**Correction**How to disclose the MassHousing Counseling fees?
Correction to this morning's newsletter ..
Everybody makes mistakes, right? We just received word that MassHousing has fresh (and conflicting guidance) from the CFPB's Calvin Hagins (Deputy Assistant Director).
Long story short, they're expecting lenders to list the Homebuyer Counseling Fee (on MassHousing loans) in Section B. of the Loan Estimate, making this a 0% tolerance fee.
Let me explain myself...
I typically find the CFPB pretty reasonable - they're available to talk to, provide amazing web resources to lenders. Lots of smart people with fresh perspectives. But so you all don't lose faith in me (why would he write about that if he wasn't sure??) I just want to put this out there: I completely disagree with this guidance. Reading the rule and official commentary, I think it is completely indefensible.
To avoid 0% tolerance, lenders need to let borrowers "shop." Lenders can put "reasonable requirements" on shopping and still get credit. For example, lenders still allow borrowers to "shop" for an attorney where the lender requires that the lender be licensed to practice law in Massachusetts.
Under the Rule, "A creditor permits a consumer to shop for a settlement service if the creditor permits the consumer to select the provider of that service, subject to reasonable requirements." The official comments explain that the Rule"permits creditors to impose reasonable requirements regarding the qualifications of the provider. For example, the creditor may require that a settlement agent chosen by the consumer must be appropriately licensed in the relevant jurisdiction."
So the requirement in question is that the Homebuyer Counselor needs to be approved by MassHousing. Even if you look past the fact that MassHousing is not a "creditor" (and thus the creditors are allowing shopping), I cannot believe that simple approval by MassHousing is an 'unreasonable' requirement - but that is the stance the CFPB is taking.
That said, of course, none of this really matters. The CFPB wrote the rule. If this is how the CFPB is going to enforce it, then we have to follow along.
So what do we do now?
It would be downright impossible to disclose the Homebuyer Counselor fee accurately under our current practice because at the time the Loan Estimate is disclosed, you won't know which counselor will be used and all counselors have different fees.
But this isn't the end of the world. There are two ways to approach this to avoid paying for increases in fees all the time:
Lock the list down to counselors who you've gotten fee agreements from. Just like many lenders have a closed attorney list, you can include counselors on a closed list. To make it on the closed list, the counselor will have to agree to a fixed fee. Instead of disclosing the full list of approved counselors, you'll just disclose those where you have fee certainty. OR
Disclose the highest counselor fee that might apply. Of course, adjust down to the actual fee on the Closing Disclosure. While typically intentionally over-disclosing a fee on the Loan Estimate is an issue because it is not in "good faith," the CFPB advised that this course of action was permissible under 1026.17(c) as an "estimated" fee where the true costs were not reasonably available to the lender.
So sorry for the confusion, I'll try to do better next time.
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