During our dialogue, I offered to share a comparison of our exiting Good Faith Estimate, which we have around for loan applications effective ten more days before we are required to use HUD’s new Good Faith Estimate.
The new estimate is highly controversial and you may hard pressed to find many mortgage originators who like it. I am for having an uniform document for consumers to use when selecting their mortgage–I don’t think this will do it. I’ll get into more of that later (perhaps on another post if this one rambles too long). Right off the bat, there are serious flaws with HUD’s attempt at improving the GFE:
- There is no “total mortgage payment” or PITI (sum of principal, interest, taxes and insurance). The closest thing we have PIMI (principal, interest and mortgage insurance).
- There is no section for total funds due for closing.
- There is no section for seller credit.
- The owners title policy must be shown on the Good Faith Estimate even though in our area, it is customary for the seller to pay for it.
- Loan originators who prepare a good faith estimate for a consumer are “presumed” to have obtained enough information for a loan application and are therefore bound by certain costs (including third party) for a specific time period.
This comparison is for a purchase using an FHA insured loan for financing. I have to admit, I’m not 100% certain if the loan amount on the new GFE is suppose to be the base loan amount or the base loan amount plus the financed upfront mortgage insurance premium–I can’t find that addressed anywhere in HUDs 51 page FAQs on this new document. I’ll correct this post if it turns out I’m wrong (I’m just using the base loan amount).
The new Good Faith Estimate consists of three pages, HUD added two additional pages even though this is suppose to streamline the process and make things easier for consumers to understand. I’m not going over it line by line in this post, I am going to review what I feel is most important…and I’ve just decided this will be series (since I can see I’ve all ready rambled too long).
Watch for part 2 where I cover page 1 of HUD’s new Good Faith Estimate…coming soon–January 1, 2010!
NOTE: This is just my interpretation of the new GFE and I am only a mortgage originator and blogger. This post is just based on my opinion. Please check with your compliance department at your mortgage company to learn about the GFE requirements.