[Code of Federal Regulations]

[Title 24, Volume 5]

[Revised as of April 1, 2006]

From the U.S. Government Printing Office via GPO Access

[CITE: 24CFR3500.7]



[Page 273-274]

 

                 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 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



[[Page 274]]



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:

    (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]