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It's Official, the New Good Faith Estimate Hurts the Consumer and the Industry!

It's official:

The New Good Faith Estimate is causing real pain to

The Consumer and;
The Real Estate Industry

I've now spent two months working on this new good faith estimate. It's been implemented since January 1rst of 2010. So, without further adieu.....what is the problem with the new Good Faith Estimate?

THE CONSUMER

First, let's call it like it is. The government wanted to create a "new and improved" Good Faith Estimate that is "user friendly, easy to read, and would promote a fairness in comparison shopping for the consumer." The consumer would be able to shop one lender against the other with such clarity that the Obama administration fully believed that the consumer would get better, clearer information and that the consumer would save about $700 per transaction.

THE RESULT?

1 The new Good Faith Estimate (or GFE) is anything but clear. Fortunately lenders are using the initial fees worksheet in conjunction with the new GFE. The New GFE is three pages long and discloses EVERYTHING, EVEN IF IT DOESN'T APPLY TO THE BORROWER. For example, the lender needs to disclose the title insurance in a purchase transaction even though the buyer doesn't pay for it in Illinois, the seller does. The title insurance becomes a "cost" disclosed to a borrower....but it is not a cost incurred to the borrower. The same can be said with most transfer taxes in Illinois. State and County transfer taxes are paid by the seller. Some munipalties have transfer taxes as well. Needless to say,

2) It is much more expensive for the consumer under the new Good Faith Estimate law for two reasons:

There are different categories on the good faith estimate. If the lender makes a mistake in certain categories, the lender eats it 100%. There are other categories with variances, but let's say that a lender fails to disclose a transfer tax that is charged to the seller, the lender eats 100% of it. It could be $1,500 up to $3,500 dollars. With a mistake like that looming over every lender, a smart lender will charge an extra few dollars to absorb mistakes on the loans that they don't get it right;
It's so much more difficult to get a loan done from start to close. Ridiculous really compared to what it was. Sure it should be tighter, but it's so tight that all a loan officer does is look for ways to make things more palatable. Slam dunks? Few and far between. With more to do, lenders are not goint to want to be paid less. They are closing less, but their family expenses having gone down one bit. The cost to manufacture a loan is the same as always. With less loans closed per loan officer, invariably the costs need to go up. I just reviewed a Good Faith Estimate on a no cost refinance from Bank of America where the charges are just over $12,000. Wow!

FREAKS THE CONSUMER OUT...

WHEN THEY SEE HIGHER CHARGES THAN THEY'RE ACTUALLY PAYING.

Currently, I have a borrower who is buying a home with zero down payment. Needless to say, I have to approve the borrower by verifying over $8,000 of funds, when, in fact, the borrower only needs about $3,500 dollars to bring to closing. Getting this borrower approved has been rough because the borrower has to now play a game and show more funds than they'll need at closing because the government wants it that way. Can I say...."Where is the Truth in our Lending" anymore?

OUR INDUSTRY

This one is short and sweet. It basically cheapens our industry. The government has overcorrected for the actions of a few. The government should have prosecuted and punished those who were criminal. They didn't do so until there was a public outrage. Now, as a result, the government is punishing the industry, and, as a result the consumer who is supposed to benefit as a result of the new legislation.

Great loan officers will calculate for a borrower what he or she needs to bring to closing. If the good faith estimate is so far off, the loan officer will say,

"here's exactly what you'll need to bring to closing. "

"I know Mr. Borrower that the good faith estimate says our closing costs are X,Y and Z, but really they're not. You see that the seller's charges are on here. Transfer taxes are on here."

BORROWER: "Yeah, but your good faith says...blah, blah, blah."

Loan Officer "Just trust me."

Thus giving birth to the "Used Car Salesman"..."Just trust me"

Are you kidding me? We're supposed to be trusted advisors not sleazy used car salesmen. I'm not a used car salesman. But here's another conversation that I had with a realtor. I work with a Re/Max agent who is in the top 1% nationally.

Realtor: I got a call from Joe blow. He's confused on the fees.

Me: I know. I just got done meeting with him. I went through the good faith estimate and told him that the new government forms suck.

Realtor: Well he's concerned because it says that he needs to bring in $11,000 to closing.

Me: I know, but I calculated it out and he's really only bringing in just under $3,500. Blah, blah, blah.... (I'm now back to just trust me). GROSS!!!!

My trusted referral partner now has to hear the "pitch" from me, her 15 year partner in the business.

Normally I'd say that the Jury's still out, but in this case, the jury has returned, really quickly. The law has good intent, but the results? I'm sorry, but the results of this bill is a resounding guilty.

There are ways around showing the client the new Good Faith Estimate. I have spoken to folks who are legally getting around going through all the headaches of this bill. What they're doing is legal, but it' skirting the intent of the law. I guess my bottom line is this. Fix the bill before someone gets hurt. In this case the someone's are consumers, realtors and lenders....as well as our economy.

If you choose, you can find me here:

Path 2 Buy Certified Coach

NMLS ID#158606 An Illinois Residential Mortgage Licensee

Posted by Larry Bettag Illinois FHA Specialist on 02/23/2010 08:55 AM

Comments (131)

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131 Comments on It's Official, the New Good Faith Estimate Hurts the Consumer and the Industry!

FEB

2010

The form is flawed and whoever created it should be fired. Ok now that I got my real feelings out, I try and just deal with it. It is crappy, and is an attempt to fix the real problem that we as people have; there will always be liars, cheats, and thieves. And we all have to "pay" for it.

Thanks for the heads up on the GFE I needed to hear this and it's good information to know! Thanks

Many of the new changes in appraisals, the new good faith estimate, etc may have good intentions, but aren't working the way they has hoped!

Larry...It's another attempt from government to legislate morality and ethics. Unfortunately the number of years and resources invested by HUD were too great for them to admit they were wrong, so we ended up with this train wreck.

Steve...good words. Really. It's a shame that most folks are getting worse information than they had on the prior good faith estimate.

Gladys....you're welcome.

Bill....no, in fact, it's working the exact opposite as what was intended.

Michael....train wreck that is affecting the entire economy. It's too bad. When the goverment comes in and wants to run an industry, it makes it difficult to do business in that industry.

The new RESPA rules on the Good Faith Estimate are insane. It is going to make a lot of good lenders leave the business, and result in a lot of people not getting their houses.

Larry, I guess you didn't vote for Obama then like me, huh? LOL

Spot on Bettag! All this government intervention is only going to succeed in messing things up worse. I've agreed the intentions were the best but with most government actions, the delivery flat out sucks. The new GFE is so bad I have had no problem disparaging the document and focusing my customers on the truly important docs like my itemization.

It used to be I reserved the government bashing for just the TIL but now I get to include the GFE as well! At least we can breakdown their true cash to close on page 3 of the 1003, but I hear there are changes coming to that form this summer. The one constant in our business these days- CHANGE.

I hope we are all happy with all this change...

Gerry Suarez, Jr.

Your FHA Loan Pro!

Great info. It's a shame the government is going after the wrong bad guy.

Thanks Larry for putting out the facts - all I can say is UGH!

Larry: I agree with you and wouldn't be surprised if the GFE is tweaked sometime this year for next. Obviously, as LO's we're all working harder than ever to explain the loans we have which doesn't leave us as much time to source new business. After all, we need to sleep at some point! Thanks again!

FEB

2010

Great clarification, Larry.

I was reading about this yesterday in the news. Unfortunately their spin doesnt take into account what you guys already know.

Kudos

Rich

its hard enought to earn clients trust, now we disclose a GFE with the fees maxed and out and then tell them thats really not what thier closing costs are, and they will just have to trust us on that. What a Mess!!!

Guess I'm the only one who remembers the old days with lenders who NEVER even sent the old GFE. I agree that the form doesn't take enough account of local variations, but let's be honest, lender's hoodwinked borrowers for too long under the old system. This is no where near perfect, but from my seat, as a buyers attorney, this is light years ahead of the old way.

And blaming the Obama administration??? I'm no raving Democrat, but have we forgotten that RESPA reform was started (and completed) under George W. Bush? Only the implementation date occured on Obama's watch.

Ridiculous form ( good intentions aside) clearly designed by someone with no working knowledge of the business.

other than the lender charges which I truly can guarantee; I just jack up everything else. I give them the fees list (looks like the old form GFE) and tell them to go by that. I'll even give them the web links to verify the actual costs vs my jacked up ones such as the state recording charges and title insurance,

.....as always we all will pay for the few that trashed it in the first place. got to love it big brother is here to fix it.....

Government has an essential purpose. But when it gets too involved in details, often the results are unexpected and not always desirable.

Larry...Or anyone... If you don't mind, what forms are some lenders using that are legal to simplify this for their borrowers, per your article? Thanks! Kurtis

A HUGE AMEN! They forgot to ask anyone that knows the industry before the "brains" got together to screw things up! It's a shame.

Larry,

Great post! Thanks for allowing the reblog :-). I just shared it as well. Like every gov't idea, I guess the intentions are good but the implentation.......not

Right on blog. We have people who have never written a mortgage coming up with these great ideas. Leave it to the government to change a 1 page form to a 3 page form to "make it easier".

It is always scary when the knock on the door is the GOVERNMENT, especially when they utter the words...we are here to help, or simplify things for you! What a joke! When I talk to clients about the loan process now in generalities, they tell me that things have really changed since they last bought a home. I tell them, they have really changed since yesterday, and that they need to contact their lender to get the latest and greatest advice.

We are frozen in place or going backward in this market. What we need are JOBS! Not more regulation...they should punish the offenders...period.

Larry,

I agree the the new GFE has its flaws but I believe that after getting use to it will provide more clarity in our industry.

To speak to a few points you brought up:

1. All political opinions aside, HUD's press release on November 12th, 2008 set the stage for the new GFE and HUD-1. This was prior to Obama's term as president. http://www.hud.gov/news/release.cfm?content=pr08-175.cfm

2. Owners Title policy is the responsibility of the home buyer, it is a policy insuring them. As long as I have done mortgages, 95% of purchase agreements state this is being paid by the seller (which does make complete sense). Now what HUD has done is say this counts against seller concessions, as well as if it doesn't say the seller is paying for the policy in the purchase agreement that it is the buyers responsibility.

In all I think this is actually a step in the right direction. Is it painful...absolutely. At the end of the day making the lender liable for "oops, we didn't lock your rate" or "oh we forgot to add in the transfer taxes" does provide an accountability that should be there when you are handling a $200,000 transaction for somebody. There are more changes needed to it, like adding in what the property estimated value is, financed cost (UFMIP), a spot for lender credits, seller concessions, and what is expected from the borrower at closing.

Larry,

Great Post - I am also a midwest lender/broker - Michigan Mortgage Lender/Broker to be exact.

In Michigan the seller pays the transfer tax, but we have to show it as a buyer expense and then have the seller credit it back to them. I am concerned how this is going to play into the max allowed seller paid closing costs, anyone come accross this yet?

One more note to add:

HUD has been reviewing the "Worksheets" that many have been providing with the Good Faith, or even before a formal Application.

The crazy thing is, HUD almost outlawed worksheets. It's like they don't want borrowers to know how much they need for closing, just how much it is costing them and the seller to close.

I fully expect that we will see an official "Worksheet" form coming out soon, which will probably be just as confusing and add another 3 pages to out our disclosure packages.

They just do not get it, and we aren't done yet. We will likely see more revision, more regulation, and higher costs and less choice for the consumers, as all the different goverment departments TRY to "fix" the industry.

Larry,

Great Post - I am also a midwest lender/broker - Michigan Mortgage Lender/Broker to be exact.

One more note to add:

HUD has been reviewing the "Worksheets" that many have been providing with the Good Faith, or even before a formal Application.

The crazy thing is, HUD almost outlawed worksheets. It's like they don't want borrowers to know how much they need for closing, just how much it is costing them and the seller to close.

I fully expect that we will see an official "Worksheet" form coming out soon, which will probably be just as confusing and add another 3 pages to out our disclosure packages.

I have had nothing but good responses from the new GFE. The Title companies and Lo's here have been very proactive and well trained They are giving classes to everyone who's taking the time to attend and learn it. It's going to be around for awhile so learn how to use it. Boy how change really bothers some folk's.

One of the problems is that in some areas, like mine, the title insurance IS paid for by the buyer, and the transfer taxes are usually split between buyer and seller. So they did need to list these under buyer costs if it is a national form.

Simplify - I THINK NOT!

I worked with a first time home buyer and we're closing today, yesterday we previewed the HUD and all I can say is that this way, the new way - it's easy for lenders and title companies to hide whatever they want. The new thing is to 'group fees'. Yes, you heard right, group the fees. When I asked why there are 2200.00 in title fees, I was told ...It's really not, 1/2 of the title insurance is given back to the buyer on page one [see the credit, which I did] and the over 1500 left - would be broken down in detail [if you ask for it] otherwise it's just.......TITLE FEES?

The lender - same thing - we'll, fees get grouped together on this new HUD, we don't like it either but that's the way it is. I'm sorry but my 1% Origination fee on the FHA loan [purchase price $158,000] should be 1,580.00 but it's 2400.00 - well, they grouped my processing fee and buydown points and well - I know it's hard to read but if you're buyer doesn't want to do the purchase [1 day before close] we'll - we'll understand....

This isn't easier - it's an easier way to smoke and mirror fees, which isn't going to happen on my watch.

I make it a point to see each HUD BEFORE the close, I hope that others are doing the same - it too can save the client money.

Larry: Excellent compilation of the typical conversation. In this case the government has overreached in an effort to help the consumer. Hopefully the politicos and bureaucrats will be able to change course mid stream. No one is happy with these forms but thus far complaints have fallen on deaf ears. It may take some of them to buy a new home to realize that some tweaking is in order! Let's remember that HVCC was a Cuomo (former HUD director) creation which has caused much pain to the industry and consumers alike. Thanks again. ~Doug

Off with their heads !!!

Larry, Seriously.... this stuff gets to me at times. You know of the post that I wrote the other day and I have seen several like yours. I want to put a few of these together and send them to HUD.... say hey, these are from loan officers with ethics, years of experience, tons of knowledge, very passionate, and who work in the trenches.. please review this carefully and think about what has been done.

I will state this again... I think the MDIA act was very good.... but now to add this GFE and that you can't change things, etc, etc... dates, this that... shit... shit happens. I know that some fees can be changed after the fact, called "changed circumstances".... but come on...

And on top of all of this... did you read Gerry's comment? Gerry Suarez's comment - that there could be a possible change to page 3 of the application? WHAT? Who comes up with this crap? What are we going to hide? The total cash to close? lol This is getting very sad and scary.. just my opinion. Larry, nice job here...

jeff belonger

Larry

I was surprised to read in your post about the seller transfer

costs being a required disclosure item on the new GFE.

Is it actually a requirement that seller closing costs be on

the new GFE?

Rob Gorman

This world seems to be full of KNEE JERK REACTIONS. It's scary our leaders come up with rules and laws that are not completely thought through and the possible pitfalls and issues. It's embarrassing when I have to explain these forms to my buyers. It looks more like the old bait and switch than the old GFE and HUD. Absolutely ridiculous!

I'm so glad I got out of lending. The reverse side is getting crazy too.

Larry, I agree with some parts of what you are saying. For example, the inclusion of transfer taxes. On one hand, zero tolerance is really bad on something that can vary by 100%. On the other hand, the big national call centers from the TV lenders would never quote transfer stamps to make their costs appear lower. I reluctantly think that this is the lesser of two evils.

I don't understand one fundamental part of your conclusion: How does this make it more difficult for the consumer to COMPARE two loans. In that sole and very limited aspect, the document works.

I agree it isn't a preliminary settlement statement, but that's the details of the transaction and that's still in the 1003. This GFE removes the old car dealer game to make a large amount of fees turn into "$100 here" and "$250 there."

To help the consumer, you'd give them totals from Lender A and Lender B, not their shell game of processing, admin and underwriting fees.

Just my $.02, but I could be off so I'll quote you $.05,

Chris

Great post Larry. I like the "Used Car Guy" analogy. That's exactly what it feels like when you have to explain to a client that some of the fees on the new GFE aren't actually paid by the buyer. Then as any good lender would do, we provide a separate worksheet to show the actual cash to close and monthly payment amount. Which means we have to essentially lay 2 pieces of paper in front of the customer and explain why they don't match. I really try not to whine to the customer about they the gov't created this new form that adds to the confusion. So I just have to say "Trust Me". It's a real problem.

I had a recent client leave me and use a large national bank for one reason...she wasn't comfortable with the way I explained the GFE and lost trust. I felt exactly as your describe...like a used car salesman. I think the new GFE plays right into the large banks who've never been good at disclosing fees, closing costs, cash to close, etc. The large banks can keep doing what they've always done...explain very little to the borrower. The GFE doesn't bother them a bit. They just send it out with the other disclosures with no explanation. Those of use who meet our clients face-to-face and prefer to consult our clients about the true cost of a mortgage loan, we have to explain this mess in front of our clients in real time.

It truly discredits our industry. However I do want to look at the positive side and "hope" HUD releases a revised form that removes the requirement to disclose fees that the seller is actually paying (title policy). Plus adds a line for the true cash to close.

The new regulations imposed are nothing short of insanity. First problem is that they are inherently designed to eliminate the broker. I am sure this is not what HUD or the FDIC will tell us, but how else can you explain a new form that is designed to make a brokered loan apear far more costly to the consumer than a banked loan? Part of the problem is also that the new GFE does not flow correctly over to the TIL, (truth in lending). Fortunately I have the ability to bank or broker my loans, so I have not been hurt as bad by this. I can however tell you this; On an identical loan when comparing disclosures from a Brokered loan to a Banked Loan the GFE, and especially the TIL will look completely different. APR on a brokered loan will ALWAYS apear to be higher, even when the fees are identical and the profit on the loan is identical. The other problem with it is this, on the new GFE, there is no section anywhere that would tell a borrower how much money they actually will need to come to the table with! The biggest thing that a borrower wants and needs know is, How much are my payments? and, How much money will I need at closing? What is the point of having a new GFE that eliminates how much money someone will need at the table?

You think this regulation stinks, wait there is more! Here in Florida our adaptation of the S.A.F.E. act also includes with it a financial responsibility section. That means that anyone looking to be a licensed originator, processor, underwriter, etc. must now pass a background check(great idea), but also must pass a credit check(not so great,read on) With regard to credit, anyone who has a foreclosure or Bankruptcy will be precluded from the industry for 3 years. Further more, as it is written right now, our credit report will become a matter of public knowledge. No I ask any rational person, what is the purpose of having my credit report displayed to the public or even remotely accesible by just anyone? It is nobody's business what my personal bills and debt are. I happen to have great credit, but I still do not want every Tom, Dick and Harry look at anything that has any relation to my personal credit report. Its bad enough that you can already look up my license, find my personal information. Now you will also be able to tie that information with my credit report? Are these people insane? How can anyone think it is a good idea to make any of this public knowledge? Can we say identity theft? I can only imagine that huge problems this will create for myself and my peers.

Want a real life expample? Ok, Jane Doe was a Senior Credit Analyst, Operations Manger for a national lender. When her lender went out of business she lost her exutive job making over a very comfortable living. Given the state of the industry her salary is no longer available anywhere and she was forced to come work for me(thankfully because she was way over qualified to process loans) Working for me, paid less than a third of what she was acustomed to over the past 15 years, even though I paid more than the going rate for the position I hired her for. There was no way to carry the debt and the individual was forced to file a Bankruptcy and give up her big expensive home. This person is one of the most qualified processors I have ever seen. I mean she was a senior credit analyst for god sakes. She now can longer process for anyone, will not be getting a license, and will not be getting hired by anyone due the new S.A.F.E act. Now I asked anyone who has any common sense. Did this help anyone? My customers will no longer have the benefit of having someone like this person process their loans? My underwriters that I have dealt with for years will no longer have the benefit of having someone as good as this person process files for them? This person will have to endure even more devestating financial hardships because their right to work is being stripped away. I will eventually have to hire someone far less qualified to replace her, and deal with getting sub standard work out of them, which will ultimately hurt my clients. What is the purpose of taking someone like this out of the industry? This acomplishes Nothing, It will not help the consumer, It will not fix anything, It will jeoperdize my credit and expose me to identity theft, It will suck all the way around. Maybe I should just move to CHINA, after all they are already a comunist country, seems we are headed the same way too?

I urge all realtors, mortgage profesionals, and consumers to write their representatives and tell them what a ridiculous mess they have created and that we will not stand for it anymore.

Steve Fingerman

First of all, I have to say Cherry Creek is a great company. Thank you for the accurate clean information in your blog. I have seen many articles on this subject that are misleading or have misinformation.

Perfect. Thank you.

Just makes me wonder - where are we heading????

You got most of it right. It does hurt the consumer. It is not the nightmare I thought it would be to deliver to a consumer. It is frustraing all the trees we are destroying to print, reprint, redisclose a GFE every time we turn around. Lock the loan, gotta write a letter, reprint a GFE and get it to the consumer. It is what you get when the government does anything. Not nearly the problem HVCC has been. HVCC

And, of by the way, the new GFE was in works for years before Obama. So where may have stated it would give clarity, he was most like repeating what he was told. He did not design it, so take that back to HUD. Donovan and Stevens, get the blame.

Thanks for your thorough investigation and reporting. We saved your posts for referenceand & referred other realtors to them.

How about a final page for the buyer, generated by the lender, beginning with the $ to close from the GFE, and then filling in the appropriate lines, pluses or minuses depending on the local practices, potential seller closing help, etc to get them to their actual need-to-close bottom line? That way it's clear, they have it in writing rather than a verbal "Trust me!"

Larry, great summary of a terribly sad situation. The consumer is paying for this new protection along with seasoned lenders in the trenches who have stood beside consumers for years.

Hmmm... As a young married couple, we lived in Greenwich Village. This reminds me of the protection businesses in the Village were forced to "purchase".

Great article. Very timely, just sat in a RESPA class that basically said the exact same thing. "I from the government and I'm here to help you." Yea right.

Jim "Gymbeaux" Brown

The GFE is now 3 pages long?!?!? I'm re-blogging.

Couldn't agree more, I've never seen so many deadpan stares from purchasers going over paperwork in 20 years in the business! Great Blog!

All the negative posts from mortgage brokers confirm what many suspected. A lot of mortgage professionals weren't paying attention to RESPA reform and many are unprepared for changes.

Some thoughts:

1. RESPA will NOT be changed again any time soon. We've got to live with it.

2. If you want to put together a terrific GFE that will beat the pants off your competitors, all you need to do is go to Closing.com and get the latest live rates from the 110,000 vendors and local taxes from each of 3,000 counties. You won't have to "eat" a thing because you'll have the best available data. You'll be able to outbid competitors who use blended national rates.

3. Or use Calyx software, which has ClosingCoro's new SmartGFE engine built in.

4 For more, go to closing.com.

I agree - This has done nothing but muddy the waters for consumers - I now over-disclose everything on the form to ensure that I'm not bit at closing.

I recently gave a GFE on a $270K 100% USDA loan - The cash to close showed $28,000!! In all actuality they'll only need $6,000 or so.

This isn't completely unexpected though - When the government gets involved with something to make it "simpler" WATCH OUT!!

Nice post, good info. Funny how Banks are exempt from the new GFE and don't have to disclose how much they get paid at all....... it's almost like HUD doesn't know who funded the loans that the Broker's submitted.

Govt. bails out General Motors and magically thinks folks now need to buy cars (Cash 4 Clunkers)

Govt. bails out Banks and comes up with a mind scrambling GFE for Brokers leaving Banks exempt from disclosing all the fees/pay. (Bucks 4 Bankers?)

See a pattern here?

Think this is bad?? Wait until you get your first credit card statement and see the wonderful changes coming. Look at it close and see how those of us with good credit are going to have to start paying more for those with bad credit who fail to make their payments. Wait until the banks find new and wonderful fees to tac on to all of us to make up their spreads. But even more, wait until you hear and see the PUCKER factor that is going to happen to non-credit card lending when people see how much credit is costing them and how long it will take to pay it down. FTB short on cash with $5-10K in credit card debt are going to see on their statements in the coming months and see that the $10k they owe is going to cost them $37K and take 35 years to pay off if they make min. payments. They are going to freak and I feel many will stop their smart lending and wealth creation activities like purchasing a new home or refinancing to remodel in order to payoff those cards. Long run good! Less personal debt and better credit scoring hopefully. Short run during a national housing crisis. Not so good.

There are some positive things about the new Good Faith, as pointed out by Gretchen-- "no surprises" on fees.. but in general, I believe the change was not thought out enough before implemented, nor were lenders given enough time to get used to the new form and put this into practice before we are obligated by regulation.

And how can they use this to shop loans when we can't get one BEFORE a contract is agreed? At least, noone here will give us one until they're under contract we're told.

Thanks for all of the comments. I appreciate them. I think that all we can do is talk to our congressmen and see what can be done to change this. Unfortunately, a good idea has had horrible results. Our industry and livelihood is being challenged now. Get the word out, right?

Great information. Thanks. Ultimately the consumer ends us more confused than informed!

Larry,

I totally agree with your thoughts. I'm a realtor who sees it from the other side and it's been awful. Slow closings have turned into slower closings or non-closings. I'm not hearing from any consumers saying that the new forms makes things any clearer for them. What I'm hearing is major frustration that they can't close in a timely manner.

And the new rules are slowing closings. I have a transaction I've been ready to close for a week, but due to delays we could not control, now we are ready to close....but can't because the new GFE has not been in the buyer's hands for long enough. So I can't close today, and now we need an extension from the bank.....insanity.

AMEN. My husband is a loan officer and we just had this conversation AGAIN last night. Once more I will say that the government has made a bigger mess out of the one that already existed. I too will find myself in the "TRUST ME" boat. Those consumers still willing to get in it with me are dwindling.

Somebody HELP US!

Larry, I completely agree. The politicians forcing banks to lend to those that didn't qualify in the first place set this snowball rolling and then came the greedy banks, investors, lenders, etc. There is a lot of blame to go around for the real estate meltdown. Now, because the politicians did nothing to stop this mess, they are going over board with regulation so they can say "See, we're fixing the problem so it doesn't happen again". They did not completely think this through and eventually after the uproar they will have to compromise and redo the GFE, the HVCC law, and other rediculously over regulated rules and documents. I am all for protecting the consumer, but it has to be fair to all parties and well planned. It was a small number of "mortgage professionals" (I use that word loosely) that took advantage of consumers and the system so, like you said, they should litigate, not regulate this industry to death!

And to top it off, there is no place for the borrower to sign the GFE.........no way to prove the borrower has even seen it before closing......

With no signatures needed from either the borrower or loan officer, who is to say what was on the 'original' GFE ? It can be revised at any time. An 'initial fees worksheet', or something similar, is non binding and not required in any way.

Our borrowers see it and have no idea what it all means even after it is explained to them, but they easily undertand the initial fees worksheet, because it is just about identical to the GFE's they have seen for the last 20 years.They just want to know how many $ are needed to close.

It's not the 'change' that's bad, it's the fact that the fix was made for something that wasn't broken.

I just wish the switch to the new forms weren't causing so many on-time deals to be delayed - it is frustrating buyers and sellers on a regular basis.

there has been nothing but confusion since this went into play, my clients are telling me they cannot get any information from their loan officers as everyone is scared to say anything or put pen to paper about figures etc....if this is all about disclosure than i would think communication would continue to be the number one important factor...what were they thinking?

First, if you review your GFE before handing it in with your loan submission and look for mistakes, you won't have to eat the cost.

Second, the GFE does not say "cash to close" on it anywhere. If you explain the new GFE and the initial fees worksheet properly, your consumers and realtors will not be confused. And I'm not even sure why your buyer needs to prove he needs to bring $8000 to closing. If you do the GFE right, your underwriters will see how much the buyer really needs.

We've closed a few dozen loans with this new GFE, and we haven't had to "cure" it yet. Perhaps you weren't trained properly on it.

This right here... "I just reviewed a Good Faith Estimate on a no cost refinance from Bank of America where the charges are just over $12,000. Wow!" doesn't surprise me that you're shocked. My office always has the highest GFE around, but it's always been accurate. Our competitors continually low-ball fees on the GFE to win over the clients. But guess what? The buyer has to leave closing to go to the bank to take out $3000 just to make up for the LO's mistakes.

The new GFE is welcomed by the honest brokers.

Jeff Coon wrote: "Ridiculous form ( good intentions aside) clearly designed by someone with no working knowledge of the business"

And therein lies the problem with most govt reforms... "no working knowledge"

Had a closing yesterday that took twice as long and there were many 'deer in the headlights' faces from the Escrow Officer, the lender and the Buyers. The Escrow Officer said their company was already considering doubling their closing fee because of the time consumed in preparing the new HUDs. Just another pass through expense to the consumer.

Great Post Larry!

OK here is the real truth!

Almost of all of us at a loan application- only show the Clients the Initial Worksheet and go thru the numbers on that- used to be the old GFE.

We quickly referenace the new GFE's first two parts and then put it back in the middle of the other disclosures (it's not like they have to sign it).

Otherwise we look like Idiots and the clients get confused and then don't trust us- for the rest of the transaction (next 2-3 weeks).

They could have use the old GFE and just said these fees (line #'s) have a zero tolerance; these fees have a 10% variance ect... but then that would have made too much sense!

Anyone that says that the New GFE is a good thing or change, clearly does not do enough business to know any better!

Great post Larry

It just another example of Government making harder for small business.

I went to one of our local Title Company's presentation on the new GFE and there were some things that were confusing. Particularly with the seller paid items...It looked like they were being charged to the buyer, but the way it was explained it was zeroed out or something. I finally got a handle on the HUD and now they come out with this...

Nothing personal here. Just my experience so far.

I haven't seen anything confusing on the new GFE. But we don't have transfer taxes in Utah and I've been to 3 courses on it already, including one tailored specifically to lenders and mortgage brokers.

It makes sense to me and my clients, and nobody mistakenly thinks it has anything to do with "cash needed to close". It just clarifies the costs involved to the consumer. A lender also does not issue a new Good Faith Estimate until after credit has been checked, a property has been identified, etc. etc. So, if the lender has done their homework, what big changes are going to affect the ability to deliver the loan as estimated? If the property changes, a new GFE is issued. If credit changes, a new GFE is issued. I don't know what the fuss is all about.

As far as the title insurance issue, we have that too. Not a big deal when you just explain that in our state, the Seller will be paying for the owner's policy... I don't find that confusing at all.

I also haven't seen a higher cost to consumers. But then, we don't choose to use the lenders who charge more for a higher rate.

When has additional government regulation ever lowered the cost of anything? Ronald Reagan siad that the 10 most feared words in the English language are "I am from the Government and I'm here to help". The new rules of lending have definitely raised the cost to the consumer and slowed the process down.

This is not only true of the new GFE but also, HVCC and MDIA. Governement rules that are placed on any industry always occur well after the industry has self regulated. In the mortgage business for example, lenders have been doing review appraisals regularly for the last two years at least. HVCC simply added a layer of beaurocracy (and fees) to a system that had already adequateky solved it's own problem.

Now that we have the new GFE what happens? Do we go back, not likely, so what exactly do we do? Frankly, I'm waiting for the new "improved" GFE to come out sometime in 2010. I wonder what they'll screw up next time?

Larry, you said it! This new GFE is a travisty. This is the clearest example of why Government should be an oversight but the private sector should be the creator of such measures. The intent is honorable but the execution of this three page behmouth as an instrument of clarity to the consumer is a joke of epic proportions.

Having said that, I know it's up to all of us to explain it as clearly as we can and to use our other tools, namely the Initial Fee Worksheet or even the details of transaction on the 1003 to do the real clarification and use the new GFE to do it's intended job telling the borrower if they have a Balloon, an ARM, a NegAm or a Prepayment Penalty.

It sure makes being a loan officer a much more difficult job than it already was. Thanks "Big Brother"

Great article--local lenders are all reacting to this differently, but no one likes it--and it is super confusing for consumers and irritating for the agents! I hope to see reform or repeal of this soon!

The new GFE has so many problems, just trust me is unacceptable! The form makes it look so much worse than it is, so now the LO needs to calc out the real numbers and diffuse the buyer, the realtor, and hope the escrow officer is competent enough to match up each of the numbers before closing.

That's of course after you hope you get a competent appraiser since at least in our area they are no longer the local trusted appraisers, they low ball and come from 2 hours away and screw up everything!

What a nightmare, all from government OVER correcting, have they not learned from the past? They are literally ruining this whole industry. VENTING!

Shelly Whitworth
www.MorSystems.com

I have a (first time) buyer only get an $85,000 loan. The loan officer wouldn't even provide an Initial Fees Worksheet (I think because she is afraid that it is not allowed, not because she has anything to hide). The 1 page loan summary she provided gave a total estimated cash to close of almost $8500 (That is 10% closing costs for a buyer!) And there is absolutely no breakdown of fees to be able to compare them to any other lender. Now, this came from a loan officer that I have been working with for years and trust immensely, I know the fees she charges and *I* know that some of the fees are the sellers cost (appraisal, owners title) and that she is over estimated as to not fall short at closing. But the fact that there is no way for us to even see the breakdown of fees and discuss them is ridiculous. I don't see how this is better for the consumer or more transparent. I feel like when I write an offer I will be writing it blindly because I don't know what the true estimate of fees are. It's very frustrating.

just like HVCC, it hurts who it was supposed to help. The big boys in government have NO CLUE!!! its ridiculous!!

A couple of things. First, these changes have been in the works for several years, so laying it on the doorstep of the Obama administration is factually incorrect. Iit is the HUD bureacracy that has shoved this down the throats of the conveyancing profession. Secondly, as a real estate lawyer with over 30 years experience in real estate in CT, I can say that HUD has completely missed the boat on this attempt to supposedly help the consumer. The new forms are clearly less transparent and more confusing than anything that has ever come before this. The new rules were the subject of an extensive period of public and industry comment, but instead of listening to ALTA (American Land Title Ass'n) and others who labor in trenches of this practice day in and day out, HUD bureacrats who have no experience in the reality of the market pushed these changes through. I am sure the rules will be tweaked, but I expect that we will all have to adjust our practices to deal with them. In the beginning this will mean that every transaction will take more time and cost more, which will eventually flow through to the consumer. Thanks, HUD!

I had a lender the other week use the new GFE with one of my clients, then showed them the old GFE to help simplify it. I thought that was a pretty good idea!

Larry,

I've closed a few loans with the new GFE. I'm going to take a contrary point of view and say it just might help me close more loans. Here's why.

Without question, the new GFE forces loan officers to be more precise in costing out the loan and making sure there are no last minute costs. It also forces us to do a better job in presenting a loan by using the tools we already have, but using them in new ways and in the right order.

I start with page 2 of the 1003 and give them the payment breakdown and answer any questions about the different components of PITI.

Then we go over the Details of Transaction on page 3 of the 1003. I highlight the offsetting costs such as seller credits, etc. Show the cash to close. Then introduce the new GFE and explain that, now that the client knows the bottom line on payment and cash to close, they can see all the costs of a transaction, knowing that some of them are actually not paid by them (remind them of page 3 and the seller credits). Explain that this was primarily designed to eliminate surprises at closing and level the playing field when shopping for a loan. Now it's time for the TIL.

Before you go over the Truth in Lending, use the TIL Details of Transaction to break out the various fees and also show what fees are considered Prepaid Finance Charges. This naturally allows you to transition to explaining APR and the fact that the Amount Financed is less than the loan amount.

If you go through these steps in order, you won't lose trust. In fact, your customers will see all of it laid out in a logical way, and you will get them to work with you.

The new GFE is a good thing for thorough lenders because it will weed out those who do a poor job of explaining what's going on or provide inaccurate information.

I understand that B of A now sends its GFE's from one national source which wildly overstates their costs; their LO's don't even give a GFE at the point of sale. The national GFE uses numbers from New York where closing costs are substantially higher than in other states. One of my good friends is a B of A LO; he openly admits that he's toast if the borrower gets local GFE's before his comes in from corporate.

We have to get over the whining and move on. Let's use our sales and presentation skills instead and focus on differentiation from the competition.

Larry,

Great write up on the new GFE. I have had the same problem showing borrowers the good faith and then tell them it is not correct. That goes over real well. You forgot one important detail on the new GFE. Not only does it not provide an accurate amount of cash need to close, it doesn't provide a full and accurate payment for the borrower.

Bottom line...Buyers want to know how much is it going to cost them out of pocket at close and what is the total monthly payment.

Oh..You didn't mention that banks don't have to disclose YSP in box 2.

Now you got me worked up again. Thanks for the great write up.

By disclosing fees that are not paid by the buyer and having to include them in the APR we have been forced to not make loans under $50,000.00

Also when the cost to cure is not worth making the deal the lenders will decline the loan under the provision "We do not grant loans to any applicant on the terms and conditions you have requested" If a broker wants to pay say a missed owners policy and the seller is already making the max concession to the buyer can that loan be cured and still be sold?

Jeff, I'm fully aware that this is not an Obama project. I never said it was. What I did say is that he's touting that it's saving the consumer about $700 per loan. That is not the case. You are so right that this is not an Obama project. But he is claiming that it's saving the consumer so much $. That is just not the case.

Kabir...I agree with you that this "process" builds trust. I will, however, say that the form creates distrust, because it is not accurate to what the costs are or what they're bringing to closing. Make sense?

By disclosing fees that are not paid by the buyer and having to include them in the APR we have been forced to not make loans under $50,000.00

I am one who is usually never at a loss for words, especially at the closing table taking the time to explain documents to customers, but the new GFE / HUD has made it a more difficult to fully explain how everything is calculated to the average consumer. I have to shuffle through more pages to show where figures are transposed, credited, and finally matched on the GFE, including costs not associated to the borrower for which I am asked "Why is this included in my figures when it is not my charge and the seller's resposibility?". Then I have to explain how it is not really their cost and credited back over here, etc. which seems to further confuse the layperson instead of making it easier. I am all for openness and full disclosure, especially concerning one's financial matters, but these forms could have been much better thought out and designed.

The intention of RESPA 'cleaning up' forms was good, but the execution however is very poor. We have adapted and will continue to do the best we can to explain this to consumers at closing. It seems like it is just another stumbling block thrown in front of this struggling industry by our reactionary government which unfortunately does less to help the industry or the consumer in the end.

All in the interest of protecting the consumer. A little late as usual. Who was looking out for the consumer with all those crap option arms, when the government was trying to extend home ownership to more people. Amazing how we always close the gate after all the horses have escaped. Thanks again politicians -

Larry, good post.

How are you getting customers credit and income qualified before they find a property? Many of our borrowers have marginal credit and we fight to get them done. In the old days if you pulled credit that was considered an application and the point your disclosure timeline begins.

Larry,

The late lamented "old" form was supposedly a preview of the closing statement, but a lot of people abused their client's trust by making lots of changes at closing.

The new GFE's purpose is now to eliminate surprises and enable easier comparison shopping. However, it does not preview the closing.

If we take a negative attitude that the form is bad, our clients will smell it like a dog allegedly smells fear.

If we take the positive attitude that the form does a couple of things well, and that the other information the client needs to know has already been provided elsewhere, then we smooth the bumps.

I find myself constantly amazed that the people who come up with this crap, are actually "hired" by us, but still seem to have an issue hearing us. Think there will EVER come a time when the "powers that be" actually create policy WITH the folks that know the most about the issues AND the people it will most affect. Oops - sorry - got off to dreamland for a moment. Sheesh! Back to reality, and trying to "think positive" and get my clients to once again "buy" something that most in the industry aren't. Good thing I am a good sales person AND social worker! Thanks Larry!

Larry,

I couldn't disagree with you more. If presented correctly, the new GFE is no more confusing than the old one. Although I'm not too keen on disclosing the owner's title insurance fee, for example. the form does a much better job showing junk fees as lender fees, which is where they have gone for years. Ultimately, the form, with the accompanying Reg Z and Reg X enhancements, raise the loan officer bar. No more last minute changes to a borrowers fees due to loan officer errors, trickery or dishonesty. The lending industry was too loose for too long. And as the pendulum swings to the side of regulation, LO's who know how to use the new GFE and TIL will thrive, while the rest complain.

So often we have heard over the years that we were self policing and that the honest brokers and real estate agents would rise to the top and the bad/unethical minority woulld fall by the wayside.

Guess what, we did a terrible job of self policing and the "few" bad apples definetly made an impression to consumers groups and the government. Whether the cure was necessary may be debatable but the results were predicted by others years ago, why is this a surprise to anyone? As others have frequently said, if you don't clean up your mess the government will be happy to step in and then no one will be happy. Well the government has stepped in and in all probability won't be making any significant changes to the new rules in the near future. We had better learn to live with this as that is the reality that we all are living in.

Kabir nailed it dead on, both times. Yes, this will absolutely redistribute market share to lenders who are (a) less expensive and (b) know what they are talking about. How is that not pro-consumer?

Realtors, you don't know how lucky you are. You have always had contract law governing your listing fees relative to your competitor's.

Imagine for a moment that your firm quoted a 5% listing fee. It was a competitive fee, you consistently produced better results, and you were the best agent for the consumer.

Yet, cross town at the other company, they'd put this juicy document saying 2% LISTING FEES, big and in bold in front of the consumer. They'd "earn" listings from time to time and then charge 8% on the HUD citing that the contract was only an estimate.

If you were that 5% agent who'd watched that 2% company rob people blind, you'd be happy when the laws finally came in. And, of course, the 2% people would talk about how this is unfair or too cumbersome.

"a smart lender will charge an extra few dollars to absorb mistakes on the loans that they don't get it right"

Woah, I'm sorry, but in what other industry can a professional honestly say "Yes, this line item here is the $150 I'm charging you because I botch forms every so often."

Are you kidding me? As a web designer, I would have a hell of a time explaining a charge on an estimate that said "Mistake Fee: I'm not terribly good at Photoshop."

Larry

For your information, we now have the Asst. HUD Secretary as a member here in AR. Maybe you should look him up if possible, and send him a link to your post.

it's very obvious that even with their good intentions, someone must have been on drugs when they created and finalized this new form.

First, it does nothing to clarify anything, and your post mentioned several flaws that need to be addressed soon, as the confusion to the borrower is obvious.

In CA, many of my lenders have had to schedule meetings to go over areas that need Re-Clarification as original instructions were misleading or wrong.

Lastly, in addition to all the confusion this form has created, the Banks and mortgage bankers still do not have to disclose their YSP equivalent SRP which makes us brokers appear that we are making outrageous commission when we are not.

So much for a level playing field...Not. The Bankers have too many powerful lobbyists in DC to buy the politicians off which is exactly what has been done.

Still think HUD needs a copy or link to your post.

Best Regards

If the government had used good sense (I know, silly of me to even think) then they would have put together a group of Realtors and Mortgage brokers to create the GFE - as it is, I'm sure it was created by people who didn't know diddley squat about real estate or mortgage lending.

Of course, if they had good sense you wouldn't be dealing with the appraisal mess, either.

Who elected these idiots?

You hit this right on the head. What a joke the new Good Faith Estimate is. I love how the politicians (especially in NY) love to come out and bash the banking industry and swear up and down that they are going to fix things and then roll out stuff like this.

I am spending too much time trying to show the customer what is actually overstated on the GFE instead of having an accurate one like I used to have. It makes no sense. More regualtion will surely come and then guys like Chuck You Shumer will run to the microphones and ask again, "Why aren't the banks lending?" They don't get it.

Well said on your blog - everything is exactly how you describe it.

CHANGE IT IMMEDIATELY!!! Yesterday would be good!

Marte: Do you really think this new GFE was put together without anybody from the industry being involved? How would they know the terminology?

Perhaps the experts were working with too much theory, and didn't realize that the lending changes would be impractical on a person-to-person basis... but seriously, be rational about it.

Larry, you're absolutely correct the new GFE can be a train wreck and the 95 comments ahead of me indicate most are in agreement.

But, it's our train wreck and we should be figuring out how to make the best of the situation. The form isn't going away or being changed any time soon.

I wonder how many lenders and their Realtor business partners have had a sit down and discussed, how working together they can answer the client's questions and provide the highest level of service while working together in a very tough situation.

Let's look for more solutions, rather than rehashing the evident problems.

Larry, you're absolutely correct the new GFE can be a train wreck and the 95 comments ahead of me indicate most are in agreement.

But, it's our train wreck and we should be figuring out how to make the best of the situation. The form isn't going away or being changed any time soon.

Let's look for more solutions, rather than rehashing the evident problems.

Brian...I rarely get confrontational, but are you on crack? Good L.O.s will thrive in either environment. It doesn't matter. You and I agree that the intent of the law is good, but the execution is poor. I could write a real straightforward GFE that would be very transparent. The problem is that what you see is not what you get. It's a farce. Quoting 3rd party fees that are the seller's responsibility. Not being able to use tax credits. The intent is good. The reality is so poor.

Chris...no parallel. They offer contracts up front. Not estimates. Estimates that vary by 6% as to what you're saying would be prosecuted under HUD. I'm talking about making a good faith estimate easy to read. I'm with you. That you don't need to change the GFE to the HUD, but make it easy on the consumer. 1 Question to you Chris....did you get any training on this new GFE? If so, then how much? Just curious. The consumer didn't get any!

Only the government can make a form be supposedly clearer by making any longer. Where is the Keep It Simple idea ? Not here with these new forms. The intent of the forms are good, but the reality is anything but. I'm from the government and I'm here to help you. LOL

I think Larry must not know what the word "official" is. Although the new RESPA guidelines place a lot more work and responsibility on the lender they are ultimately good for the consumer, assuming the the consumer knowing as closely as possible what their closing fees are as early as possible in the process is considered good.

I think that the new laws are good and do protect the borrower... I just spend 3 hours this morning listening to Attorney's, title companies and lenders that gave a seminar to a room full of lenders... I was only real estate agent that attended. It was very informative and helpful. I can agree that there are some definite tweaks that can be made- but essentially- if a lender is not doing anything wrong it is very do-able... I seems to only draw more time when items need to be re-disclosed.

i see a few re-blogs in your future on this one. : ) thanks for the blog!

Good perpective to share with us. I just went to a HUD/GFE class yesterday sponsored by a national title company. She flat out said ALL of us in the industry were to blame for where we are and why items liked this revamped GFE is in place. We all know this is because a very small percentage of bad people acted dishonestly and a larger amount of consumers took the easy way out by saying they had no idea of the type of loan they had. COME ON!! Now the rest of us GOOD, HONEST and PROFESSIONALS, who are sticking with the work we love have to pay for it.

I have a hard time feeling bad for lenders being held responsible for their mistakes. Accurate accounting, disclosure, reporting and timeframe are all important items. The pendulum has swung back in the opposite direction and it's a bit more difficult than it was. For consumers if everyone is using the same forms and the same rules then it should be just as easy for the consumer to compare lenders across the board because they'd all be subject to the same risks of making mistakes of disclosure & accuracy. It also educates the consumer as to potential expenses to be mindful of when it comes to negotiations and more.

Where as the new GFE is a pain, it does have one major benefit to the consumer. If a fee is not disclosed on the GFE, it can't be added to the HUD1 at closing. Hopefully, this will eliminate buyers being charged fees at closing they were not made aware of at time of appliction. It does take a bit more time to explain to borrowers, but when I point out many of the disclosed fees they will not be charged, they are fine.

Thanks Larry. It is truly a disaster in my opinion. VERY Consfusing to all involved. I would expect a new and "improved" version soon. Look at how many revisions of the Colorado Contract and various disclosures there have been recently. Interestingly enough, did a HUD contract for a HUD Repo Home the other day. Basically 2 pages, with 2 pages of disclosure. Our state contract is 12 pages +/-. Maybe there is hope, but I personally thought the old HUD-1 form was easy to understand, which is probably why those that didn't even have to use it did... Now I think we will need private/custom forms to explain the government ones... Why is it I got into this business? Arghh!

The gov't is aweome at running businesses. Just use look the Postal Service!

(are you picking up the sarcasm)

The greater the gov't involvement the mercier the waters!

Atleast HVCC has been great for our borrowers and buyers.....NOT!

Again for anonymous people like Pete, Lane and Brian..... I'm not arguing that the law isn't relevant.

#1 THE BORROWER - WE'RE NOT BEING TRUTHFUL WITH THE BORROWER WHEN WE DISCLOSE COSTS THAT ARE THIRD PARTY COSTS THAT AREN'T THEIR COSTS. THAT'S A MAJOR PROBLEM. THAT'S NOT TRUTH.

#2 LENDERS - WHY SHOULD LENDERS EAT FEES SUCH AS TITLE INSURANCE OR TRANSFER TAXES THAT THE SELLERS PAY FOR WHEN THE BORROWER DOESN'T PAY FOR THEM AND THE LENDER HAS NOTHING TO DO WITH IT?

The idea is good. The implementation is faulty!

The new GFE fails to provide:

* the total monthly mortgage payment (PITI)

* total cash to close

* escrow amounts

* seller paid closing costs

* Loan-to-value ratio/down payment

I will say that it doesn't allow lenders to play games by only filling out the 800s on a GFE and giving that to a prospective client for comparison purposes. I always filled out my GFEs with reasonable taxes, insurance, etc to give the client a better idea of what their payment would be. Many never called back because some chump LO lowballed my "real-life" numbers.

Are there workarounds to all this? Sure. Use the "old GFE" aka Initial Fees Worksheet in conjunction with the '10 GFE. Most of my clients actually prefer the IFW because the form is more familiar to them. Newbies don't know the difference and it gives me an opportunity to educate them. I'm trying to stay positive and make lemonade out of a great big lemon.

I do not think they want to help the consumers. They want to make things harder and more difficult.

Sean....good point indeed.

Damon....all your points are so well spoken. Perfect examples of the mess of the process.

Gene....absolutely.

A simpler approached would have been to have a zero tolerance as it relates to lender fees. The other fees are third party which the borrower should have a right to shop for, just as they have the right to shop for the lowest rate and lender fees.

Larry, thanks for your spot on post. Everyone above has already said everything that can be said about the worst lending disclosure I have ever seen.

I think Barney Frank and his pet Gerbils put this GFE together one weekend they were high on Chris Dodds weed. I think I see a wabbit, I think I see a wabbit,

Michael

The form is one more attempt by the banks to eliminate broker competition. They've tried for years to put the little guys out of business. How is taking away consumer choice a protection?

Great post... what i would like to know is what's the solution??? Thoughts would be appreciated... I just have resided myself to block out the "doom and gloom"

IT'S TIM FOR SOLUTIONS TO COMPLAINTS!!!

It's much more confusing than before. You almost have to ignore pages 3 and 4 entirely if you don't want the consumer to freak out.

The first presentation I attended by a title company took pretty much the position of your post. Then I attended a 2nd presentation by a major mainland lender who seemed to think it was just fine. I hope buyers don't feel as confused as me!

Larry, EXACTLY!!!!!!

"The government should have prosecuted and punished those who were criminal. They didn't do so until there was a public outrage. Now, as a result, the government is punishing the industry, and, as a result the consumer who is supposed to benefit as a result of the new legislation."

I have a closing tomorrow where the Buyer has all the Title insurance on THEIR side even though the Seller is paying it. They have a credit on page 1, but why do it that way? Prosecute the criminals and leave the rest of the industry along. Those few sentences are the essence of what's gone wrong that caused this crazy change.

FEB

2010

All I know is that my first closing of the year was delayed 5 days because of the new GFE! Lender made a big mistake which required us to wait 3 business days plus the weekend! Furniture delivery had to be cancelled, my buyer was a transferree in a hotel and had to go back home. It was not fun!

One big flaw in the plan for consumers being able to "shop and compare" is that they take a ding to thier credit score everytime they go to a different lender and their credit is pulled. Until they make it not a crime to have your credit pulled when shopping a loan, they are really missing a huge key in the quest for the consumer being able to check out different lenders. Hopefully the issue will be addressed if it hasn't been already.

ONE piece of good news for consumers is that they can and should shop without fear over credit dings.

See myfico for the nitty gritty, but I think it is either 30 or 45 days on the new model where all of the mortgage inquiries are treated as one. I think it used to only be 14 days.

Consumers can and should shop around more than ever before. In 2003, everyone had roughly the same rates, fees and products. That's not the case today. Fees can vary by 150-200% from lender to lender.

As with anything new, there will be a learning curve. As with anything at all, there will be people who abuse it. That's why we have to have rules and regulations to begin with. There's always someone out there who would rather spend time trying to circumvent something or get something illegally rather than put their intelligence into working for the common good.

The old Good Faith Estimates were anything but good but they did require a lot of faith!

Fantastic article. The knowledge of technical details of the lending industry, how it dovetails with real estate agents, and most of all how it relates to our mutual clients' lives was great.

Finally, for the perspective of what that looks like from the clients' mind on out-of-pocket costs and the used-car-sales comparison - that is priceless, and well pointed that we fight that image constantly already. We do not need any consumer tools, however well intended, that perpetuate that hostile impression.

Every great lender and Realtor I work with has the intent to succeed massively by virtue of serving the clients' priorities first in a true fiduciary manner. The new GFE seems counter-productive to that if taken at face value.

Thanks again for a great take on this new document!

I bet the people who made up the focus groups that HUD tested the the GFE's andHUD's with were an interesting bunch. I doubt any of them had ever bought a home and had the first clue on what questions to ask. I have not had one borrower yet who didn't want to know what their total payment and cash to close amounts would be. The new GFE, of course, shows neither of those amounts.

I'll be so glad when all the tinkering is over and we can hopefully find an honest and truthful process to rely on in place. Thank you Larry for laying out this information in such a forthright manner. It will be useful in understanding what it really going on.

FEB

2010

You are preaching to the choir. Totally agree.

MAR

2010

Any chance of all of us mortgage brokers to start faxing to HUD with our reasons why this form sucks.

MAR

2010

I love how you get right to the point. I feel sorry for all o us to explain this to our clients!

APR

2010

Lenders have only four weeks before HUD starts enforcing the new RESPA regulations that took effect January 1. That means they will be penalized if they fail to provide binding Good Faith Estimates and use the new GFE and HUD 1 forms..

Yet four out of five originators are having trouble complying, according to a recent survey.

This week ClosingCorp, owner of Closing.com, the most comprehensive site on the Web for closing services, is launching SmartGFE.com, a new service that accesses live rates from thousands of providers and is backed by a compliance guarantee. If a lender who is covered gets fined, ClosingCorp pays it.

Check it out at http://www.smartgfe.com/ .

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Larry Bettag Illinois FHA Specialist

Saint Charles, IL

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Larry Bettag - Cherry Creek Mortgage

Address: 40W310 LaFox Road, Saint Charles, IL, 60175

Office Phone: (630) 524-9677

Cell Phone: (630) 417-7172

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¹ “Let not your heart be troubled; you believe in God, believe also in Me. ² In My Father’s house are many mansions; if it were not so, I would have told you. I go to prepare a place for you. ³ And if I go and prepare a place for you, I will come again and receive you to Myself; that where I am, there you may be also. ⁴ And where I go you know, and the way you know.”
(John 14:1-4, New King James Version)

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It's Official, the New Good Faith Estimate Hurts the Consumer and the Industry!

The New Good Faith Estimate is causing real pain to

The Consumer and;

The Real Estate Industry

THE CONSUMER

FREAKS THE CONSUMER OUT...

OUR INDUSTRY

Normally I'd say that the Jury's still out, but in this case, the jury has returned, really quickly. The law has good intent, but the results? I'm sorry, but the results of this bill is a resounding guilty.

If you choose, you can find me here:

#1 THE BORROWER - WE'RE NOT BEING TRUTHFUL WITH THE BORROWER WHEN WE DISCLOSE COSTS THAT ARE THIRD PARTY COSTS THAT AREN'T THEIR COSTS. THAT'S A MAJOR PROBLEM. THAT'S NOT TRUTH.

#2 LENDERS - WHY SHOULD LENDERS EAT FEES SUCH AS TITLE INSURANCE OR TRANSFER TAXES THAT THE SELLERS PAY FOR WHEN THE BORROWER DOESN'T PAY FOR THEM AND THE LENDER HAS NOTHING TO DO WITH IT?