Posts Tagged ‘GFE’

More on the new good faith estimate

February 17, 2010

Since blogging about the new good faith estimate in January, I’ve had the chance to listen to clients and other loan professionals’ feedback on the new three-page form… and the feedback has been consistent.

As the recent post states, there are some great benefits to the new good faith estimate:

  • the terms, interest rate, and loan amount are clearly stated on the first page leaving no room for confusion
  • lender fees quoted must match at closing
  • other fees (attorney, credit, etc.) are also clearly identified leaving no room for ambiguity

The areas needing improvement are still there:

  • there is no signature line/page on the new good faith estimate for borrowers to acknowledge they received the form
  • total closing costs are not shown. Instead, prepaids and closing costs are mixed together.
  • total cash required to close is nowhere to be found
  • monthly mortgage payment is also nowhere to be found

Solving the first problem is easy – all mortgage professionals must create a form for borrowers to sign acknowledging they received the good faith estimate.

In order to help our clients with the rest, we created another form. This additional page shows the itemization of closing costs and prepaid items along with the cash required for closing and the monthly mortgage payment – problems solved!

The one item out of our control is how other mortgage professionals quote estimates for property taxes and homeowners insurance. This is one area that the burden is on the borrower to ensure the good faith estimates they review use the same amounts for property taxes and insurance. Only then will a borrower have a true apples-to-apples comparison.

As with all things in life, there are pros and cons, and the new good faith estimate is no different. As a colleague of mine said in one of his recent posts, the keys to helping our clients through the pros and cons haven’t changed – be simple, honest, and professional:

  • quote closing costs honestly and don’t try hiding or under quoting fees
  • quote real interest rates and not something abnormally low to get the phone to ring
  • keep your word!

Mortgage professionals able to do that will help to keep themselves, their realtor partners, and clients happy as we all navigate the new (and sometimes confusing) three-page good faith estimate (oh, and don’t forget the extra page showing the itemization of closing costs, and one more page to confirm receipt of the new good faith estimate).

New Year, New GFE, New Problems

January 27, 2010

As of January 1, 2010, the new, standard Good Faith Estimate (GFE) implementation was underway for all banks, lenders, and brokers was underway. The new estimate design was to clear up any misconceptions or misunderstandings about a borrowers loan terms, interest rate, closing costs, etc.

Some of the highlights of the new GFE include:

– providing a summary of the loan showing the interest rate, term, if the interest rate can rise, if the loan balance can increase even with regular monthly payments, and if there is a prepayment penalty
– showing a total fee for all services required for a loan including lender fees, attorney fees, recording fees, etc.
– containing a graph showing the fees that can’t increase for any reason at closing along with the fees that can change so long as they do not exceed a 10% tolerance limit

The benefits?  That is easy – gone are the horror stories of dramatic increases in closing costs at the closing table… no confusion about the terms of the loan… makes comparison shopping easier than before.

However, nothing in this world is perfect and there are couple of items that could use some improvement on the new GFE.

– Borrowers must receive the new GFE within 3 business days of a completed loan application. Ironically, there is not a signature page for borrowers to sign and acknowledge they received it.
– The total monthly mortgage payment for the loan is not listed anywhere on the new GFE.
– The required cash needed at closing (combination of the down payment, closing costs, and prepaids) is also not listed on the new GFE.
– The new GFE shows an itemized list of the costs for services rendered (total attorney fees, total lender fees, etc.), but does not show an itemized summary of those costs. For example, say the GFE shows the attorney fee is $1,000.  That would include the cost of the attorney’s services, title exam, title insurance, etc., but it doesn’t show the dollar amount for each of those items.

Change can be a good thing, and overall, the new GFE is a good thing for consumers and a step in the right direction. That said, it will take some time to adjust – especially for borrowers looking to buy their second or third home. This format is completely different from their prior experiences!

Be sure to work with a loan originator who knows the new good faith estimate, can explain it, but also offer you some of the missing information – like the total monthly mortgage payment!