Guidance/Clarification – Final Inspection Fees (appraisal) on GFE vs. HUD-1

Appraisal Fees, listed on page 2, section 3 (“Required services that we select”), are subject to a 10% tolerance when compared to the “final” figures on the HUD-1.

On occasion, Underwriting may condition you for a “Final Inspection” of the subject property. Most of the time, this is done when the appraiser notes a deficiency with the property that must be corrected to ensure the appraised value and marketability of the property. In any case, the “Final Inspection” fee is added to the Appraisal Fee line on the HUD-1. This fee is $100 through Reliable Appraisal Management (GMG preferred vendor), but can vary from vendor to vendor.

If a Final Inspection of the subject property is required, this would constitute an acceptable “change in circumstance”. A new GFE should be provided to your client, indicating the Final Inspection charge on page 2, section 3.

Failure to disclose this fee to your client prior to closing will result in a loss of revenue to you.

For example; The cost of the appraisal, as stated on the GFE, is $435.00. The cost of the Final Inspection is an additional $100. Your borrower may only have a 10% increase in the initially disclosed $435…which means, the HUD would reflect a charge to the borrower of $478.50 ($435 increased 10%). The remaining cost for the Final Inspection would be deducted from the Adjusted Origination Charge…i.e. paid for by the Loan Originator.

Please ensure that, when a Final Inspection is required, you are providing your borrower a new GFE which includes the associated Final Inspection Fee.

J. Whitney Barth

VP Operations

Gateway Mortgage Group LLC

972.908.3390 x101 p

918.392.8336 f

6/7/2010