Okay, I admit…I’ve been groaning, sniveling and bitching along with many other mortgage originators about HUD’s 2010 Good Faith Estimate. The document has it’s faults and was created pretty much because of the faults of loan originators who used the GFE as a tool for bait and switch. We’ve had a month to mourn the loss of the old good faith estimate, which was an asset in how I explained scenarios to my clients…it’s gone. Get over it.
I’m hearing from consumers that many mortgage originators are refusing to issue Good Faith Estimates — even if they have provided the “six points of information” which HUD uses to define a loan application. A mortgage originator has three business days to provide you with a good faith estimate or deny your “application” if you have provided the following:
- the borrower(s) name
- monthly income
- social security number to obtain a credit report
- property address
- estimated value of the property
- loan amount
HUD has added an additional item (which can be vague): any other information deemed necessary by the loan originator.
Per HUD’s most recent RESPA FAQs that were updated on January 28, 2010, a mortgage originator cannot refuse to issue a good faith estimate if they do not have supporting documentation (such as income or assets documentation) or verification disclosures signed by the borrower. If after providing a GFE to a borrower, it is discovered that their income they provided is not how an underwriter would view it, this may constitute a “changed circumstance” allowing a revised good faith estimate to be issued. If you read the FAQs, you can tell that HUD is well aware that consumers have been having a real challenging time getting their hands on the 2010 GFE.
Update from HUD’s RESPA FAQs (page 11, #33)
“In order to prevent over burdensome documentation demands on mortgage applicants, and to facilitate shopping by borrowers, the final rule specifically prohibits the loan originator from requiring an applicant, as a condition for providing a GFE, to submit supplemental documentation to verify information provided by the applicant on the application…
Similarly HUD has long supported a public policy goal of creating a circumstance where consumers can shop for a mortgage loan among loan originators without paying significant upfront fees that impede shopping”. (Only a credit report can be charged to a borrower at this point).
So dry your eyes, my fellow mortgage professionals, the Good Faith Estimate IS a tool for consumers to use for shopping…whether we like it or not. It’s time to open our arms wide and embrace it.
PS LO’s: This post (and any of my articles) are not a replacement to your employer’s compliance department or legal advice.
Happy Valentines Day
Great post Rhonda. I too have gotten over it and making the best of an opportunity. The actually implementation has not been that bad and in most cases more advantageous to those of us willing to educate and walk through it (GFE) step-by-step with our clients. An opportunity to create greater value. Well said!
Thanks, Chik! I think many of us have been experiencing the stages of grief, which all kidding aside, is a natural process: denial, anger, depression and acceptance. 🙂
Rhonda:
I think most of us are dealing with it and learning how to use it. However, it does not change the fact that in its current form, the new GFE is a waste of paper and it was created by bureaucrats that have never originated a mortgage.
You would think if HUD wanted to help consumers, they would actually ask the people with knowledge of the process how to create an effective tool to help consumers shop for a loan. Any LO with six months experience could have created a form better than this.
In fact, they could have just taken the old GFE and simply said that fees in section 800 cannot change unless there is a changed circumstance. I would bet any of the “worksheets” that LOs are using right now are better than this GFE garbage.
Looks like Russ isn’t over the anger phase yet. 🙂
Jillayne
Perhaps Russ is angry, but at least he has not succumbed to cynicism, nor lying to himself.
It is a piece of garbage, and it should be clearly stated as such by intelligent people.
“they should have said that the fees in section 800 could not change without changed circumstance”
That’s all that was needed. Duh!
And WA state already made that law.
Still, we have to help our customers, and fend off the wolves. So we provide them with GFE’s that do not provide them the information they need to know, and which still can be manipulated by crooks.
And follow that with even more education.
And hope for the best outcome.
If that sounds cynical…maybe I’m a little further down the grief cycle than Russ is… but I’m not yet ready to deny the truth.
I wouldn’t say that I’m “denying the truth”… I’m probably more like someone in rehab… I’m accepting the things that I cannot change. We have to make the best of this or be bitter and angry all day long…it’s not going to solve anything…or we can be happy that someone is actually considering to do business with us and is giving us a chance.
Looks like Roger is still in the anger phase. 🙂
Rhonda what event finally helped you turn the corner on this issue?
I don’t like being angry and Valentines Day is around the corner. 😉
For the record, I’m not championing this “piece of crap.” It is what it is and there’s noting I can do about it. I can only turn it into a positive spin to my clients. They don’t care if i like it or not.
I got over it after my first walk through face-to-face with a client. I had the new GFE, the Fee Worksheet (old GFE) and definition of Origination Fees to walk through with the clients.
They got it and there was no issue.
Don’t get me wrong, I am not “angry” but I have always believed in calling a spade a spade. This form sucks and does nothing to help consumers. If anything it is hurting them by raising costs and making it that much more difficult to shop for mortgages.
My frustration is that all these rules and regulations are coming down and they aren’t helping but hurting the very people they are supposed to be protecting. This business is already over regulated too death and the last thing we need is more mindless regulations just so some political hack can make themselves feel good.
We spend more time in this business inconveniencing and raising costs for 99% of the people trying to protect the 1% of mental midgets from themselves.
The old GFE was fine. All HUD needed to do is enforce the laws already on the books. It was no secret who the boiler room hack shops were.
I’m not happy with the GFE, Russ, either. If I could have designed one, it would have resembled a HUD so that there would be some sort of congruency for the consumer…but we don’t get to do that. I’m just doing the best I can to “embrace it”.
There will always be LOs who will mis-use the government required forms.
There will never be enough regulators to regulate every single transaction at every single company.
You know what I’m going to say because I’ve been saying it for 9 years.
Since WE are the ones who know who the companies are that mis-use the forms, we need to self-regulate our own industry.
It’s not a perfect fix but it’s more than what we have going on right now.
As the number of LOs continues to shrink, we’ll get to a point where only the core LOs are left and that’s when we start.
It will happen.
Patience.
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I have been reading your comments and am glad to know there are people out there that feel the way I do. I work for a 105 year old bank in Arkansas and have been in the mortgage industry for 20 years, so needless to say I’m pretty set in my ways. When January 1 rolled around, our mortgage software provider wasn’t able to send us the updates for the new GFE, which completely shut us down from taking any loan applications for about a week, and the problem is still not resolved. I got to learn how to figure the new GFE by hand, until our department manager purchased an excel spreadsheet that would work in the interum. Talk about stress levels going through the roof in addition to explaining to the customer that the new GFE is basically 3 pages full of bullshit. In my area, we do a lot of government bond loans with down payment assistance second mortgages for low to moderate income buyers, and are now told if there are additional mortgages, there must be two HUD-1’s, instead of showing it all on one HUD as we did in the past. Our title companies are now charging a closing fee for that second HUD. And the sellers pay for owners title insurance, so that creates a problem on the new GFE too. All this has done is increase the fees for the borrower. The look on their faces when you try to explain the new GFE is awful. Most customers want to know what their monthly payment will be and how much they need for closing. And purchasing a new home is supposed to be a happy and exciting time for the borrower, not a nightmare caused by bullshit paperwork created by people who have no idea how to originate a mortgage loan. There are some bad people in this industry that created all this and the good LO’s are paying the price. I can remember one LO in my office did a 100% EA-III loan to a customer with PMI of $900 a month! I gasped when I saw the amount and it wasn’t even my deal. This customer was approved through DU, and after the LO thoroughly explained this to the customer, by god, she still wanted that house, and now, guess what, she’s in foreclosure. Is this the LO’s fault??? I don’t think so. How could the LO deny that customer when she has DU approval? That’s a lawsuit waiting to happen. I treat my customers like I would want to be treated if I were getting a home loan, and try to provide quality customer service to each of them. And after bitching and complaining about the new GFE for a month now, I have figured out I can’t beat the system, so I’ve surrendered and am trying to make the best of a unnecessary and stupid change in the system. I think the people who did this will soon realize the havoc this has caused. Until then, I’ll just try to stay calm and eke out a living and hope I don’t royally screw up one of my deals. Good luck to all of you LO’s out there, I feel your pain.
This whole mortgage mess was creatd by the beureucrates for the government. Reugultations and new policies do not help the mortgage origination system they only cause more headaches and confusion for the general consumer. Who by the way on average has no idea what is going on with the NEW GFE. If it is hard for us who have been ion this industry for decades, and deal with GFE on a daily basis. How do you think these consumers are feeling!!?? They hate it and it is very discouraging to say the least. Mortgage originators who break the law eventually get caught and then can NEVER originate again! So why all the punishment for all of us who are out here and have been doing it right for decades?? We are being punished…why? This GFE does not help the borrower, it is a bunch of junk that causes more confusion than anything. I had a borrower ask me to go over the GFE 3 times, because they want to be sure they understand it.
In short the new GFE takes up time, paper, and just adds to the policies and regulations that are already out there. I think this may be the slippery slope affect…meaning more changes to come in the future, made by people who are not in the mortgage business at all!! I pray not.
You may be looking at the GFE from the lender’s side. From an attorney’s viewpoint, the new HUD form and GFE is a disaster. It only confuses the customer more. Title fees are now hidden with legal fees and OVERNIGHT CHARGES. This is ludicrous. Worse, attorneys like myself, are increasing our legal fees on our clients because of all the extra work involved which is nothing more than nonsense.
Getting rid of this new HUD is not asking the sun to rise in the west.
terry, the new GFE and HUD-1 are a wreck…I agree. My point with the post is that we have to live with it. I’ll eat a shoe if HUD comes out and declares “wow, we really screwed this up!”
HUD needs to losen up on what qualifies for a “changed circumstance”…although this document was created with the purpose of “rate shopping”…a consumer will be hard pressed to find a mortgage originator who will issue a GFE since the event of adding an address does not qualify. A mortgage originator will be on the hook for any fees over the tolerances just because the buyer has found the home…even in HUD’s FAQs and presentations, they state a MLO can issue a GFE w/out an address (or TBD address) WITH GREAT RISK.
And to your point, I’ve seen fees INCREASE from many third parties and lenders.
Right now I’m reviewing a HUD-1 and my fees are perfect (from my GFE to the HUD) but because my client found a home and gave me the purchase and sale BEFORE I could provide my written list of preferred providers, I look like I’m off on the title and escrow fees–third party fees I have no control over…GRRRR.
Valentines Day is long over.
Seeing the attorneys and title agent stumble through trying to explain the HUD at closings now is hilarious. All the credits tied to the GFE for stuff that borrowers don’t even pay…
Almost everyone of my clients calls me on the formal GFE for purchases because it looks nothing like the “estimate” I give them in excel. We have to disclose all these fees that the BUYER DOES NOT PAY in IL. Transfer taxes, owner’s title insurance, etc. The HUD GFE looks like it is $6k higher than what borrowers really need to have for closing.
Complete disaster.
It’s a joy to review HUDs and instruct the escrow company to move the title/escrow fees because the borrower didn’t select the title and escrow provider from my Written List… I don’t want the fees of a company I did not select in my “10% tolerance” bucket.
The problem now is that everyone is over disclosing, so borrowers don’t get a true sense of cost. It makes it that much harder to shop.
This entire business from the regulations to underwriting is basically being boiled down to if you filled out docs in black or blue ink.
The mortgage business is a case study as to why banks, government, and attorneys should never work together. Talk about organized confusion… better yet, a fustercluck.
On the HUD-1 I’m reviewing, I see there’s a home owners association fee of $200 that’s in my 10% bucket that I didn’t have on my original GFE because I didn’t know they had a HOA! It’s not a condo… I’m within my accumulative 10% allowed tolerance…but if I wasn’t, I would be paying for a part of this fee that is NOT a lender’s fee.
We have been getting burned with transfer taxes and owner’s title insurance.
We have to disclose that the seller is paying transfer taxes and then give a credit on the hud to wash it out. The same with the owner’s title insurance policy. Makes my GFE look way higher than reality.
Last minute title fees and the like are problematic. I just over disclose and explain what is going on to my clients. Fortunately, I don’t deal with too many neurotic rate shoppers, so the GFE is just a formality anyway and they get it. But if anyone thinks they can use a GFE to shop for mortgages, they are going to be in for a rude awakening.