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(a) Lender to provide.
Except as provided in this paragraph (a) or paragraph (f) of this
section, the lender shall provide all applicants for a federally
related mortgage loan with a good faith estimate of the amount of or
range of charges for the specific settlement services the borrower is
likely to incur in connection with the settlement. The lender shall
provide the good faith estimate required under this section (a
suggested format is set forth in appendix C of this part) either by
delivering the good faith estimate or by placing it in the mail to the
loan applicant, not later than three business days after the
application is received or prepared.
(1) If the lender denies the application for a federally related
mortgage loan before the end of the three-business-day period, the
lender need not provide the denied borrower with a good faith
estimate.
(2) For ``no cost'' or ``no point'' loans, the charges to be
shown on the good faith estimate include any payments to be made to
affiliated or independent settlement service providers. These payments
should be shown as P.O.C. (Paid Outside of Closing) on the Good Faith
Estimate and the HUD-1 or HUD-1A.
(3) In the case of dealer loans, the lender is responsible for
provision of the good faith estimate, either directly or by the
dealer.
(4) If a mortgage broker is the exclusive agent of the lender,
either the lender or the mortgage broker shall provide the good faith
estimate within three business days after the mortgage broker receives
or prepares the application.
(b) Mortgage broker to provide. In the event an application is
received by a mortgage broker who is not an exclusive agent of the
lender, the mortgage broker must provide a good faith estimate within
three days of receiving a loan application based on his or her
knowledge of the range of costs (a suggested format is set forth in
appendix C of this part). As long as the mortgage broker has provided
the good faith estimate, the funding lender is not required to provide
an additional good faith estimate, but the funding lender is
responsible for ascertaining that the good faith estimate has been
delivered. If the application for mortgage credit is denied before the
end of the three- business-day period, the mortgage broker need not
provide the denied borrower with a good faith estimate.
(c) Content of good faith estimate. A good faith estimate
consists of an estimate, as a dollar amount or range, of each charge
which:
(1) Will be listed in section L of the HUD-1 or HUD-1A in
accordance with the instructions set forth in appendix A to this part;
and
(2) That the borrower will normally pay or incur at or before
settlement based upon common practice in the locality of the mortgaged
property. Each such estimate must be made in good faith and bear a
reasonable relationship to the charge a borrower is likely to be
required to pay at settlement, and must be based upon experience in
the locality of the mortgaged property. As to each charge with respect
to which the lender requires a particular settlement service provider
to be used, the lender shall make its estimate based upon the lender's
knowledge of the amounts charged by such provider.
(d) Form of good faith estimate. A suggested good faith
estimate form is set forth in appendix C to this part and is in
compliance with the requirements of the Act except for any additional
requirements of paragraph (e) of this section. The good faith estimate
may be provided together with disclosures required by the Truth in
Lending Act, 15 U.S.C. 1601 et seq., so long as all required material
for the good faith estimate is grouped together. The lender may
include additional relevant information, such as the name/signature of
the applicant and loan officer, date, and information identifying the
loan application and property, as long as the form remains clear and
concise and the additional information is not more prominent than the
required material.
(e) Particular providers required by lender. (1) If the lender
requires the use (see Sec. 3500.2, ``required use'') of a particular
provider of a settlement service, other than the lender's own
employees, and also requires the borrower to pay any portion of the
cost of such service, then the good faith estimate must:
&nbbsp; (i) Clearly state that use of the particular provider is
required and that the estimate is based on the charges of the
designated provider;
(ii) Give the name, address, and telephone number of each
provider; and
(iii) Describe the nature of any relationship between each such
provider and the lender. Plain English references to the relationship
should be utilized, e.g., ``X is a depositor of the lender,'' ``X is a
borrower from the lender,'' ``X has performed 60% of the lender's
settlements in the past year.'' (The lender is not required to keep
detailed records of the percentages of use. Similar language, such as
``X was used [regularly] [frequently] in our settlements the past
year'' is also sufficient for the purposes of this paragraph.) In the
event that more than one relationship exists, each should be
disclosed.
(2) For purposes of paragraph (e)(1) of this section, a
``relationship'' exists if:
(i) The provider is an associate of the lender, as that term is
defined in 12 U.S.C. 2602(8);
(ii) Within the last 12 months, the provider has maintained an
account with the lender or had an outstanding loan or credit
arrangement with the lender; or
(iii) The lender has repeatedly used or required borrowers to
use the services of the provider within the last 12 months.
(3) Except for a provider that is the lender's chosen attorney,
credit reporting agency, or appraiser, if the lender is in an
affiliated business relationship (see Sec. 3500.15) with a provider,
the lender may not require the use of that provider.
(4) If the lender maintains a controlled list of required
providers (five or more for each discrete service) or relies on a list
maintained by others, and at the time of application the lender has
not yet decided which provider will be selected from that list, then
the lender may satisfy the requirements of this section if the lender:
(i) Provides the borrower with a written statement that the
lender will require a particular provider from a lender-controlled or
-approved list; and
(ii) Provides the borrower in the Good Faith Estimate the range
of costs for the required provider(s), and provides the name of the
specific provider and the actual cost on the HUD-1 or HUD-1A.
(f) Open-end lines of credit (home-equity plans) under Truth in
Lending Act.
In the case of a federally related mortgage loan involving an open-
end line of credit (home-equity plan) covered under the Truth in
Lending Act and Regulation Z, a lender or mortgage broker that
provides the borrower with the disclosures required by 12 CFR 226.5b
of Regulation Z at the time the borrower applies for such loan shall
be deemed to satisfy the requirements of this section.
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