New Good Faith Estimate (GFE)

The Consumer Finance Protection Bureau (CFPB) has finally announced the date of when the much awaited New Good Faith Estimate (GFE) will go into effect.  After designing and redesigning as well as testing the new GFE for over two years the CFPB has finally determined the new GFE will go into effect on August 15, 2015.  This means we will continue to use existing GFE for another year and half years, unless the CFPB makes provisions for Lenders to implement the new GFE earlier if they choose.  The new GFE will also take on a new name on August 15, 2015, it will be re-named "Loan Estimate". 

I have seen the new GFE and it is a major improvement over the present one, this is a LINK to the new GFE if you would like to see what a complete one will look like.  For once it appears the CFPB has done something right, and I hope an option for Lenders to implement it before August 15, 2015 is granted. 

I have never liked the present GFE, it is three page long, but is less transparent than the previous GFE which was only one page long (new GFE will also be 3 pages).  There are a number of reasons I feel the present GFE was a step backwards from the previous one, and why I feel the new GFE is a major improvement.  For example:

• The present GFE does not state anywhere on it the Loan Program the Borrower is applying for.  The previous GFE listed the Loan Program and the new GFE will disclose the Loan Program as well.
• The present GFE does not disclose the full monthly mortgage payment, it only discloses the Principle & Interest, and PMI/MI, and not the Monthly Escrow payments for Taxes, and Homeowners Insurance in the monthly mortgage payment.  The previous GFE disclosed the total monthly payment (P&I, PMI/MI, and Taxes & Insurance) and so will the new GFE.
• The present GFE does not break down each cost on separate lines like the previous GFE.  The present GFE has two major areas it groups cost together.
  • Attorney Fees, and Lenders Title Insurance are stated as one figure.
  • Escrows for Taxes and Homeowners Insurance are also given as one figure and not broken apart.
• The new GFE will have a separate line for each cost, and no longer group costs together.
• With the implementation of the present GFE Lenders were mandated to provide a Borrower with a GFE within 3 days of having the six pieces of information that the CFPB considers an application.  However, there is no signature or date line on the GFE for the Borrower to acknowledge receipt of the GFE.  The CFPB continues to mandate a GFE be given to the Borrower within 3 days of the Lender having the six pieces of information the CFPB considers an application, but now there will be a signature and date line.

Along with the new GFE a new "Closing Disclosure will replace the present HUD-1 and Truth In Lending (TIL) on August 15, 2015.  I will provide more information on those forms once I have more information on them.

As you can see I am a fan of The New Good Faith Estimate (GFE), and hope it is implemented sooner than August 15, 2015.  I have been very critical of the CFPB, but this is one time I have to admit it appears they have gotten it right for a change.