The U.S. Department of Housing and Urban Development (HUD) has proposed reforms to the regulatory requirements of the U.S. Real Estate Settlement Procedures Act (RESPA).
HUD said by statement in November 2008 that it will require that lenders and mortgage brokers provide consumers with a new, easy-to-read Good Faith Estimate (GFE) that clearly discloses key loan terms and closing costs consumers pay when they buy or refinance a home.
HUD had earlier allowed comments on the Department's proposed GFE form. HUD received many comment letters following the proposal of its new RESPA rule.
HUD made modifications to its original proposal and wants a new page on the HUD-1 Settlement Statement that allows consumers to easily compare their final loan terms and closing costs with those listed on their Good Faith Estimate.
To help with comparison between the HUD-1 and the Good Faith Estimate GFE, each designated line on the final HUD-1 will now include a reference to the relevant line from the GFE.
Other HUD changes are shortening the GFE form from four to three pages and adding instructional section to help borrowers understand their loan offer.
All real estate settlement costs on the new Good Faith Estimate GFE form are to be broken down into three categories.
First: includes charges that are not allowed to change (such as the origination charge and transfer taxes).
Second: consists of services selected or identified by the loan provider such as title services and lender's title insurance. (These costs can increase up to 10% at settlement.)
Third: for services the borrower can shop for, such as homeowner's insurance (these charges are not subject to limits on price increases).
The new Good Faith Estimate GFE and revised HUD-1 are expected to be effective January 1, 2010.
Harrison K. Long, Explore Group Properties, Coldwell Banker Previews.
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