Elimination of the GFE (Good Faith Estimate)!!

What do you mean the elimination of the Good Faith Estimate?

Well not exactly, more like the GFE is now becoming the GF.

What?

Part of the government's Housing and Recovery act (HERA) is going into effect today July 30^th 2009. This portion of the act has to do with the Truth in Lending (TIL) portion of a mortgage application. It has been enacted to help protect the consumer from bait and switch tactics, whether intention or unintentional, by the lenders and mortgage brokers.  In other words no more surprises at the closing table where most home buyers are apt to roll over because they have too much invested to decline.

The new law while good for the consumer, may have unintended consequences for everyone involved in the transaction, by delaying the closing.  

These are the highlights of the new law:

•   Appraisal cannot be ordered until borrower receives the initial TIL.
     

 The new regulation prevents the collection of any upfront fees, except a credit report fee, prior to the initial receipt of the TIL. This can delay the order of certain services required in the mortgage process.

•   Loans cannot close before the seventh day of the consumer's receipt of the initial Truth in Lending (TIL). 
  

  No more "close in 5 days" (unless it's a cash transaction). Closing documents cannot even be signed prior to the seventh day of the initial TIL.

•   Any changes that affect the TIL by increasing the APR by more than a .125%, delays the closing by three additional business days.

 The new law calls for a mandatory re-disclosure of the TIL to the consumer. It requires three business days from the time of receipt by the consumer before closing docs can be signed. This process from what I've seen so far can vary from lender to lender. Some lenders are sending the TIL out by email and upon getting confirmation of the client opening the email is when the clock starts. Other lenders have stated they will be mailing the corrected TIL and adding 3 days for the mail delivery before the 3 day clock starts making it a minimum of 6 days.

 Some of the common fees that can affect the APR and can trigger a re-disclosure are lender, broker and title fees, including but not limited to, discount points, change in amortization, flood cert and attorney fees.

So how does this change the GFE to a GE?

Easy; as a mortgage professional in order to expedite the loan process we need to make sure that the initial GFE is no longer an "estimate" but and accurate representation of actual costs in order to eliminate any possible delays in the closing.