Home Buyer says dealing with the new Good Faith Estimate is “Close to Living Hell”
Rhonda Porter on 01 9, 2010
We’ve heard plenty of rants from mortgage originators about the HUD’s Good Faith Estimate. Because the new HUD required GFE is so new, most consumers and real estate agents have not had a chance to witness one first hand beyond sample on a website. Right now I’m dealing with a buyer where we began the preapproval process late 2009 and wouldn’t you know it, they bought a house this week. Yesterday I prepared my first “official” HUD Good Faith Estimate since this is a bona fide transaction (we are using a detailed form for pre-GFE clients). The comment I received from one of our readers is so timely, I had to share it as a post.
I am a home buyer caught in the transition between the old and new GFE and it has made the last three days something close to a living hell. We started the loan process the last week in December and will close the end of January. These new forms damaged the very good relationship I had with a good and reputable lender but reading some of the blogs has confirmed that the seeming crazy things my lender was telling me are in fact true.
-My first shock was how much higher the settlement charge total compared to the closing costs total. After three days of call and emails I see that my costs have risen a little due to increases from my lenders service providers but at least not the $1,500.00 that I originally thought.
-I still have not been able to determine my “Estimated Cash Required at Closing” from the info on the new form. I’ve done my own estimate that appears to be $500.00 more that what I expected using the old GFE. The omission of this information in the new GFE is beyond understanding!
-I’m still confused on the new line of “Owners Title Insurance”. Why show costs the seller will pay? I don’t care as a buyer and it is making it very difficult to know what cash to have available at closing.The new GFE is bureaucracy at it’s worst and I pray there is enough backlash to cause this form to be updated quickly; bad time to be throwing a government wrench in an improving housing market.
As a Mortgage Originator who also had to recently convert from the old GFE to the new, I’m sure I shocked my client as well. This transaction is an FHA purchase so my good faith appears more expensive by:
- $1000 Owners Title Insurance Policy (which the Seller pays for)
- 1.75% of the loan amount for their upfront mortgage insurance premium (which is financed and not paid out of pocket)…in my clients case, the UFMIP is $7,623 and is now appearing as an out of pocket cost.
- No credit for the closing costs the seller is paying for on the transaction.
I highly recommend that you look at your loan application for some of the very important missing information on your new Good Faith Estimate. 
- Page 2 of your loan application (also referred to as a 1003, or 10-0-3) shows your detailed proposed mortgage payment including your property taxes and home owners insurance (aka PITI) in the upper right corner. This is the figure used for qualifying your for your mortgage and is your mortgage payment (taxes and insurance may be estimates–check with your lender).
- Page 3 of your loan application shows your transaction summary(see Section VII Details of Your Transaction) including “real” summaries (vs HUD’s required formulas) of your closing costs, prepaids and as an added bonus you’ll find the seller closing costs credits and funds needed for closing. NOTE: The “Total Other Paid CC” shown on “line l” is the owners title policy which the seller is paying for.
If my client were to just look at the bottom line of page one of the new GFE which shows A (Your Adjusted Origination Charges) + B (Your Charges for All Settlement Services); it looks like my closing costs, prepaids and reserves are close to $18,000 on a purchase of about $400,000. The last GFE they saw from me in 2009, closing costs, reserves and prepaids were reflected at 10,000 (with no credit for what the seller is contributing). A consumer in their shoes (and our reader above) might think the Mortgage Originator has suddenly increased their fees by huge chunk and it’s probably not so.
My clients, who are out of state, so they’re reviewing this new HUD via email, are pretty amazed as well. We’ve had a great relationship and now with this document, even though my closing costs have not changed with exception to the reserves and prepaids (property tax and prorated interest), everything looks different…as if I’ve thrown them a Randy Johnson wild pitch…and I have not. They sent me an email last night after reviewing their HUD GFE:
“I can see how the GFE must make you feel…Thanks for everything you keep everything calm and clear.
“We survived the 2010 GFE” should be a T shirt or bumper sticker.”
About the Author: Rhonda Porter
- Author's website: http://www.mortgageporter.com
- More posts by Rhonda Porter
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[...] Home Buyer says dealing with the new Good Faith Estimate is “Close to Living Hell” raincityguide.com) [...]
Here’s a Smart Money article on the subject that I just ran across- J- http://tiny.cc/nGmi5
Dear Jerry,
That article says what the new Good Faith Estimate is supposed to do, not what it actually does. Have you seen the new document compared to the old? Also the article is filled with hyperlinks to list sales companies disguised as Mortgage Lenders. You leave your personal information, short of your Social Security number. They then sell this information to every lender willing to pay the $70.00 to $100.00 per name they charge. The people that will be ringing your phone off the hook are the very boiler room operators the industry needs to get ride of. The best source for finding a Lender is your friendly Real Estate Agent, or family member or friend. The worse source is dealing with an unlicensed entity. They do not have a fiduciary duty to do whats in the best interest of the consumer. By the way, all Federal institutions are unlicensed. This includes banks, and credit unions. In fact, there is no law that prevents a felon convicted of financial misdoings from working at your Local Bank and/or Credit Union. This is going to change in 2010 but the banks lobbyist are working hard to get major loop holes put in the bill. Barney Frank & Dick Todd are bought and paid for by the big banks. Look at their top campaign contributors!
Steve, This point needs to be made more:
“By the way, all Federal institutions are unlicensed. This includes banks, and credit unions. In fact, there is no law that prevents a felon convicted of financial misdoings from working at your Local Bank and/or Credit Union. This is going to change in 2010 but the banks lobbyist are working hard to get major loop holes put in the bill. Barney Frank & Dick Todd are bought and paid for by the big banks. Look at their top campaign contributors!”
Jerry seems to like popping by my post to do “drive by” comments.
The argument that they just need to be “registered” for the SAFE ACT (and not held to the same standards the rest of us are) is sadly laughable.
Rhonda- As to “Jerry seems to like popping by my post to do “drive by” comments.”- not so, I had thought this might add to the discussion.
thanks for clarifying.
Rhonda- As you know by now, I come at Real Estate issues from the Design side having worked with custom clients for many years. As Dustin knows, I’ve tried to get Rain City Guide a bit more oriented to the consumer as well as the industry side. This to broaden its appeal to other than RE Agents, Mortgage Lenders, Escrow Companies. As a residential architect, I’ve had to deal with and educate my clients on the myriad facets of achieving a custom home that fits their individual needs in today’s world. J-
You don’t think RCG was consumer oriented prior to your contributions here?
Jerry, this is really getting off topic with my original post.
Rhonda- As to: “You don’t think RCG was consumer oriented prior to your contributions here?”-
No I don’t, it’s Real Estate Industry oriented. An architect commenting seems to be unwelcome per se. J-
[...] 4) Shopping for a Mortgage Should Get Easier – Easier???!??!!?? Some times I wonder if people are paying attention to what is really going on? I agree you need to know the forms for your clients, but then you need to know the truth about the new GFE forms. [...]
Dear Mr. Jerry Gropp
It has nothing to do with your commenting on the post but how your trying to portray your self as an industry expert that is the problem. If you choose to comment as a consumer that is fine, but then again this website is for Real Estate professional’s.
Then to devalue Rhonda Porter’s post, who is a recognized, award winning expert in the industry, well Sir, with no disrespect intended, it makes you come across as a bitter old man with to much free time on his hands. I am sorry, I was careful to choose my words, but we are trying to solve some real problems with in the industry.
My post to you pointing out the many short comings of the new Good Faith Estimate was supported by consumer sentiment, in a printed publication. I did this specifically for the reason that the public reading our post don’t care about our opinions. They want facts, from reputable sources. Speaking of, I included the article to back up my opinion, for the same reason a good author cite’s their source’s. Many times the public will want to further research the subject and citation gives them the ability to do so.
Dear Mr. Steven B’ Harkness
Thank you for clarifying that “this website is for Real Estate professional’s (sic)”. Having long been accustomed to sitting on the client’s side of the table as well as my own, I had thought RCG and its Real Estate “professionals” might like to hear from those architects who provide and those customers who live in the product you so avidly market. Thanks for writing. Jerry Gropp Architect AIA- not bitter, not old and with plenty to do.
Thanks Steve, I think Jerry doesn’t understand what a “drive by” comment is (and I’m not going to waste any more if my time trying to explain it or dig up past examples for him)…I’ve chosen to ignore those comments until now and I’m now regretting that I brought it up.