Rain City Guide

Ring Out the Old, Ring in the New Good Faith Estimate

Rhonda Porter on 12 21, 2009

Today between “actual work” Ardell and I were tweeting (on Twitter of course) about the new Good Faith Estimate.

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.

About the Author: Rhonda Porter

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Rhonda Porter began her mortgage career on April 1, 2000 at Mortgage Master Service Corporation, a family-owned correspondent lender that has been lending in the Pacific Northwest for over 30 years. Prior to mortgage, she was in title industry for 14 years where she managed an escrow branch and gained an invaluable insight to the real estate industry. Rhonda Porter is a Licensed Loan Originator MLO-121324. Inman News named Rhonda one of the Top 50 Online Influencers of 2009. She was recognized in Seattle Weekly's Best of 2009 issue as the Best Twitting Mortgage Broker http://www.twitter.com/mortgageporter) and Sellsius 2007 Top 12 Women Real Estate Bloggers and 2007-2008 Maginficent 7 Consumer Articles. Her peers recognized her with the Washington Association of Mortgage Professionals Distinguished Service Award in 2009. Rhonda originates mortgages for homes located in Washington State. You can reach Rhonda at rhonda@mortgageporter.com or by calling (206) 718-9488. NOTE: Rhonda Porter and Mortgage Master Service Corporation are not affiliated with any real estate brokerages.