The recent mortgage and real estate troubles have sparked all sorts of efforts by the federal government to update existing rules and regulations governing housing transactions. In all honesty there certainly is some room for that, but there also were many other reasons to this ugly mess. In the spirit of doing something the Department of Housing and Urban Development, or HUD, burned the midnight oil for months and now it has released a new set of rules.  

Actually, what it did was to some degree revise RESPA, or Real Estate Settlement Procedures Act, that has been the benchmark for home purchase transactions since the 1970's. The purpose here is to give borrowers clearer information about the loans they are signing for. If that process can be simplified it works better for everyone; buyers, mortgage consultants, real estate agents, title. Everyone.

One of the main achievements of this revision is the new and improved three-page good faith estimate, the famous GFE. It supposedly puts in plain words interest rates, lender fees, possible prepayment penalties and potential monthly payment increases in case of Adjustable Rate Mortgages, or ARMs. It'll also curb to 10% that some fees can go up from the original quote. Mortgage brokers and lenders are advised to begin using these new forms by January 1, 2010.

Any time a prevailing practice can be improved is a good thing. The intention of HUD is commendable, no question about it. There is one big flaw in this undertaking, though. HUD has no legal authority to enforce these new rules. There is no legislation backing them up. HUD merely counts on federal and state regulators to demand adherence from the institutions they oversee. Well, this appears to be more wishful thinking than anything else. What is likely to happen is that some states pursue this directive with more punch than others. Consumers in states with a lax attitude toward this will see very little progress in the information they get during the lengthy mortgage application process.