On Wednesday the 12^th ,2008, the Department of Housing and Urban Development (HUD) issued a press release announcing the finalization of its changes to the Real Estate Settlement Procedures Act (RESPA).  HUD has released a Fact Sheet on the final Rule as well as a copy of the new GFE and HUD-1.

For the first time ever, HUD will require mortgage lenders and brokers to provide borrowers with an easy-to read standard Good Faith Estimate (GFE) that will clearly answer the key questions they have when applying for a mortgage including:

     What is the term of the loan?

     Is the interest rate fixed or can it change?

     Is there a pre-payment penalty should the borrower choose to refinance at a later date?

     Is there a balloon payment?

     What are total closing costs?

I don't know what planet HUD thinks we live on, but all of the above is and always has been disclosed both at time of application and again at closing.  Perhaps having all the information on one document will some how make this easier to understand, but what if having all these numbers blasted at one time overwhelms the buyer.  I have found taking all this information and spreading it out during the process of the application seems to stick in there mind better

HUD estimates that by improving upfront disclosures on the GFE, and limiting the amount estimated charges can change, consumers will save nearly $700. in total cost.  If the lender is in the practice of bait and switch, then I can see the average improvement.  However most ethical lenders will have a GFE that is accurate in the first place, and for those who pulled a bate and switch, your days are numbered.

To help borrowers compare their Good Faith Estimate with their HUD-1 Settlement Statement, each designated line on the final HUD-1 will now include a reference to the relevant line from the GFE.  Borrowers will now be able to easily compare their estimated and actual cost in the same manner many commenters have suggested.

Loan originators will be required to provide borrowers their Good Faith Estimate three days after the loan originator's receipt of all necessary information. To facilitate shopping, loan originators could not require verification of the GFE information (income and asset doc's) until after the applicant makes the decision to proceed.

HUD will allow lenders and settlement service providers to correct potential violations of RESPA's new disclosure and tolerance requirements.  Lenders and settlement service providers will now have 30 days from the date of closing to correct errors or violations and repay consumers any overcharges.

Effective date to start this new plan is January 1, 2010.