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Spelling Out the Fees in GFE's - The New Good Faith Estimate Spelled Out For our Liberty Hill Part 2

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Real Estate Agent with RE/MAX Town & Country

man, cash, wheel barrelIn our previous blog, The New Good Faith Estimate Spelled Out For our Liberty Hill - Part 1: The Basics, we looked at the first part of the GFE form that presented the facts about the loan.   The far more controversial sections in the form deal with other fees.  After all, if you are shopping for a loan and want to know where you will get the best deal.  Certainly, before you go to the bank to sign the final papers for your new home, you want to know the total cost and the amount of cash you need to take to the closing.  

The complete new GFE form is available here.

Listing Fees

HUD has made it clear that fees for mortgage brokers and lenders must be combined into one lump sum.  As noted in HUD's FAQ's  - Fees can no longer be broken down into Loan Origination Fee, Processing Fees, Tax Service Fee, Funding, Doc Prep Fees, Broker Fees, Underwriting Fees, etc. They must be included in "Our origination charge" and "should not be itemized separately."

Line 2 of "A" shows if you are paying discount points to lower your interest rate, or if you are paying a much higher interest rate to offset (or lower) your actual closing costs. As quoted from the FAQ document, "There may not be a credit for a yield spread premium and a charge for discount points in the same transaction." Brokers must disclose this information in block No. 2 in the "Understanding your estimated settlement charges" section. . HUD also has made it clear that there may be either a credit or charge related to the interest of the loan -- but not both

Section "A" of the Good Faith Estimate must be the same at closing (on the HUD-1 Settlement Statement).

Since it was designed to provide consumers with a concise view of the TOTAL costs with acquiring the loan, the disclosure therefore, should represent all fees related to the loan. There is Zero Tolerance for any differences. It does not matter who pays the fees or when they were paid. With the exception of obtaining a credit report, no fees are allowed to be collected before issuing the GFE.  In addition, at the time of disclosure, no fees should be marked as paid outside of closing.

Should the Originator (the potential lender) try to collect additional fees, HUD considers this "Breached Tolerance." The lender must either give a credit at the closing or a send a check to the borrower within 30 days of closing. This brings Lenders to more accountability towards the accuracy of their good faith estimates to their clients, and should eliminate the BIG problem of under quoting.  If there were any fees charged by the broker prior to issuing a GFE, they will be required to refund those fees back to the borrower before submitting the loan to the lender or the loan submission will be denied.

There are fees that can and cannot be changed, listed in three categories at the top of page three. It gives instructions on what fees can increase up to 10 % and what could potentially change at the settlement.

The trade-off table section on Page three should help originators go over loan options with borrowers.  The originator must accurately fill out the first section and the other two columns of the tradeoff table can be left blank. The purpose of the table is to show to borrowers that-- by accepting a higher interest rate they may pay less upfront charges- -or by paying higher settlement costs they can lower their interest rate.

Last  but not least, "The Shopping Chart" on page three is for borrowers to compare prices from different lenders; since that is to be provided by other lenders there is no requirement to complete section 2,3, and 4 which are for other lenders GFE's.

All of that means:

•     All fees must be combined into lumpssum

•     The fees should not vary from the estimate of the fees offered in the GFE

•     For some fees, there is a 10% allowable variance

•     Lenders should discuss the pro's and con's of their loan with the potential borrower

•     Borrowers should shop around

The intent of the new GFE is noble. The form looks great and user friendly. However, it is not clear how putting fees into a lump sum rather than itemizing them benefits consumers. The intent is to make customers more conscious of the total cost rather than focusing on how the various fees differ at each bank.  That is what people are looking for, but by not listing all the particulars seems out of step; you get more indepth information reading a nutritional label on a can of chili than you on the form.  Some critics of the GFE form are claiming that customers do not even get a clear picture of the amount of cash they will need at closing , what the seller might contribute, or even their mortgage payment. This is why some lenders are offering their own worksheets to help customers get a more complete picture.

The Shane T. White Team can help you make sense of all this. If you've been waiting for the right opportunity to get into the market, now's the time.  The tax credit is an important incentive that will help stabilize our local housing market, stimulate the economy, and create new jobs in central Texas.   Call the Shane T. White Team at ReMax Town and Country Realty today to get started in buying your new home.  We can even sell your existing home.

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logoThe Shane T. White Team
RE/MAX Town & Country
13561 Hwy. 29 West
Liberty Hill, Texas 78642
Phone: (512) 515-5263
Toll Free: (866) 302-5263
Fax: (512) 515-5931
Email: shanetwhite@remax.net

 

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