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RESPA reform, the new Good Faith Estimate, the new HUD and you, part 1

By
Real Estate Broker/Owner with Keller Williams Bellevue 1505

OK agents, hang on to your hats, it's new rules for a new decade and we get a year lead on it.  In the following days I will be sharing a few, as in a couple of hundred commonly asked questions regarding the new GFE and HUD-1.

Q: When does the new RESPA rule require implementation of the new good-faith estimate and new HUD 1?

A:  The November 2008 RESPA rule is effective January 16, 2009.  Implementation of the new good-faith estimate and new HUD one is effective January 1, 2010.



Q: "In the past agents have always sent their buyers to lenders and told buyers to obtain a good-faith estimate from each lender they are interviewing to determine the best price and product for their needs.  I have been told that many lenders will not be providing good-faith estimates until the buyer is ready to lock the loan.  Is this true?  If so how will buyers obtain a comparison in order to shop for a loan?

A: The short answer is yes and no.  Under the new good-faith estimate provisions the lender will be required to honor the rate that they quote for 10 days following issuance of the good-faith estimate.  Many lenders will be reluctant to provide a good-faith without the borrower locking the loan because of the volatile nature of interest rates.  The lender is not required to issue a good-faith until they collect specific information necessary in order to complete the loan application.  Many lenders will be providing a "loan cost comparison worksheet" instead of a good-faith estimate in order to comply with this provision.  One item to note is that the new good-faith estimate does not contain the two most important items that most borrowers want to see.  It does not list the monthly payment and it does not list the cash required to close.  The loan cost comparison worksheet does however list these items.  Lenders will be providing the good-faith estimate (as required by RESPA) once the buyer completes the loan application and locks the loan.

Q: If the borrower applies for a first and second mortgage before January 1, 2010, and the loan originator issues a good-faith estimate using the new form for the first mortgage does the loan originator have to issue the second mortgage GFE on the new GFE form also?

A:  No,  the loan originator does not have to issue the GFE for the second mortgage on the new GFE form prior to January 1, 2010 even if the originator issues the GFE for the first mortgage on the new GFE form.  To avoid consumer confusion the loan originator may choose to issue new GFE's  for both the first and second mortgage.  The loan originator may also choose to use the old GFE for both the first and second mortgage.  If the loan originator chooses to use the new GFE then the new HUD 1must be used.  If the loan originator chooses to use the old GFE than the old HUD 1 must be used.

To be continued...

If you have specific questions concerning the new GFE and HUD 1 please post them in comments or email directly and your questions will be included in this discussion.

Comments (2)

Dan Tabit
Keller Williams Bellevue - Sammamish, WA

Brian, Thanks for the post and the format.  I suspect as we move forward, questions will abound.

Dec 29, 2009 06:01 PM
Anonymous
Charles Grubb

What information do you have on YSP? Is it or isn't it going away? And why should it go away, as it is a benefit to the borrower as well as the originator. If the government thinks LO's are making to much money, why isn't the government putting a cap on "lawyers" fees. hum...

Jan 14, 2010 05:06 AM
#2