National Media Claims Lenders Skirting New RESPA Good Faith Estimate Through Loan "Worksheets" And "Fee Estimates"

This is a great post.  Our industry is flawed in general right now! It seems it gets harder and harder to do our job.  We can thank those who chose to do things the WRONG way for making our jobs tougher. For those of us who have managed to survive, Congratulations! More change is coming. The GFE2010 is a perfect example. Our LOS system makes it an even bigger nightmare. Thanks CALYX point who can't seem to answer questions about why things won't carry over from initial fees to the 2010 worksheet so it actually equals the same number and makes sense to your customer.   We actually have the old good faith estimate in our system renamed initial fee worksheet that we are showing our customers. It has " cash to close, payment, and seller contributions on there" It actually makes sense to the consumer. This is by choice, its not mandatory. You may want to implement this in your practice to simplify your appointments.  If you use Calyx- I would suggest it. It is a bit of a headache getting it to match up with the 2010 though because not everything carries over perfectly especially on government and USDA loans. It is just quirks in the system. They can't seem to answer why. I just have to manually enter them which is frustrating. THese are mainly the 1300 items and on Georgia the 6.50 (I have one lender who says it has to be in block 3 and Calyx automatically has it populating to block 1).  Great Post.  Well Done.

I don't have a problem with the fee estimates as long as there is full disclosure. The problem remains wherein the consumer still is left guessing on what rate is best for them.

Richard

I sincerely hope that you are successful in getting HUD to recognize the flaws in the new form.

I know the intention was there, but this new form really has holes, and jeopardizes a lender in some cases for fees that we would never normally have to quote since they are outside fees.  I am not talking about Title, but section 6 items which would include pest, property inspections, roof certs, et al.

I know that the Assistant HUD Secretary has recently joined AR, so maybe you can scroll the past blogs as he introduced himself last week while announcing updated HUD changes to FHA.

I for one will be using a worksheet in addition to any good faith.  The current form is a head on collision waiting to happen.

Let's hope that you can help in this area.

Best Regards

I'm not a huge fan of the form, but I was working with a repeat client recently and had a long conversation with him about the new RESPA rules.  After reviewing all of the major changes, he said there wasn't anything there that he, as a Borrower, didn't like.

If the result of all of these RESPA changes is that Borrowers are more comfortable, then its worth it.  If Borrowers are not satisfied, more change will come.

Richard,

Good job stirring up the bean pot!  The daily AR e-mail omitted the words "National Media Claims..." in its link to this blog.  No wonder people got unhappy.

Lenders can do preapprovals without a property, no GFE is required until a property is identified. 

Realtors, if you want your clients to get thoroughly preapproved (with income and assets documented) then refer them to a reputable lender *before* a property is selected.  Then the lender can actually get the documentation from the borrower and run the scenario through automated underwriting if applicable.

The 6 pieces of information are inadequate to do a preapproval because the borrowers *do not* have to provide income or asset documentation, so lenders who will preapprove on on this basis are shooting themselves in both feet.

The new GFE will actually reduce shopping because reputable lenders will not provide a binding contract to just anyone.  Or they won't do it quickly enough to blow out the possible competition.

My most recent borrowers told me up front that they were shopping with just one other lender who is a member of a well-known civic organization along with the borrower. 

I said "That's great!  Bring me their GFE, we'll compare it to ours, and if they're offering a better deal, I'll tell you to take their loan."  They never got a GFE from the other lender, even though it was promised for the next day.  They made a commitment to work with me because I did whatever I said I would do.  And I answered questions and returned their calls and e-mails very promptly.

I frame the additional information I provide to my clients by explaining that the GFE is not enough to make a big decision, and that I owe it to them to provide all facets of the transaction.  If that is skirting then I'm guilty by reason of insanity. 

It not a matter of the lenders "skirting the new regs", it a matter of providing the information the client needs and is not being provided by the new regs.

The 2 most important questions asked by a client is "how much is my payment and how much money to I need to bring to closing."

I am shocked that a gov't form is not complete right from the get go. I thought I hezrd there was going to be a 4 month period to work out the kinks? I do like the rider provision idea.

I would guess that any lender still in business understands what information consumers need to have - like their total cash-to-close and their actual monthly mortgage payment - and we will continue to provide this critical information to our clients even though the new RESPA regulations no longer require it. 

As I have stated elsewhere, these regulations were clearly written by people who have never actually originated a loan.  Even a newbie loan officer would take one look at the new GFE and ask "where is the cash to close?" and "where is the monthly PITI payment?"  More experienced folks will also wonder "why are we disclosing the sellers portion of title insurance?" and "what about the property tax prorates?" 

Any lender who is not providing additional worksheets and/or estimates is doing their clients a disservice, and I'm certain that was not the intent of these reforms.

If you were selling a minivan, you'd definitely try and focus the consumer on money down and payment. This is a little more important.  No one wants a minivan or a 2/28 ARM, but you'll take the minivan when it is $0 down and only $x a month.

The GFE outlines settlement charges and certain loan terms like that 2 year ARM.

A fee paid by the seller is a settlement charge.  Financed UFMIP is still a settlement charge.  A seller credit does not change settlement charges.  Cash to close and settlement charges are two different numbers.  Is there anyone here who actually tells a buyer that a seller credit or financing UFMIP lowers their settlement charges?

Are "Fee Estimates" wrong?  YES, if it leads a consumer into being misled because Lender A is showing a cash to close worksheet when Lender B is showing settlement charges.  If you don't regulate the 'estimates,' you are precisely where we were before the changes.

Ah - hah!  Except Lender A is actually showing BOTH amounts.  Total Estimated Settlement Charges IS on the Worksheet along with the Cash to Close and Payment.  IMO there is nothing misleading about full disclosure.

In a best case world, there is nothing misleading about full disclosure. Laws are designed for worst case world. 

Why not just create a standardized loan summary?  It's not a GFE, but it would answer every complaint from people who like to comingle unrelated financial figures AND prevent the worst case broker from printing cash to close in 18pt font and costs in 8pt font.

If a loan officer was disclosing correctly before than the new GFE is not that big of a deal.  Comminicating excpectaions to the client can be donw with a combination of the 1003 and the new GFE.  But the consumer does not undersatnd the changes.  The consumer is used to getting a GFE which gave the itemized settlement charges, the cast to close and the rate and payment.  I believe the new process is cumbersome.  HUD should have cleaned up the mess rather than trying to reinvent the wheel. 

The solution to all this GFE issue:  we need is more government.  We need MORE people making the forms conform to government issued mandates. We the people are terribly ignorant, and we must be protected by a government class-  a class of people far more qualified to know what a consumer should be forced to know.. and what a professional should provide in terms of actionable information.  In truth, perhaps the federal government should just take over the lending business.  That's a solution that would make access to and distribution of capital "fair". Sure, some might think that would restrict competition, innovation and raise costs... and some think that focusing power like this would naturally lead to potential for entrenched "cronie" powers to take over the segment.  If you happen to not agree with a government policy or edict, too bad.  You no longer qualify for a loan.. anywhere. 

Ah, cronie government-

We are enjoying much better government these days.  After all the pay has made it MUCH more attractive to join that club!  for example, in the past 24 months, the number of federal employess earning in excess of $150,000/year has increased from only 30,382 to 66,538.. about 119% growth!! 

The explosion of federal employees earning six-figure salaries increased the average federal worker’s pay to $71,206 in 2009, which is 76.5 percent higher than the average salary of $40,331 for workers in the private sector.  Here's more - learn about how government is being groomed to help us all improve!

Government is GOOD!

The GFE reform certainly justifies the increasing salaries for our loyal Government, don't you think?