Posted by Ilene C. Seidel on 8/30/10 12:28pm
Msg #350919

GFE and HUD screwup

I had a late closing Friday and started to go over the HUD with the borrower I see a credit on the origination fee (minus) -$xxxx.xx. The borrower then precedes to tell me the broker failed to put an origination fee on the GFE so they issued a credit on the HUD and expect the borrower to give them the cashout and in addition to the cash out the borrower was to give them an addl $3,500.00 out of their pocket to cover the origination fees. The broker stated it was perfectly legal and they bit for it. So I'm going over the docs and (of course) there's an affidavit stating no oral agreements and freeks out. After discussing this problem with the customers he calls the lender and asks for a letter stating they screwed up and the funds he is paying them is for an origination fee. The problems is going to be it won't be picked up on the HUD so he can deduct it on his taxes, needless to say is this legal folks? I don't think so but I need to hear from ya all.

Reply by GA/Atty on 8/30/10 12:44pm
Msg #350920

If he pays it and keeps a record of it - it doesn't matter

what the HUD says for purposes of being tax deductible.

That being said I am not sure an origination fee is usually deductible anyway.

Reply by Linda_H/FL on 8/30/10 12:54pm
Msg #350922

I wondered about this too...per IRS

"You generally cannot deduct the full amount of points in the year paid. Because they are prepaid interest, you generally deduct them ratably over the life (term) of the mortgage"

There are exceptions...subject to 9 criteria...ALL of which must be met to qualify..


http://www.irs.gov/publications/p936/ar02.html#en_US_publink1000229936

Reply by Ilene C. Seidel on 8/30/10 12:58pm
Msg #350923

Re: I wondered about this too...per IRS

I know the origination fee is amoritized over the life of the mtg. My problem is if the origination fee is NOT on the GFE how can they collect it from the borrower? This is part of the new hud that says the fee can not be increased on page three of the new HUD. Well if it's not there how can they collect?

Reply by jojo_MN on 8/30/10 2:58pm
Msg #350932

No changes can be made unless re-disclosed. I'm not an attorney, but this is the law as stated.
§ 3500.7 Good faith estimate.

http://www.fdic.gov/regulations/laws/rules/6500-2520.html#fdic6500res35007

Reply by Ilene C. Seidel on 8/30/10 3:35pm
Msg #350944

Thanks JoJo, unfortunately the borrowers is going to pay these people.