HUD made a huge announcement today regarding new RESPA rules surrounding the Good Faith Estimate and HUD-1 final settlement statement. I am amazed that this rule has not gotten more attention in the real estate community.
I blogged about these proposed changes back on November 2nd and pointed out the pro’s and con’s of the changes. Now that the rule has been finalized here are a few thoughts I’d like to share:
*The new GFE is now 3 pages and is standardized. This means that every lender, mortgage broker, or bank will offer consumers the same GFE format. This should prevent lenders from “hiding” fees/ changes. Here is a link to view the new 3 page GFE.
*The one issue I have with this new GFE is that there is no section where a consumer can view their estimated cash to close. This appears to be a huge oversight on the part of HUD.
*There is no section for the loan originator to include the company name or lender.
*There is no section on the 3 page GFE where a borrower’s total principal, interest, taxes, and insurance payment is shown (PITI) together.
*There are plenty of positive aspects of the new GFE including the requirement to offer consumers other options with higher closing costs and lower interest rates as well as lower closing costs and higher interest rates. This is a very important concept and one that often gets over looked by loan originators.
*Fortunately, the final rule did away with any sort of escrow officer script reading which would have made signings painful.
*Here is a link the new HUD-1 settlement statement. There are some confusing aspects of this new document as well.
*These new procedures will have a 12-month transition period. Lenders may start using the new GFE’s on January 1, 2009. They will be required to no later than January 1, 2010.
I am in the process of putting together a class for real estate professionals which I plan to offer for continuing education (assuming the principal broker will approve the content). Please shoot me an email if you’d like to attend.
I have to say that these versions have significant advantages over the present 3-page version which fails to disclose to a loan applicant their estimated cash due at closing. It looks like the newer version still does not have an applicant signature line which means we’ll have to create a second disclosure for the applicant to acknowledge that we provided a GFE as a part of the disclosure process.