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Kim N. Bregman's Blog

By Kim N. Bregman | Broker in Boca Raton, FL

The New Good Faith Estimate & HUD Guidelines Effective 1/01/10


The U.S. Department of Housing and Urban Development (HUD) has updated and re-released
“Shopping for Your Home Loan: HUD’s Settlement Cost Booklet.”

A large share of content in the 49-page publication, which helps consumers comparison-shop mortgages,
addresses the standardized Good Faith Estimate(GFE) and HUD-1 settlement statement forms that lenders must
start using on Jan. 1, 2010.

HUD estimates that consumers could save almost $700 in costs and fees per loan on average as a result
of the new requirement, which is one of several changes to the Real Estate Settlement Procedures Act (RESPA).

In addition to the updated literature, the agency has set up a RESPA “FAQ” section and other information
on a dedicated RESPA page so that consumers, settlement service providers and lenders can gain a better
understanding of the new rules.


Here is the location of the .pdf of the booklet that you can save or print out for your reference.
http://portal.hud.gov/portal/page/portal/HUD/documents/Settlement%20Booklet%20December%2015%20REVISED.pdf

Lenders are now required to provide loan applicants with the following:

■Good Faith Estimate—provided at the time of application to borrowers to outline the loan terms and
total settlement costs.

■HUD-1/HUD-1A Settlement Statements—to inform borrowers of final costs at settlement.

■Servicing Disclosure Statement—to inform the borrower whether another financial institution
may be servicing their loan.

■Settlement Cost Booklet—provided within three days of application to inform the borrower of fees
involved in home purchase settlement.

There are three categories of charges that a consumer will pay at closing.  Some of the charges can change
and the Good Faith Estimate is just that ....AN ESTIMATE!  Page 17 of the booklet outlines those charges that
are fixed and will not change, those that they have established a limit whereby the charges can only increase
by 10%, and those charges that have no limits.  The charges that are limitless are available on the open market
and the borrow can shop for competitive rates or negotiate these charges as a condition of the contract.

Before closing you will be provided with a HUD-1 Settlement Statement listing all charges and credits to the
borrower and seller in a transaction.  The HUD-1 will often differ from the GFE ( Good Faith Estimate). 
Question the lender about any changes in fees between you rGFE and the HUD-1.  If the lender has exceeded the
closing cost "tolerances"  established by these new guidelines the must reimburse you.
BE AWARE AND INFORMED of your rights.
A good real estate agent will also review the HUD-1 and should be knowledgeable enough to discuss it with you
and point out any errors or discrepencies they may find.

Pay special attention to the last section of the HUD-1.  This section details the terms of your loan,
including the loan amount, your interest rate, your loan balance or your monthly payments can increase and
whether your loan has a prepayment penalty or balloon payment.  Look at this information carefully and
determine if these are the terms of the loan you agreed to and what was shown on your GFE.

Before you consider buying a home, page 36 of the booklet has a very simple worksheet that will assist you in
determining what you can afford before you start to look at homes on the market.

This is an excellent resource for real estate and loan professionals.  I feel it may be complicated for the
average consumer or first time home buyer who may not have a good understanding of terms people in the industry
take for granted.  Home buyers should use this resource along with the knowledge of their real estate professionals
to navigate through the home loan process.

Exclusive Buyer Brokers provide these services to their clients.  To learn more about Exclusive Buyer Brokers and
the benefits to home buyers please visit www.OptimaProperties.com

Comments

By MARCO HAUMAN,  Fri Apr 1 2011, 13:41
Great Job, however I must clear up a few things: Within 72 hours of the application, any prospective buyer, should expect: Good Faith Estimate, Truth in Lending, Affiliate Arrangement Agreement and a Terminology Booklet. If you were looking for an ARM (Adjustable Rate Mortgage) you should also expect to receive a "C.H.A.R.M." (a booklet explaning terminology, and pros and cons of that mortgage product).
Don't confuse Good Faith Estimate, with a "Worksheet Cost Estimate" which any buyer should demand as well. In this second document, will show to the detail aproximate costs for Lender Fees, Title and Attorney's Fees, Reserves and Escrows.
Starting on April 1st, rates won't be anymore, sensitive to an Incentived Compensation. I think that is a great thing for the consumer...
The Truth in Lending is a document showing, whether there is a Prepayment Penalty, the total Financing Charges for the life of the loan and also shows the "true" rate: APR.
Everybody is entitle to review the HUD-1 settlement statement, at least 48 hours before closing date.
By MARCO HAUMAN,  Fri Apr 1 2011, 13:45
... one thing is extremely true!!! It is always worthwhile, working with a Realtor, who bothers to understand mortgage financing!!!

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