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Are Your Mortgage Disclosures X-Rated?

Posted by  on Apr 06, 2010
 

Does comparing mortgage quotes drive you to drink or cause you to pull out your hair? Is it only slightly less thrilling than an afternoon at the DMV? Well, the nice folks at HUD feel your pain, and since January 1, 2010, it should be much easier to find your best mortgage deal.

Regulation X Means No Ugly Surprises

Changes to Regulation X means the end of ugly surprises when you close your home loan--no more extra fees, no unexpectedly higher interest rates, no low-balled loan costs. It also standardizes the way all lenders have to disclose their charges and their interest rates, so shopping for a new home loan or mortgage refinance should be much easier.

New Good Faith Estimate and Settlement Forms

The Good Faith Estimate (GFE) and settlement form (HUD-1) are important documents that mark the beginning and end of your loan process. Changes to these forms include:

  • All lenders must disclose fees the same way
  • Loan feature information must be on the forms
  • Total lender fees will be combined and shown as a single amount so you can cut to the chase
  • A reconciliation of the GFE to the HUD-1 is required, and they must agree (within certain tolerances)

Settlement Service Provider List

Lenders must provide a list of service providers (appraisers, title companies, etc.) and you are allowed to choose any provider you like, from the list or not. If you choose a provider on the list, your fees are guaranteed not to exceed the estimated charges by more than 10%. If you choose a provider off the list, that protection goes away.

However, there is no guarantee that the providers on the list are the lowest-priced, and no guarantee of adequate service. And at least one major American bank is only putting a single provider on that list--their own title/escrow company. So unless you comparison shop for title and escrow services, you might pay more by sticking with the list.

Re-Disclosure of Mortgage Rates and Fees

If you get a GFE and there are no changes to your loan, the lender must stick to what was initially disclosed--even if the charges were underestimated. If circumstances change, the lender must re-disclose its fees and terms within three business days of the change. Changed circumstances include the following:

  • Acts of God, war, or disaster
  • Updated information provided by you (for example your income dropped)
  • Changes to the loan amount or appraised value of the property
  • Locking your rate or the expiration of a lock
  • A change in the deal structure requested by you

The new forms should make shopping for a home loan much easier. In the case of mortgage disclosures, being X-rated is a good thing.

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