News

12/23/2009 - New Good Faith Estimate to be released January 1, 2010

As part of RESPA (Real Estate Settlement Procedures Act) reform, several forms as part of the mortgage process have been changed.  The most important change from a mortgage borrower's point of view is the new Good Faith Estimate (GFE) that is now 3 pages instead of 1.  Making the disclosure longer allows room for the fees and terms associated with a mortgage to be clearly explained to the consumer.  And, even though the disclosure is longer, it now has an extremely important benefit to the consumer:  fees are less likely to change from the time the borrower is comparing mortgage proposals to loan closing. 

Because the new GFE is binding, lenders may provide loan proposals prior to loan lock-in as you are considering different loan scenarios.  These may be called Loan Scenarios, Initial Fee Worksheets, or Itemization of Amount Financed.  These worksheets may provide more detail than the new GFE.  When you are ready to commit, it's important to compare the loan proposals with the GFE, and note the fields below as described on the new GFE:

Note: a more detailed explanation is under the Learn/Articles section of our website.
 
Understanding which charges can change at settlement

For a sample of the new GFE - see http://www.hud.gov/offices/hsg/ramh/res/gfestimate.pdf on the HUD Website.
 
As you can see in the left box above, the lender cannot change their charges for the loan, and other charges have to be reasonably accurate. 
 
However, if any of the underlying facts provided by the borrower prior to the GFE change, the lender fees CAN change.  In the new RESPA laws, this is referred to as a Changed Circumstance. 

Changed Circumstances include:

- Information particular to the borrower or transaction relied on in providing the GFE is found to be inaccurate or changes after the GFE was provided, including information about the credit quality, the amount of the loan, the estimated value or sales price of the property, or other information used to provide the GFE (like income, or loan type)

- New or changed information regarding the borrower or transaction that was not relied upon for issuing the GFE.

Various examples provided regarding issuance of a revised GFE include:

Circumstances affecting settlement costs - If the changed circumstance results in an increase in settlement costs at closing and exceeds the tolerances, a revised GFE can be given within 3 business days of receiving the information sufficient to establish the changed circumstance. If a revised GFE is given, the increase in charges must be limited to only those charges where the changed circumstance resulted in the higher charge.
 
Circumstances affecting the loan - If there is a change to the borrower's eligibility for the specific loan terms identified in the original GFE, the originator may provide a revised GFE to the borrower, but it must be issued with 3 business days of receiving the information sufficient to establish the changed circumstance.
 
Borrower-requested changes - If a borrower requested change results in a change to the terms of the loan or the settlement charges, an originator may provide a revised GFE within 3 business days of the borrower's request.
 
Expiration of the original GFE - If the borrower does not express an intent to continue with an application within the mandated 10 business days that the GFE must be in effect, or longer if the lender establishes a longer time frame, then you are no longer bound by the issued GFE.
 
Charges and terms dependent upon interest rate - If the interest rate is not locked or a lock has expired, the charge or credit for the interest rate, the adjusted origination charges, per diem interest and loan terms related to the interest rate may change. Once the borrower does lock (or re-lock) the rate, a new GFE must be provided reflecting the rate dependent charges and terms. All other terms and charges not affected by the rate must remain the same.
 
New home purchases - If the loan is for a new home purchase and the settlement is expected to be beyond 60 calendar days from the GFE issuance, the originator may provide the GFE with a separate disclosure (clear and conspicuous) stating that any time up until the 60 calendar days before the closing a revised GFE may be issued. If this is not done, the originator cannot issue a revised GFE.

Want more information? 

RESPA Page on the HUD Website - http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm

HUD's new Settlement Charges Handbook - http://portal.hud.gov/portal/page/portal/HUD/documents/Settlement%20Booklet%20December%2015%20REVISED.pdf

goodmortgage.com has offered guaranteed lender fees for many years.  We believe the new disclosures will enforce all lenders to be more upfront and honest about the costs associated with obtaining a mortgage.  This is good for the mortgage lending industry, because it's good for the consumer.  You can now more clearly compare lenders and loan programs.  We believe that goodmortgage.com will have the lowest rates when you have a chance to honestly compare lenders!