In Good Faith
Posted by ecreal on December 14th, 2009
Effective January 1, 2010, all loan applications must use a new Good Faith Estimate form in order to be accepted. The Real Estate Settlement Procedures Act (RESPA) requires all mortgage lenders to provide you with a Good Faith Estimate for your mortgage loan. This form is provides you with an itemized list of fees and costs associated with your loan, allowing you to compare the real total costs of different lenders when making your decision.
The new version of this form has been revised by the Department of Housing and Urban Development in order to be more consumer-friendly. The new form will make it easier for you to compare settlement service providers when shopping around by giving you a more clear presentation of loan terms and total settlement charges.
The form includes an improved disclosure of yield spread premiums (YSPs) to help you understand how they influence charges associated with your settlement. The main purpose of these revisions is to prevent home buyers from entering into loan agreements they do not completely understand and may not be able to afford in the long run.
Fees included on the form will fall into three categories:
• Fees that will not increase from the upfront estimate to final closing.
These include lender or broker origination, processing, and underwriting charges, as well as discount charges or “points” based on the quoted interest rate, and local transfer taxes.
• Fees that may increase, but must stay within 10% of the upfront estimate.
This category specifies that while individual items may increase more than 10%, the combined total must not exceed this limit. These items include services such as appraisals, title insurance, settlement services, owner’s title insurance, and other services required by the lender where the lender selects the provider or supplies a list of providers that the borrower must select from.
• Fees that may increase without limit.
This category is of items that are beyond the lender’s control or realm of prediction. These include services that are required by the lender when the borrower chooses the provider, such as title insurance, escrow, homeowner’s hazard insurance, daily interest charges on the loan, and the amount of initial deposit by the borrower into an escrow account.
The form also requires a new standard closing cost statement, the HUD-1. This allows you to do a side-by-side comparison of the costs that you were given upfront to what you were actually asked to pay at closing. In addition to this, the HUD-1 also requires disclosure of confusing fee splits of title insurance premiums for the insurance underwriter and the title agent. The estimate must be provided by a lender and made available to you within three days of accepting your loan application and will be good for ten days.
For more complete information on the changes being made to the Good Faith Estimate form, watch this informational video provided by United Wholesale Mortgage.
Source: The Washington Post. www.washingtonpost.com.
Department of Housing and Urban Development. 24 CFR Parts 203 and 3500, RIN 2502-AI61. Office of the Assistant Secretary for Housing – Federal Housing Commissioner, HUD.
Photo by: atoach // CC BY 2.0
Leave a Reply