Someone recently landed on my blog by searching: "can a bank alter a good faith estimate?".
The answer is yes IF there is a qualifed changed circumstance or IF the good faith estimate has expired. If the mortgage originator made a mistake with a good faith estimate (regardless of how human the mistake may have been) they still cannot reissue the good faith until it has expired. This is why many mortgage originators or loan officers are still hesitant to provide the good faith estimate that HUD created last year.
Even though HUD created their GFE as a tool for lenders to shop, they have decided that the addition of a property address is not a valid changed circumstance — meaning that mortgage originators cannot reissue the good faith estimate because someone has gone from being "preapproved" to in a bona fide contract. From HUD's FAQs dated April 2, 2010:
"…if a GFE is issued wihtout a property address, the future receipt of the property address is not a changed circumstance that would allow the loan originator to issue a revised GFE."
So if an LO issues a GFE without an address, they are bound by those cost (subject to certain tolerances) if the buyer accepts the GFE prior to expiring. This is why MLOs (mortgage loan originators) have been issuing rate worksheets prior to having a transaction. However, if the MLO has received the criteria HUD had determined is an application a Good Faith Estimate must be issued within three days or the loan must be denied…this tends to happen more often with a refinance than a purchase scenario due to the valid address component.
When does a Good Faith Estimate expire?
From HUD's RESPA FAQs:
If a borrower does not express an intent to continue with an application within ten business days after the GFE is provided…the loan originator is no longer bound by the GFE.
It's a minimum of ten business days (two weeks) after the Good Faith Estimate is issued to the borrower that the mortgage originator is liable for the good faith estimate. If the MLO forgot to include the owners title policy fee (which the buyer doesn't pay for) they (or their employer) may out hundreds of dollars. On a $400,000 sales price, an owners policy runs about $1000. That's a hefty penalty to a mortgage originator for something the buyer doesn't even pay for in Washington state or that has nothing to do with the mortgage. Another expensive mistake is if the MLO forgets an upfront funding fee that FHA, VA or USDA loans have…HUD does not allow any wiggle room for human errors once that GFE is issued.
With all that said, President Obama's new Consumer Financial Protection Bureau is working on drafting a new Good Faith Estimate that is suppose to be friendlier (to conumers) which will also combine the Truth in Lending. Watch for this new document to be created by June 2012…with new guidelines on when a good fiath estimate may be changed or reissued.