Positive Changes for Good Faith Estimates
Some of the most helpful changes in mortgage lending law are revisions to Good Faith Estimates (GFEs). The changes required by Mortgage Disclosure Improvement Act's (MDIA) recent updates will be implemented in January 2010.
The MDIA Requires Accurate Cost Estimates from Mortgage Lenders
This Act requires borrowers be provided factual data, rather than just rough estimates or comments. These changes accomplish several objectives.
" Borrowers may accurately compare potential loan costs when shopping for the best mortgage rates.
" Consumers are better informed prior to committing to a mortgage loan.
Mortgage Lenders Must Make Certain Disclosures Available Early in the Application Process
" The GFE must be prepared and sent to applicants within three days of the completion of a loan application.
" Borrowers receive their loan documents at least seven business days before closing, enabling them to resolve any issues, ask questions, and double check the fees and interest rate.
" Mortgage rates available from that lender for different loans can optionally be included.
" Lenders must re-disclose and revise GFEs when loan terms change. In recognition of daily and sometimes hourly volatility, interest rate changes are not included in required GFE updates until the rate has been locked.
The New GFE Provides More Information About Your Mortgage Loan
" The Annualized Percentage Rate (APR) calculation now includes total amount financed, including some processing and closing costs, not just the loan amount.
" The final closing statement, or HUD-1 form, is mapped to the GFE, providing easy comparison of estimates to actual costs
How Accurate Will the New Good Faith Estimate Be?
Of particular interest to borrowers, tolerances for cost categories, necessitating revised GFEs, were established. Charges that cannot be increased at all between issuance of the most recent GFE and closing include the origination charge and transfer taxes. Those that can increase, but have a maximum tolerance of 10%, include charges for required services selected by the originator (such as the appraisal), owner's title insurance, and government recording charges. Charges for required services chosen by the borrower, title services, and initial escrow deposit amounts can change and do not have established tolerances. Any charges above these tolerances are the responsibility of the originator, not the borrower.
In the works is HUD's "Special Information Booklet, TIL" for borrowers, explaining the regulation.
