The first thing you will notice about the GFE is that it is totally redesigned. It's not just Windows Vista with a new name it is actually a different set of documents! Easier to understand? Let's see:
First section Got that first sentence - the average borrower will skip right over the further information blah blah blah.
don't you know they refer you to page three ... ya, okay - so there's no shopping cart. Oh CHART. Ya, you want ME, Mr. Borrower to fill this out? I'll just trust the bank - after all they are HUGE - they wouldn't lie to me. And they have been so kind to provide their competitor's costs for me right here online. Where do I sign?
#1 uhm this interest rate is good through ... heck, is it even locked yet? It's good through about the time we hang up the phone. You want every loan locked at application time? Talk about firing some loan officers! (I wonder if people realize that locking a loan means the lender will be paying the daily interest on that amount of money whether or not the loan closes?) #2 All other settlement charges? Uhm okay that's a given. #3 "After you lock your interest rate" .... infinite loop with #1 #4 that would be uhm 0?
- I have my tongue in my cheek by the way -
So here is what I do like about the new GFE on the front page (A) there's no TIL - it is on the GFE (B) I do believe it will make it easier to explain to short attentioned borrowers (C) There is no space on there for YSP (come on! This is either really good for customers because it won't confuse the crap out of them or really bad for customers because it means on 1/1/10 there will be no YSP - yikes.) (D) It has a tally column that will let people separate numbers from gobble-de-guk (E) The tally columns have bottom lines just like real people do!
And the HUD1
Probably the best change is that it has the line numbers from the GFE to match up GFE numbers with HUD numbers. Of course if you are lucky and get wonderful borrowers like mine they will want forty-eleven GFE's to match the umpteen houses they are looking at so they are bound to show up at the closing with a GFE for a $199,000 loan to close on a $349,000 loan and then go berserk because their payment and closing costs doubled. (I kid you not, this WILL happen.)
All in all I think the changes are good. I still don't think they are going to save the ignorant from the unscrupulous but that's not my job. I'm not unscrupulous and I actually take the time to explain everything in painstaking detail to my clients ... and probably yours too.
THE OPINIONS IN THIS COMMENTARY ARE STRICTLY KEN COOK's PERSONAL OPINION AND NOT REFLECTIVE ON ACTIVE RAIN, NOVATION MORTGAGE, or ANY SPONSOR OF THIS WEBSITE.
EDUCATION BEATS LEGISLATION EVERY TIME. Get your clients, friends and family members to a LENDER RUN home mortgage seminar as soon as possible.
Ken... question, I know of the changes, but you said they went into effect now? When is now? Is that just for Georgia now? Nationally now? Will it take months or a year until all lenders are on board? lol
I didn't click onto your links as of yet. I will do that soon. But in regards to rates locked and such... I will be collecting a lock-in fee, which is refundable. I will not play along with the public on this one. If you want a rate and want it locked in, pay up front. I think gov't can hurt our business at times. Those states that don't let you coolect any fees up front other than the appraisal fee, shame on them. I need to protect my work since I am ethical and play by the rules.
Jeff - sorry, did not mean to give any impression this is now - this is efective January 1, 2010 and I will make that better known in the post - thanks! (In the Utterli audio I said people better start learning about them now.)
Ken... no problem.. I wasn't going to drop and roll over anyhow, not that quickly.... I took a quick look at the 3 page good faith estimate. What a joke... I think I might be writing a post on that soon and blasting someone. I don't care for the bottom part of page 3... call me sometime.. thanks, jeff
Ken, Do you really think that it will take effect 1/1/2010? I recently attended a meeting as an introduction to the new GFE. I have a few problems with the form and also consumers comparison shopping. I suspect we will see a number of lawsuits that will delay an change.
Here are a few of my concerns
1) No where on the GFE does is show the funds needed by the borrower to close. 2) The adjusted Origination Charges has nothing to do with Closing Costs when a Broker is used. (Note: I fall into the Banker Category so not an issue for me). This is because any YSP must be added to any fees collected by the lender. 3) On the subject of YSP, Because there is Zero Tolerance in "Origination Charges" this would mean that the broker would have to lock the loan with a lender before they issued the GFE otherwise it would have to be reissued when the loan was locked. I believe some brokers float loans therefore would they be in violation if they collected an appraisal fee before the loan was locked? 4) So far I have not see a booklet similar to the "Guide to Settlement Costs" that is used with the current GFE's 5) Unless the lender/broker requires the use of Title/Escrow Company and their services, the broker/lender is can underquote most of these items. Yes there is a 10% tolerance on some items, however not on the total. 6) As stated in #5, the under quoting of fees/charges in not solved unless the lender requires the use of a provider. 7) Because buyers enter into a Contract with the Seller. I can imagine a number of suits if a buyer wants to select a Title or Escrow service not listed in the contract. 8) Some items that must be included in Settlement Costs may not be items normally charged to a buyer based upon local contracts language. Here in Northern Ohio, typically a seller pays the Transfer Tax with the County. Based upon the Q&A, this needs to be quoted to a borrower regardless of who is paying it. 9) In the Q & A, HUD uses Generally and Normally charged to a buyer. I have seen no definition of Generally and Normally. Typically one group of contract divide charges one way, HUD Contract and REO contract are different. Without a definition of Generally and Normally, I see issues. 10) As stated in #5 & 6, then new GFE can be understated and for the purposes of comparison the "Total Estimated Settlement Charges" is the number the document instructs consumers to use to compare different quotes.
These are just my opinions and I welcome feedback on my concerns.
Tim this post was originally written on November 12, 2008 and, as you are well aware, hardly anything is the same as it was back then. Your list is good and those are some of the topics that we have discussed and seen around the net. You bring up some good angles especially with #9 which more or less echoes the ambiguity of the documents. Thanks for your comments!
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Ken.
Thank you very much. I'm hosting a financing seminar tomorrow and these will make a very nice hand-out.