Let me begin by saying I think that uniform Good Faith Estimates are a huge step in the right direction. However, I’m quickly reviewing the newly revised Good Faith Estimate and HUD-1 Settlement Statement (beginning on page 46; link below) to see if any changes were made since they were unveiled. The two biggest issues that I see are:
- No clearly marked monthly mortgage payment.
- No funds due for closing.
HUD boasts that consumers will save an average of $700 by using these new forms, yet consumers won’t have the tools to compare without these two factors. It seems like HUD was so focused on YSP (which seems less clear to me on the new form) and controlling closing costs, they skipped a few important details.
Am I missing something right under my nose? Click here to read the final rule. I’ll go through this again and perhaps dig into the entire document over the weekend…I’m just wondering if any of you have more insight into this.
Page 51 regarding the disclosure on Block 2 for “credit or charge for interest rate chosen” is interesting. I don’t live in the lending realm, but who is it that will be “choosing” the interest rate?
I’ll be hearing about this tomorrow at a class for escrow people. I think it is really early and we will see a few versions. This is not going to take place, from what I understand, until 2010—unless some elect to integrate the standard sooner.
Tim, please give us your feedback after class! As far as who selects the interest rate–it should be up to the borrower based on different price points.
The monthly payment is listed under the “Summary of Your Loan” on page one….the fourth block. It is shown as principal, interest and mortgage insurance. There is no estimate anywhere else including taxes and hazard insurance.
Both pages have a Total Estimated Settle Charge but I don’t see where you can adjust for earnest money deposit.
One thing I don’t understand is the how the Instruction for understanding which charges can change at settlement. I tend to let borrowers choose whoever they want for all of the required services. I have a list of all local appraisers, attorneys & title companies that I provide as part of the application package, letting them know that this may not be a complete list and there may be others that provide the services and that they are free to use any of these service or shop around. It is updated once a year. I do this rather than identifying the service providers as part of the GFE. State, FHA, VA, USDA auditors have been fine with it.
It appears that if I continue to do this (identify any provider) then those fees can only change 10%.
What if I’ve prepared a GFE with an appraisal fee of $350 (the current fee with a certain appraiser). Rate is locked. The appraisal come back with deferred maintenance items. Underwriters require some items to be repaired and a final inspection is required. The final inspection costs $50. So I have an invoice from the appraiser for $400. I have to eat the $15.00?
Or can I issue another GFE with the new amount? It doesn’t seem reasonable to me to have to issue another GFE in order to collect $15 for a fee that I have no control over if I identified the appraiser.
I expect there will be changes also….hopefully for the good. I also expect a a rash of state regulations changes too.
Jeff, I’m hoping we can redisclose if needed. I tend to “over estimate” on my preliminary GFE’s and I explain to clients that I’d rather have a $450 appraisal fee on my estimate with a $350 appraisal fee on my HUD vs the other way around (higher fees than estimated at closing).
I’m constantly updating my estimates when something happens that may change what I’ve originally quoted, such as identifying the property, locking in a rate or learning who the title or escrow company is (and their fees).
If we’re not allowed to re-disclose, then we’ll have to over-estimate.
Jeff, I forgot to thank you for pointing out the payment is under “summary of your loan” however, as you mention, it does not break out principal and interest, taxes and mortgage insurance.
The tradeoff table on page three (I’ve since noticed) also has a spot for “your initial monthhly amount owed”.
No spot for seller credit or credit for earnest money deposit.
The “shopping cart” which compares lender to lender does not have a spot that compares closing costs. Just rate!
If this is the form we will be using, I think I’ll have to continue using my current GFE along with the new form to fully disclose the PITI break down and amount due at closing.
I won’t use the current GFE too….I use Calyx Point….I’ll just create a customized doc that with do the same thing as the bottom section of the current GFE………but I might just quit before 2010….hehe.
For as far back as I can remember, my clients have enjoyed seeing the info on a mock HUD 1 before they make an offer. This way what they see at the end matches what they saw before they committed to purchase. This of course not INSTEAD of all the LO required documents, but in addition to.
I then bring the original client initialed mock HUD 1 to closing, and they compare what they expected with the actual numbers. Seeing it in the same format as they did before they started the process, gives them a sense of comfort.
I’m sure we can all get used to the new form, but I’m not sure it does anything to address the problem of borrowers taking loans they don’t understand. A big part of the problem is the sheer size of the pile of papers, and I don’t think a three page GFE is going to help. Lenders already have to disclose all of this stuff, including the YSP, ARM rate caps, etc. A good loan officer will explain all of this, and a bad one will gloss it all over and tell you to just sign it.
I’m sure the regulators mean well, but adding more forms and pages will only decrease the likelihood of the borrower reading any of them. It’s ridiculous to see at least three forms in every package reminding you to keep insurance on your home. The sheer volume of paper, much of it redundant, is what prevents people form understanding their loans.
If you don’t work with a lender you can trust, then the paperwork becomes your only protection. Unfortunately the important stuff can get lost in the shuffle if nobody is there to point it out. The better approach may be to get rid of 90% of the forms in favor of 5 or 10 that are clear, easy to understand, and cover all the bases.
Ardell, I don’t think the new HUD portion approved with the new GFE will be part of the GFE. It will just be the GFE (I could be wrong).
Bela, I agree. I think the new form is more confusing…but maybe the regulators are on to something and the form will make sense to consumers. We’ll find out in about a year!
The problem is that the disclosures are not there for consumer protection. They are there as a CYA for the companies. Thank the attorneys.
Seriously, do we really need a whole paragraph pointing out that you aren’t supposed to keep hazardous materials in your home? Or how about that you aren’t going to be refunded interest on payments already paid if you payoff your mortgage early. Better yet, that if you don’t make a mortgage payment, the lender has the right to screw up your credit.
Everytime a bank gets sued, the stack of paper is going to get thicker. It is only going to get worse.