After almost two years since the new Good Faith Estimate (GFE) and Truth In Lending (TIL) have gone into effect, Washington is coming to the realization that everyone in the Lending Industry came to the minute that the revised forms were unveiled. The Lending Industry has been stating for almost two years that these forms do not do what they were meant to do. In fact these two forms not only fall short of what they were intended to do, they may even be accomplishing the opposite.
The reasoning behind the new GFE & TIL was to bring about more transparency. So the new GFE went from a one page document to a three page document, and the TIL from a one page document to a two page document. The TIL may have actually moved closer to accomplishing the intent of the document, but it still fell short, but at least it was a step towards more transparency. The GFE on the other hand was a completely different story. Here are some of the reasons why:
- No where on the form is the Loan Program Listed (it was on the old form)
- The total monthly payment (principal, interest, taxes, insurance, & MI) is not disclosed. Only the principle, interest, and if applicable, MI are disclosed. Borrowers want to know what their total monthly payment is going to be and not just the principal, interest, and MI (the total payment was disclosed on the old form)
- Many of the fees are not individually disclosed, but grouped into one total (they were all individually listed on the old form). Example:
- Lenders Fees are combined and given as one total
- Title Insurance and Attorney Fees are combined and given as one total.
- Escrow for Tax and Insurance are combined and given as one total.
So now Washington has finally come to the realization that if they want more disclosure and transparency, that they need to talk with, and listen to the advice of those who work with these document daily. The new effort is to combined the GFE and TIL into one document, and to clearly state, and provide the transparency that was intend with the present documents.
The drafting of this new document is underway, with hope to roll it out in the near future. I for one am looking forward to seeing what it looks like, and will reserve judgment until I see it. But if the points that I made up above are address and correct, this documents will make a marked improvement to finally start to provide the transparency that is long over do in the Lending Industry.
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