You all know that I am not a fan of government interventions, nor government regulations that are absolutely insane, such as the new HUD GFE. I am all for government regulations that actually do what they are supposed to do, which is to protect the consumer and give them good, solid guidance on how to shop for their mortgages. Unfortunately, the new GFE goes in the opposite direction.

HUD made the announcement last month, and stated the new GFE and HUD-1 Statements would save consumers nearly $700. I have no idea where they came up with the $700 savings, nor am I even going to dispute that. Instead I will point out that while they may save $700 because of the new GFE, they could lose thousands, or more, by doing what the HUD is encouraging consumers to do while shopping for their mortgage. Is that good legislation?

I know, you are wondering just what I am talking about, right? Well, you have all read and/or heard about rate shopping, comparing loan proposals from 4 or more lenders to get the best deal. If you have been reading my information for a while, you know this is a futile way to find the best value and can ultimately cost you much more over time. Well, the new GFE takes rate shopping to the ludicrous level, actually encouraging shopping by GFEs!!!!

"Use this chart to compare GFEs from different loan originators. Fill in the information by using a different column for each GFE you receive. By comparing loan offers, you can shop for the best loan."

By now, you should know that rates can change in an instant, especially in the current marketplace. That has been one of my points explaining why rate shopping is futile. Now, HUD wants you to shop by GFEs? This would be a great joke, except it isn't and will almost guarantee consumers more harm than good.

Why? Anyone whom originates a loan has to take the time to prepare a GFE and, by law, has up to three (3) business days to deliver it to you. Even if you shopped all 4 lenders at the same time, it could still take 3 or 4 days to get your comparison to ensure you are getting the "best deal". Unless you can find 4 lenders that can lock in your rate at the same time and before you sign the documents, which is highly unlikely, the rates on the GFEs will likely not be valid anyway.

Since mortgage rates can change, even if only in pricing and not necessarily rate, in mere minutes, you can only begin to imagine just how much those rates can change while you are waiting to do your GFE comparison. In three days, rates could have swung higher by a full percentage or more!!! I would prefer people rate shopping over GFE shopping any day, even though that is a futile effort as well.

Why did HUD make the changes? It is their effort to cut down on foreclosures and to protect consumers from harmful loans or not being fully aware of what they are getting into. Hey, I am all for that, but is this new GFE doing that? NO!!!

So let's look at what HUD Secretary Steve Preston said and just how true his statements are...

"It has been a long road but today we can finally announce a better way to buy homes in America" (Is this really a better way to buy homes? What about refinances?)

"Consumers need and deserve to know what they're getting themselves into before they sign on the dotted line. (agreed)  After carefully considering the concerns of consumers and the different businesses in the housing sector, we have developed an approach that empowers the average family to shop for the most appropriate loan to meet their needs." (This fails to accomplish this statement. It does not address a consumers needs, rather to try and get them the lowest rate and fees which may actually be contrary to their needs.)

And what about Brian Montgomery, HUD's Assistant Secretary of Housing...

"We have carefully considered the concerns expressed from every corner of the mortgage market in developing this rule. (Really? I rather doubt that.) I am convinced that we successfully balanced the needs of consumers with those in the business of homeownership. (I disagree as they do not address all of the needs of the consumer.) None of us can lose sight of the fact that millions of Americans simply don't understand all the fine print of their mortgages and this, in many respects, is at the heart of today's mortgage crisis." (Let's just discredit the fact that many Americans are facing foreclosure due to lack of financial discipline, which even the government encouraged. Yes, there were unscrupulous mortgage professionals. There were also homeowners whom knew the fine print and did it anyway.)

You can be the judge by reading the press release and reviewing the new GFE. My thoughts are that this is yet another case of the government doing more harm than good for the consumer.