VA Issues Guidance on Disclosing Origination Fees on New GFE
January 14, 2010
In response to the new form of Good Faith Estimate (GFE) required under the revised Real Estate Settlement Procedures Act rule, the Department of Veterans Affairs (VA) has
issued a circular with guidance on how VA origination fees should be disclosed on the GFE. The new GFE consolidates the fees that all originators on the transaction will receive, other than those for the rate chosen, into a single fee called “Our Origination Charge.” VA limits the origination fee that a veteran borrower may pay to a one percent origination charge and certain limited allowable fees. The circular, issued on Jan. 7, explains how to disclose the fees on the GFE where the traditional “origination fee” plus the allowable fees taken together exceed one percent of the loan amount.
VA offers two options for disclosing the fees on the GFE. One option is for lenders to itemize the charges in the empty 800 lines of the HUD-1 Settlement Statement, to the left of the column. In the event that there is insufficient space on the HUD-1 to itemize all of the fees, the lender must provide a separate origination statement, to be signed and dated by the borrower, indicating the purpose of the charge and the amount. If the lender chooses to attach an origination statement, the HUD-1 should not also separately itemize the fees. While VA encourages lenders to comply with the new procedures as soon as possible, it is not requiring that the procedures be followed immediately. All VA loan applications taken on or after May 1, 2010 must comply with this guidance.
According to the VA, veterans may pay reasonable and customary amounts for several services, including title examination and title insurance, recording fees, Mortgage Electronic Registration System fees and surveys. Whenever these itemized fees relate to services performed by a third party, the veteran may only pay the actual amount charged by the third party.
According to the circular, the lender may not charge the veteran for attorney’s fees associated with settlement.
"This fee should not be confused, however, with attorney’s fees for title examination; it is allowable to itemize and charge for a title exam performed by an attorney, as long as the associated fees reflect the actual cost and are reasonable and customary," the VA stated in the circular.
Additionally, effective immediately, lenders are no longer required to issue an Interest Rate and Discount Disclosure Statement for VA-guaranteed loans where the new GFE and HUD-1 have been used. In all cases, a copy of the GFE and HUD-1, as well as any copies of invoices for all third party services, must be maintained as part of the origination package. These documents must be submitted to VA if the loan file is requested for review by VA.