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128 Comments on It's Official, the New Good Faith Estimate Hurts the Consumer and the Industry!
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.
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?
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.
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.
You are preaching to the choir. Totally agree.
Any chance of all of us mortgage brokers to start faxing to HUD with our reasons why this form sucks.
I love how you get right to the point. I feel sorry for all o us to explain this to our clients!
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