[Code of Federal Regulations]
[Title 24, Volume 5]
[Revised as of April 1, 2004]
From the U.S. Government Printing Office via GPO Access
[CITE: 24CFR3500.7]

[Page 256-258]
 
                 TITLE 24--HOUSING AND URBAN DEVELOPMENT
 
 CHAPTER XX--OFFICE OF ASSISTANT SECRETARY FOR HOUSING--FEDERAL HOUSING 
        COMMISSIONER, DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT
 
PART 3500_REAL ESTATE SETTLEMENT PROCEDURES ACT--Table of Contents
 
Sec. 3500.7  Good faith estimate.

    (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

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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:
    (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:

[[Page 258]]

    (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.

(Approved by the Office of Management and Budget under control number 
2502-0265)

[61 FR 13233, Mar. 26, 1996, as amended at 61 FR 58476, Nov. 15, 1996]