Part 3 of a continuing discussion of the new GFE and new HUD 1.
Yesterday one of the comments on this discussion was "Great info...lets see how long before they make revisions on the revisions" Why wait, revisions have already started.
· Signature lines on page 3 of the GFE 2010 have been removed.
· The printing of the Tradeoff Table has been updated.
Granted these are minor changes but they require tens of thousands of pages to be re printed and hundreds of thousands of software revisions. OK, now to the good stuff.
Q: "My understanding is that the purpose of the new Good Faith Estimate (GFE) is to "help consumers shop for the lowest cost mortgage and avoid expensive and potentially harmful loan offers". How does the new form do this?
A: Good question. The new form does this in one significant way and one only. In most respects, the old form was more than adequately disclosing all of the fees and costs associated with obtaining competitive mortgage rates and fees. One thing that the new form does is it requires any rebate or yield spread premium to be credited to the borrower. What happens is that the lender is required to state in their quote the total amount of compensation that the loan originator will receive. Often in the past many unscrupulous lenders would hide the rebate or yield spread premium in the good faith estimate or simply not disclose it at all. On the new GFE any rebate or yield spread premium must be credited to the borrower thereby forcing the loan originator to disclose it as part of their mortgage fee thereby showing exactly what their total compensation is. This levels the playing field between mortgage banks and mortgage brokers giving the borrower a fair and real method of comparison. Another element of the form is what is called the "shopping cart". The purpose of this is to encourage borrowers to comparison shop for mortgages. One of the big flaws, however, is this takes into account only the rates and fees. Perhaps the most significant elements in obtaining the best mortgage product is to shop not only for competitive rates and fees but by qualifications of the service provider. Bottom line is that if the borrower selects a service provider by qualification based on the providers track record, participation in the industry as a knowledgeable and well educated professional who really cares about their clients and who has a track record of repeat business then a competitive rate and fee is a natural outcome. The shopping cart provides for three rate quotes but gives no indication of any method of determining the real qualifications of the service provider. More on that topic to follow.
This blog was written by Brian Leavitt, a Licensed Real Estate Broker and Licensed Mortgage Broker representing Northstone Real Estate Inc, and Northstone Mortgage.
Brian serves clients within the Northwest Multiple Listing Service.
You can contact Brian directly by phone at 800-806-3145 or by email at brian@northstone.net. Click here to view his client newsletter.
Brian is licensed with the Washington State Department of Licensing and the Washington State Department of Financial Institutions License number 510-MB-19802 and is a member of the Seattle King County Association of Realtors and Northwest Multiple Listing Service.
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