be paid a flat fee per loan or a set percentage of the principal amount of the mortgage.
The Real Estate Settlement Procedures Act guidance includes one example where a mortgage broker receives a flat fee of $4,000 and the lender charges $500 for processing and administrative fees. In filling out the GFE, Block 1 should reflect a "charge of $4,500," HUD says.
The guidance also covers cases where a lender has to pay a borrower to correct GFE tolerance violations by a mortgage broker.
"The FRB's compensation rule will go into effect April 1, 2011 and absent other factors cannot be considered a basis for a changed circumstance to revise the GFE," the RESPA guidance says.
Two trade groups are suing the Fed, hoping to block the rule. That case may be decided this week.
