In his blog this week, mortgage broker Dennis C. Smith of Stratis Financial in Huntington Beach looks ahead to a new guideline coming in 2010. Some excerpts:
Q.: “Can you please explain the new Good Faith regulations that take effect in January?
A.: “On January 1, 2010 the Department of Housing and Urban Development, HUD, new Real Estate Settlement and Procedures Act guidelines go into effect.
The major impact of the new RESPA regulations will be the new Good Faith Estimate (GFE2010) that will have to be provided to all individuals inquiring about mortgages. What is interesting about GFE2010 is that to be in compliance with the new RESPA regulations the proper completion of the form puts the originator in violation of existing RESPA regulations that govern the Truth In Lending disclosure and also the Reg Z disclosures under the authority of the FDIC/Federal Reserve.
When the GFE2010 was rolled out then HUD Secretary Steve Preston hailed it as the form that would save consumers “nearly $700 at the closing table.” This premise is based on limiting the fees that could change from initial disclosure to closing, disclosure of which is part of the new form.
Another purpose of the GFE2010 is to “bring clarity” to the market “through a simpler and better understanding of their costs.” To do this HUD took the previous 1 page Good Faith Estimate that clearly delineates all charges and tailored perfectly into the HUD/RESPA required Truth In Lending disclosure (which discloses APR) and created a three page form that does not delineate any fees, lumps charges for non-related services together, separates out services required by the loan process from those the borrower can select and has no relation to the Truth In Lending disclosure or the Good Faith Estimate required under Reg Z by the Fed.
On the training conference call on Wednesday were originators from across the country who worked for direct lenders, brokers and banks. The common sentiment was that the consumer will in reality end up paying higher costs for loans as originators will not want to risk under-disclosing costs and fees, not just their own but those of escrow companies, title companies, appraisers, surveyors, etc, and be stuck with the tab.
Also impacting borrowers will be the inability to lock in loans early in the transaction as lenders must accept all fees and rates on the GFE2010 once they accept a loan. If the market has changed and the loan was not locked in, or the originator under-disclosed fees the lender will be on the hook for the lower fees. As a result we anticipate one of the fallouts of the new RESPA rules will be lenders not allowing mortgage rates and terms to be locked in until loan documents are being ordered. In a volatile or up rate market this can be costly to borrowers, and for those on the edge of qualifying it could result in their loss of loan approval between application and documents.”
More HERE.
If you have an opinion about the new rules, please share in the comments.
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