Lenders are relying on technology to help with good-faith estimate compliance, but some loan origination system providers may have been caught off guard when the new GFE rolled out, said an executive with one of the settlement services providers.
Greg Holmes, national director of sales and marketing for Credit Plus Inc., said it is like any change, it takes time to get used to. This is especially so in the mortgage industry where there have been numerous changes affecting processes in the last few years.
In its own attempt to ease the situation for lenders and give them certainty for the GFE, Credit Plus has created “a flat fee or a closed loan fee for credit that is all encompassing of everything regardless of what we have to put in as far as work to satisfy the processor or loan originator,” Holmes said. With the new GFE’s tight tolerances, the costs for extra work providers like Credit Plus have to do in order to create a satisfactory product can no longer be added to the borrower’s charges.
He added it takes a little work on its own end, but Credit Plus is able to find the general average cost of all the services it provides based on the lender’s historical data and offers a flat fee.
“At the end of the day we are trying to stay cost effective. We want to make sure the originator and the mortgage company knows up front what that fee is going to be so there aren’t any surprises and they don’t have to eat unnecessary charges simply because” they did not know how much work Credit Plus would have to do.
Holmes added that not all of the company’s clients have been receptive to the flat fee concept because there is “some sticker shock.” But in the end, once all the work has been done on the credit file, the flat fee allows originators to recoup the costs they would have had out of pocket if it had not been disclosed up front. And some companies have adapted to the concept and love it.
Until the file is actually pulled, the vendor does not know how much it is going to cost to produce the report if there is some unexpected finding. In the end, the flat fee product allows lenders to lower their costs. The fee covers everything the lender needs to close the loan.
But Credit Plus still offers the traditional a la carte pricing model that is used by most of the mortgage industry. The a la carte pricing is aggregated and put into the GFE by the lender. But with that model, if the lender has misestimated how many supplements or changes to the credit file are needed to close the loan, they can’t charge for it because of what was already on the GFE.
Holmes said the flat fee model helps to create some protection for the lender and let them recoup what they are not able to charge for.
Cathy Blaszyk, vice president of lender services at ClosingCorp, noted that vendors are among the beneficiaries of an automated process to deliver fees to populate the GFE.
Title providers, settlement providers and even pest inspectors being able to have their fee data being given in an integrated solution to a preferred lender partner is “a real enhancement to their work flow as well,” she said.
Meanwhile, International Document Services worked with online lender Nail Your Mortgage to simplify the disclosure process. The lender was looking for a document preparation system with a user-friendly interface that would let borrowers sign mortgage documents electronically.
In relation to the GFE, IDS executive vice president Mark Mackey said there are audits in place to make sure that all things that need to be disclosed on the GFE is done appropriately. This includes making sure the correct blocks are select and fees are in the right place.
Then it compares the GFE to the final disclosure statement to make sure the fees have remained in compliance.
Even though the GFE does not require a borrower signature, Mackey noted IDS verifies whether the borrower receives the GFE, including electronic verification of receipt.
“You have to make sure the documentation associated with the GFE is correct, then you need to make sure the data within the document is correct. So you have the form side of it and then you have the data side. And we’re taking care of both of those,” he said.
As changes are made, in real time audits are performed by the system to make sure the disclosure remains in compliance.
IDS also provides a report that shows in what stage the file is in terms of the disclosure process, that each document has been delivered and that it is in compliance.
“The worst-case scenario for a lender is that they are stuck with paying some fees themselves. They’re looking to us to make sure that the data inside that GFE is accurate and that the form itself is accurate,” Mackey said.
From Nail Your Mortgage’s point of view, IDS is a one-stop shop for both making the disclosure and making sure it is in compliance, its CEO Mark Pickett said.
Previously, the mortgage brokerage had to manage the compliance function for the documents each different lender that it works with.
When Nail Your Mortgage chose IDS as its vendor, that compliance worry went away, he said. Compliance is one of the issues that has to managed very stringently, Pickett said.
IDS did a survey in December which found that over 90% of lenders said compliance was the most important thing when it came to the initial disclosures.
