The U.S. Department of Housing and Urban Development issued long-anticipated mortgage reforms that will help consumers shop for the lowest cost mortgage and avoid costly and potentially harmful loan offers. HUD will require, for the first time ever, that lenders and mortgage brokers provide consumers with a standard Good Faith Estimate (GFE) that clearly discloses key loan terms and closing costs. HUD estimates its new regulation will save consumers nearly $700 at the closing table.

 

 

HUD continues to believe that consumers need to be aware of the key aspects of their loan as well as associated settlement costs.

 

To facilitate comparison between the HUD-1 and the GFE, each designated line on the final HUD-1 will now include a reference to the relevant line from the GFE. Borrowers will now be able to easily compare their estimated and actual costs.

 

HUD will require the new standardized GFE and HUD-1 beginning January 1, 2010.

 

To view these documents, click on the following links:

 

 

Using a series of "Yes/No" checkboxes on Page 1, mortgage lenders specifically note:

 

•         Interest rate on the mortgage

•         Whether rate can change over time

•         Whether loan carries a prepayment penalty

•         The length of the rate lock

 

 Important Dates

•         The “interest rate” and “other settlement charges” dates are independent of each other

•         At lock, an updated GFE must be issued with “Important Dates” sections updated. 

•         Line 4 may contain “N/A” at this point.

 

 Disclosing Fees 

All fees typically charged to borrowers regardless of who pays must be listed on the GFE except:

 

 

•         Fees disclosed, but paid by others are still bound by tolerances

•         Block 3 includes all third party settlement services selected by the broker/lender

–        Exception: Document preparation performed by a third party should be disclosed in Block1 (Our origination charge)

–        Exception: Charges for appraisals performed by in-house appraisers should be disclosed in Block 1 (Our origination charge)

 

–        Acts of God, war, disaster or other emergency

–        Changed situation or inaccurate information provided by the borrower after issuance    of the GFE

 

 –        Only those fees impacted by the changed circumstance

–        If pricing changes due to a changed circumstance, or a borrower requested change, only the interest rate dependant charges and terms may change. This includes only those charges or credits in Block 2 which will, in turn, impact the “Adjusted Origination Charges.”

–        If pricing changed due to going from a float to a lock, only the interest rate dependant charges and terms may change (Block 2 and the impacted, “Adjusted Origination Charges.”)

–        Block 1 fees CANNOT change, even with a changed circumstance

Exception: If the loan amount changes and a portion of the “Origination Charge” is a percentage of the loan amount or the overall loan program changes Important Dates Section – must be updated to reflect any new information.