Let's share our Tales from the Trenches and how much we miss the old GFE!
Let's share our Tales from the Trenches and how much we miss the old GFE!
I do miss the old GFE document. We had a history, that document and I. I remember when we had to TYPE THEM ON A TYPEWRITER for goodness sake! I have just taped one of the old relics to my wall just so I can see it and remember the good old days of providing a very well laid out illustration of the entire transaction including the total funds needed along with a breadkdown of the total monthly payment. So many fond memories...
A few years ago a borrower said to me at the closing table "that Good Faith Estimate you gave me was off by almost $500 from what this HUD1 form says!" I replied, "only $500? Wow, I think that's a new record!" Point is, good originators and lenders will always provide as accurate an estimate as possible. The new GFE, I believe, hampers our ability as MLOs to deliver outstanding customer service and respond to our borrowers' immediate requests for numbers and constantly changing scenarios during the homebuying process.
The lender for whom I originate has not authorized us to provide any supplemental worksheets with our GFEs. I am presently providing each borrower with a notebook to write things down during my origination presentation since the info they want to walk away with, the total funds for the transaction and a detailed breakdown of the monthly payment will not be on the GFE! What is also helpful for the borrower is to mark with a highlighter these numbers on the 1003 for their reference.
I look forward to continuing this ongoing discussion as we all adjust to the new RESPA so please share your own "Tales from the Trenches" too.
Here's a tale for you all about what I have to go and work on right now:
I must produce a GFE for an application signing on a transaction that is a $340,000 workforce housing new construction FHA condo purchase with a $60k subsidy, a $30k grant, a $26,000 downpayment, a contract that only states $280,000 with no mention of the $60k subsidy being on top of that, and a borrower who wants to apply for a $224,000 mortgage! The buyers attorney tells me that he is "pretty sure" the mortgage and transfer tax are exempt on the subsidy and grant portions which, by the way, will be recorded as subordinate liens. The grant people do not see why I don't "understand" that the purchase price is really $340,000. How am I supposed to issue a GFE, be held accountable for numbers with little or no tolerance when I cannot even get the answers I need? Welcome to my world!!!
Have fun out there people:)
Deborah Camacho
Tel: 914-629-5661
(As a lender/buyer closing attorney--file this under "Don't Shoot The Messenger! And Blame HUD, Not Me!")
Well, it didn’t take very long for some lenders to be accused by HUD and consumer activists of working around the new stricter Good Faith Estimate required by HUD’s new closing cost rules which went into effect on January 1. HUD officials say they plan to conduct a review of the growing use of “worksheets” and “fee estimate” forms by mortgage lenders providing quotes to home buyers and refinancers.
The new closing cost rules under the Real Estate Settlement Practices Act (RESPA) significantly changed the manner in which lenders are required to estimate loan and closing costs. Many charges cannot deviate at all, or at most by a 10%, from the Good Faith Estimate to the closing. That’s in stark contrast to earlier rules, which essentially allowed some lenders to quote low estimates of total costs, with no responsibility for the final dollar charges at closing.
Reportedly, many lenders have began offering rough estimates or worksheets that some consumer groups and federal officials say attempt to skirt the hard estimates required by the new GFE. Under the new rules, if borrowers do not submit a formal application including property address and Social Security number, there is no obligation to provide a new GFE.
Lenders respond that since the new GFE has a number of deficencies, such as not providing a total monthly cost payment and seller paid items, it justifies the worksheets/estimates. I hear both sides of the argument. If I were a loan officer, I wouldn't want to be hamstrung by not being able to provide the full loan picture. Lenders, what are your issues with the new GFE and do think providing these worksheets will ultimately help consumers? Are the critcisms about the worksheets unfair and uninformed? Did HUD get it wrong with the new GFE? (I think I know the answer to that!).
As an attorney, however, I would advise my buyers that if a lender gives you a worksheet or anything other than the prescribed Good Faith Estimate, it’s not binding and the closing costs can vary, even significantly. Ultimately, the lender must provide you with a real Good Faith Estimate which when issued will provide you with some security in knowing that the quoted closing costs will not vary by much at the closing.
If lenders insist on using a worksheet, my recommendation is to explain clearly to the customer, preferably with a written disclosure right on the estimate, that this is not binding and not a substitute for the new GFE.
My goal with this post is to get the conversation going on the new GFE, not a rail against the mortgage industry. It's a controversial issue...
On a related note, as buyer's counsel I now insert a rider provision into the P&S providing that the seller agrees to an extension (up to 7 days) of the closing date due to any RESPA/GFE related delays.
For more RESPA information, please visit my main blog, The Massachusetts Real Estate Law Blog.
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