Home Buying in Los Angeles>Question Details

Janice Park, Home Buyer in Los Angeles, CA

Confused about GFE's

Asked by Janice Park, Los Angeles, CA Sun Jul 7, 2013

I'm completely taken aback by the GFE's my bank and broker are sending me. I was under the impression that the document should accurately state the amount I am expected to pay at closing and monthly payments. However, on the itemized sheet, I keep seeing hazard insurance listed even though that's included in the HOA fee (we are getting a townhouse), and on our monthly estimates there's PMI included although we are getting a loan that specifically does not charge this. My broker doesn't seem concerned, and that at closing these things should be more clear, and that a lot of items are just written in as a default but is not a correct assessment. Is he correct? I don't want to sign anything that has incorrect information

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If your broker is doing his job he should explain everything to you. WE DO! You can check us out at http://www.TheMortgageOutlet.com and give us a call. One of our loan officers will be able to explain everything to you.
0 votes Thank Flag Link Thu Jul 11, 2013
Janice,

I, too, agree completely with Robert. The changes of January, 2010 to the GFE (thank you, Frank Dodd!) have made it nearly impossible for a mortgage professional to provide complete clarity to a borrower. The penalties are so high that lenders do not have an option but to over disclose. In my situation, all initial disclosures are created by my Corporate Office using higher National averages.

A fee sheet is the only alternative; however, the irony of the situation is not lost on any experienced mortgage professional.

Do be aware that most lenders do not require the initial disclosures signed or returned. Personally, my "work around" to the Frank Dodd ruling is to get an estimated HUD from the title/escrow company right after the contract is ratified. Then I can have them add rate, fees, etc. Then my borrowers are in possession of their real costs quickly.

All my best,

Deborah
NMLS #279125
0 votes Thank Flag Link Tue Jul 9, 2013
Janice,

As stated below - the GFE's are almost always higher than what you are going to have to ultimately bring to the closing table. Lenders overestimate everything now to avoid being responsible for the difference. The new GFE regulations were adopted in response to the opposite - and even more unsettling - instances of a buyer getting to the closing table only to realize that their lender had increased the interest rate a point and adds hundreds of dollars in "extra fees".

A few unscrupulous lenders took advantage of the fact that once you've planned for 30-45 to buy a new home, sold your old one, and are now essentially sitting homeless with your stuff in storage until you close......you are just going to accept the raw deal that the lender gives you (in the form of some "snuck in" fees or a higher interest rate than promised) unexpectedly when it's time to sign on the dotted line. The new GFE is an effort to increase their accountability.

Hope that helps!
0 votes Thank Flag Link Tue Jul 9, 2013
Janice,

Robert Chomentowski's response echoes my sentiments. We, in the lending industry, have our backs against the wall because the new GFE (2010) is not only confusing to the consumer, but it binds the lender and/or title company to fees that are initially disclosed, even if they are later changed for reasons beyond our control. So you can imagine that because of this risk, many of us have adopted a policy to send out an initial "catch all" GFE.

Have your lender write you up a fee sheet, and if you'd like, have him sign it for you. It won't replace the GFE, but if he/she is intent on being clear with your real costs, your mortgage professional will have no issue doing this.

Best of luck and let me know if you have any questions.

Rob Spinosa
rspinosa@rpm-mtg.com
0 votes Thank Flag Link Tue Jul 9, 2013
Don't sign it until it is corrected or explained to you to your satisfaction or both.
0 votes Thank Flag Link Mon Jul 8, 2013
It's possible that the Loan Officer didn't update his/her system to reflect the actual cost if hazard insurance as your insurance agency quoted.

Why don't you consider a 2nd opinion?

If my response was helpful, consider clicking BEST ANSWER!

Javier Meneses
Senior Loan Officer
NMLS #23130
STERLING NATIONAL BANK
310 Crossways Park Drive
Woodbury, NY 11797
jmeneses@snb.com
(516) 606-9648 Cell
(516) 740-4478 Office
(516) 918-5383 Fax
0 votes Thank Flag Link Sun Jul 7, 2013
So ok, I am indeed confused about the insurance, I did get an estimate from my insurance agent with walls in, and that was forwarded to the bank. But what is listed under hazard is 2x more than my agent's estimate, which is why I thought it was a mistake. Ugh yes this new gfe is mind boggling.
0 votes Thank Flag Link Sun Jul 7, 2013
Lender does not require hazard insurance from borrower/buyer since it's included in your HOA dues. This is an optional insurance item.
Flag Sun Jul 7, 2013
Do not sign anything until you get the clear answers you want.

Your mortgage broker is making money of the transaction and his or her job is to make sure you have peace of mind and are comfortable with it.

They should not brush your concerns off and tell you to sign... they should explain it to you 1,000 times if necessary...

Do not sign if you do not feel good about it.

Best of luck!


Ron@select-realestate.com
0 votes Thank Flag Link Sun Jul 7, 2013
What's really shocking is that this document was created to make things less confusing for buyers, and it clearly doesn't. What typically happens is lenders throw in all fees, even ones that are typically paid by sellers to make sure they quote enough so they don't have to pay any money out of pocket.

Yes, this is the way it's done, and yes, it's ridiculous. What you can do to find out what real costs are is have your agent get an estimate from the title company and then add in any lender fees. That should get you close to the real number.

Best Regards,

Lance King/Owner-Managing Broker
King Realty Group

lance@king-realtygroup.com
415.722.5549
DRE# 01384425
0 votes Thank Flag Link Sun Jul 7, 2013
Hi Janice - Your broker is correct in that many items are included/estimated by default from the lender, however he should provide you a more accurate version of his own as well as the lender's version so that you can see the differences. The hazard insurance is something the lender estimates at the beginning so I suggest you get a quote from your insurance agent so that the lender can update the GFE with that number later on. While your HOA will cover the fire insurance portion of the insurance, it only applies to the structure of the building, you will still need to get condo owners insurance to protect anything inside the condo. Most lenders require HO6 coverage which is also referred to as "walls-in". PMI should not be included on the GFE if your loan does not call for it. This should definitely be removed. Are you planning on having an impound/escrow account? If so, make sure you are not confusing the PMI estimate with impounds, that could be the miscommunication there. Good luck!
0 votes Thank Flag Link Sun Jul 7, 2013
The new GFE is a terribly confusing document that is almost worthless. I would instead have your lender send you out a "Initial Fees Worksheet" document that is a lot more clear and breaks all closing costs down in a very detailed, understandable fashion.

The old GFE before 2008 was similar to the current Initial Fees Worksheet and was very clear. The new GFE was a product of Government intervention and Dodd Frank and is a terribly confusing document that does not do the job it's supposed to do.
0 votes Thank Flag Link Sun Jul 7, 2013
Do not confuse your GFE with your HUD1:
The GFE pertains only to the LENDER and the LOAN numbers; Look for the Interest Rate and the APR, the APR will be higher because it include a bunch of charges that are not included in the basic Interest Rate. You really cannot see the forest for the trees unless you have two GFEs to compare.
The HUD1 shows all the money you will need before Closing as well as the monthly payment including the PITI. Talk to your Escrow Officer!
Do not confuse the "Hazard" Insurance that the HOA needs for every unit. That (probably) will not cover your unit for Fire, Theft nor Liability, much less for the contents. You need to talk to your Insurance person; your Lender will not you Close Escrow without complete coverage.
Why isn't your Realtor advising you better? These are basic questions that you should know!!!
0 votes Thank Flag Link Sun Jul 7, 2013
It's just an estimate, but you are right. You can request for a better estimate with unnecessary figures before signing it.

http://DouglasPerez.pw
0 votes Thank Flag Link Sun Jul 7, 2013
Yes and no. So at the beginning when a lender discloses to you, a bunch of the numbers there are simply estimates, mainly the title related charges. Things like bank fees, taxes, etc, should be accurate. Now I'm not sure where you are in the process, but if you were disclosed PMI fees, and there shouldn't be any, the lender or broker should be re-disclosing a new GFE to reflect so. When you lock your rate, again you're supposed to be executing a new set of GFE disclosures to reflect so. All these changes should be re-disclose and you're supposed to sign these forms that come along with the GFE, specifically the GFE acknowledgment form and the Intent to Proceed disclosure. There is no way you make it to closing without signing the GFE that reflect the #s you'll see at closing, because by law you must sign this final GFE 3 business days before closing. Perhaps it's a good idea to have your attorney take a look at everything for you?

I would be more interested in knowing the specifics of your situation, if you need a better explanation. Feel free to call or email me. Good luck!

If my response was helpful, consider clicking BEST ANSWER!

Javier Meneses
Senior Loan Officer
NMLS #23130
STERLING NATIONAL BANK
310 Crossways Park Drive
Woodbury, NY 11797
jmeneses@snb.com
(516) 606-9648 Cell
(516) 740-4478 Office
(516) 918-5383 Fax
0 votes Thank Flag Link Sun Jul 7, 2013
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