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Good Faith Estimates - Knowing & Understanding the Power of the paper!!!

By Jeff Belonger

Mortgage and Lending with Social Media - Infinity Home Mortgage Company, Inc

May 19, 2009 03:58 AM

Good Faith Estimates - Extremely important message below!!!

If you are a consumer looking to purchase or refinance, this is a must read. It could cost you thousands if you don't pay attention. This is not a threat, but a warning from someone that has over 16 years of experience in the mortgage industry.

When shopping for a mortgage, even if shopping with more than 2 lenders, you want to get a good faith estimate from everyone that you speak to.

Red Flag about good faith estimates

So, here is my pet peeve. This is a major red flag - if you speak to a loan officer, on the phone or in person, and they didn't offer you a good faith estimate, don't walk, Run!!!

The Good Faith Estimate is an over abused term and can be misleading. If the loan officer qualifies you for a mortgage, no matter if its a FHA loan or a conventional loan, you should receive one in a few hours. In reality, if the loan officer qualifies you and tells you a rate, a payment, and your total costs, they should be able to give you that good faith estimate in a matter of minutes. Think about it, they had to do this already in order to give you those figures. There is no excuse. Sure, things happen, but just being busy is not good enough. Unless they specifically tell you that they will give it to you the next day. This can happen, but other than that, if they dont communicate this with you, no excuse. And this could be indicative to how your loan process will go.

Let me ask you this. If you are shopping for a car, don't you want to see your payment, interest rate, and total costs? I know I would. If you have to keep asking for a good faith estimate and it's been 3 days, major red flag.

Overall, it doesn't matter if you are applying for a FHA loan, a conventional loan, or any other type of mortgage. If you have to beg for a good faith estimate, you are just asking for trouble in most cases.

THE GOOD FAITH ESTIMATE

Good faith estimates

So, what is a good faith estimate? Its an estimate of all your costs associated with buying or refinancing your home. But here is the catch. There are some costs that are known costs and not just estimates. These would be the lenders fees. The lender fees are all fees that are under lines 801 to 823. I enlarged this section below for you.

good faith estimate section

Three things that you want to look for when you first look at your GFE.

Look at the loan program and make sure this is the program that you want. If it was an adjustable, it would say differently. This would fall under the term of the loan.

Look at the mortgage rate. Make sure this is what you discussed when speaking to your loan officer. (Up top, middle of page, yellow highlight)

The 3rd issue are the fees. As I mentioned above, everything in section 801 to 823 would be the lenders fees or anything the lender is going to charge you. (left hand column with highlighted items) Don't ever be fooled if one lenders fee is higher than the other. You still need to compare the mortgage rate.

(Speak to your tax accountant to make sure what can be written off and what cant. But typically just the points can be written off)

What not to do when comparing good faith estimates.

Don't compare total fees at bottom of the GFE, which I will explain why below.

Just dont compare the APR of the loan. (explained here)

Conclusion: Again, don't always shop and ask for total fees. Compare the lenders fees the most. In regards to your escrows, each state is different. I highlighted this in red. Your property taxes are paid either quarterly, twice a year, or once a year. I have seen some loan officers sometimes not show enough for your escrows in regards to the property taxes. Its very easy for a loan officer to say at closing, ˜these aren't my fees, so all I can do is give an estimate. Word of advice, yes, its an estimate. But I have seen some loan officers estimate less to make the overall cost look cheaper. And just be careful, because some of these figures are not worth the paper that they are written on. It's just that, an estimate based on good faith. Make sure that you always speak with a Mortgage Professional. And don't shop yourself right out of the market.

One other thing, if you have 3 good faith estimates in front of you, always go back to the person that you had the best feeling with, that you are comfortable the most with, and share the other 2 with them. Just don't run to the person with the best rate and or fees. I always like my clients to come back to me no matter what. I might be able to point something out to them. And this next topic must be discussed when receiving a GFE, otherwise this Good Faith doesn't mean squat. Locking or floating my mortgage rate !!!!

Lastly... if you are going to shop rate & costs, ALWAYS shop on the same day !!! Rates change daily...

UPDATE : The laws in some states are different, when a good faith estimate must be given. In Paul McFadden's example, comment #15, they have 3 days from the day they pull credit. According to RESPA, the lender has 3 days from the time of application. When just casually shopping, there is no time period or law.

In regards to my example, with the rate and points, this is just an example. Besides, not all rates or good faith estimates come with points. And I don't charge fees. But there is a cost of doing business with any lender or bank out there.

- FHA Loans - USDA Loans - VA Loans -

- Energy Efficient Mortgages -

- Conventional Loans - 203 k loans -

- Mortgages -

Experience & Knowledge at its BEST !!!

_________________________________________________________________________________________

For more information on FHA loans, please go to this link. The FHA Expert

For more information about the 2009 Tax Credit for First Time Homebuyers : 2009 Tax Credit

For important mortgage insight to watch for, please read : Consumers need to be aware of these Red Flags !!!!

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Ken Cook

Content, coding, marketing, host. - Marietta, GA

Content Marketer/Creator

Jeff, you should know better than to dance with drunken monkeys. Have you not been listening? (wink wink) First of all I just beat Wells Fargo AND Quicken Loans on an FHA streamline refinance. I beat them on closing costs, loan amount and interest rate. I did it as a broker, not a lender, and I put the YSP in my pocket. The funny thing is the moron operator/order taker at Quicken told the borrower I would lie to her and she would end up paying more at the closing table - that, however, was the lie. She paid less at the closing table, lowered her payments even more than either of those two companies offered her, paid a lower interest rate and I made less profit than I would have had I acted as the direct lender (which I could offer a better rate on this one as a broker so I did). So the anti-YSP crowd and all of that ilk are always wrong, will always be wrong, and there's nothing you can do to save them. They are blind by choice not by lack of knowing. As both lender and broker I fully understand the power of being able to hide my SRP and being required, by federal law, to fully disclose my YSP.

SHOULD BANKERS ALWAYS GIVE THEIR SRP TO THE BORROWER? Can YSP be abused? Hard to abuse something the client sees in black and white and agree to at the closing table. NO BROKER HAS EVER APPROVED THEIR OWN RATE, PERIOD. No lender has ever exposed their full income to the borrower. So it's the truth, people like you and I, against the less than 1/10th of a percent of some blind, arrogant, haters. But then again, I'm old and have way too much experience pleasing borrowers, getting referrals, supporting Intelligent Thought, running a business, providing for employees, paying thousands of dollars a year in licensing fees, etc., to play this stupid game that harms the borrower.

Upfront my a$$. Nobody is more upfront than me - NOBODY. That's just another gimmick.

Sheesh, it took me a half hour to format the text. These people act like bankers don't make money on the interest rate. When they believe such nonsense they are fooling only themselves. They act like bankers don't set rates to make profit/commission. Let the dog sleep. Apologies for hijacking your blog.

May 20, 2009 05:30 AM

Darin Osenberg

Funky Quail Vintage - Nashville, TN

GREAT JOB KEN! Geez, you would think this is YOUR blog! Just kidding!

You know team, there are just people in this world that will never get it!

It would not surprise me if this Catilyn person, or any others like her, are selling SOMETHING ELSE TOO! Like, Noveau Rich, AMWAY, or some other pyramid scam! SORRY, if I offend anyone...no, not really! You talk about wanting to be UPFRONT...I dont think brokers could BE MORE upfront than they are being today!

Jeff, I actually lost a deal while in Tennessee, to a lender (uh hum...) ...that is charging the customer 200 less in closing costs...due to a lender credit! I got a copy of the good faith estimate, and it doesnt have the escrow correct, doesnt have the funder fees on it...and I am wondering what else will come up later..SADLY at that point, it is TOO OOOO LATE, and the customer is on the hook!

With all due respect to everyone on this blog...THere are really three ways to sell loans!

1. AT PAR, With either a fixed or flat fee up front. IF THE CUSTOMER HAS MONEY DONT FORGET!!!!

2. With YSP, and no up front charge...Perfect for people with little money, or closing cost credits.

3. A combination OF THE FIRST TWO!

That's it!

None are really and truly better than the other IN GENERAL! THEY ARE ALL CUSTOMER SPECIFIC!

nice job!

Bucky

May 20, 2009 07:27 AM

Anonymous

Holli

Jeff, I am a fan of your blog! Could you please keep us updated on the Homebuyer Tax Credit situation? Your blog saved me with my clients who were excited about the "Downpayment Assistance that was gone in a day!" Thank you for your clear information. Holli - Old Republic Title in Long Beach, CA

May 20, 2009 09:18 AM

#47

Anonymous

Caitlyn Coyle

Mr. Belonger wrote: you still don't fully understand the whole issue behind YSP and bankers vs brokers.

I most certainly do understand it--thoroughly. If you quote 1 point origination, the consumer understandably thinks that's your only compensation. If you don't credit YSP/SRP, then, in fact, you're receiving MORE than 1 point origination, and the consumer paid for your back end compensation through an above par interest rate.

Even if your end price to the consumer is better than someone who credits YSP/SRP, all that means is that you could've offered your customer an even better price, but you put the back end compensation in your pocket instead. In other words, you shopped for better terms for your benefit, not your customer's benefit.

The GFE that you embedded in this blog has a space for YSP--which, of course, is shown as POC on the final HUD-1. What do you say if your customer asks, "What does $1,200 POC mean?" Or do you hope he or she doesn't notice?

May 20, 2009 11:13 AM

#48

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

I want to apologize to everyone else that I have not responded to yet. But Caitlyn keeps leaving comments that I feel needs to be addressed now and not later. And apparently I am not the only one that feels this way. Those commenting and trying to explain to her the differences, I have great respect for and are some of the better loan officers in this industry. Again, I will try to get back to everyone else tomorrow.

CAITLYN.... no, you actually don't understand this as you think you do. You are only assuming. Let me try to explain it another way. I will tell people that I am not the cheapest. But I will also be less expensive than the average. What you get from me is honesty, integrity, extremely knowledgeable (someone that will work out many scenarios)... did you read any of my comments, replies to you? On how I have competed against a few upfront mortgage brokers who was giving the borrower the wrong type of mortgage that was more expensive in program. Meaning, the person buying a home for their son, being told to go the conventional route. Well, I not only saved them a 1/2 percent, but a huge difference in down payment. If they would have taken your advice, it would have cost them more, even though they "might" have been saving because they went with an upfront mortgage broker.

Did you not read Robert Ashby's comment? Or a few of the others? You only know what you know, because it's what you want to believe or because someone told you so... or because it's what you read. Do you know that half the things on the interenet are wrong or incorrect? That is a reality, and it's obvious that you just want to argue your point. But you are wrong about my pricing and my services.

Lastly, you didn't read my blog. I "stated" that the good faith estimate in my blog was 'just an example'. It was not comparing to any other lender or upfront mortgage broker. This alone tells me that you actually have no clue on how all of this works. Secondly, as I told you once before, I am a mortgage banker, I don't disclose yield spread. So # 824/825 will always be blank. Again, proving to me that you have no clue in what you are talking about. Again, you just want to argue this point, because you can see that it gets me upset.

Here is why I get upset so easily. Because I do believe that I am in the top 5% of all loan officers, when it comes to integrity, honesty, being extremely knowledgeable, and one that takes pride in what I do. This is not a job for me, but a profession. Many loan officers can't say that, even Upfront mortgage brokers. Again, read Robert's comment. And I get upset, because it's people like yourself, that will tell others about this, thinking that you are an expert on this topic. You my friend aren't. I will charge less, just like a upfront mortgage broker, but my service is going to be average. You won't get me at night, or on the weekends. I will be slow when it comes to responding, etc, etc. And I know this for a fact, because as I mentioned, I have dealt with many borrowers in the past, that ended up going with me, just because of these same reasons mentioned. Hey, I am not saying that all upfront mortgage brokers won't give service... this can happen to anyone. And lastly, I never said that you didn't get bad service. You had a very good experience. It's your overall tone and comments that make it sound like we all should be like the upfront mortgage brokers. AGain, go back and read Robert's comments.

All I can say this, I don't think you have or even care, because you only come back to reply to me, and to nobody else. Gee, I wonder what that says? And I think I have an idea, a very good idea to as why. In any case, I have given you enough attention now, and I have responded to your comments. But this is the last time that I will respond to you, no matter what you say. Because you think you know it all, and you aren't even in this business. I need to get back to others and reply to their comments. So thank you for your comments, but I won't be replying back to you from here on out. thanks

May 20, 2009 12:02 PM

Anonymous

Caitlyn Coyle

Mr. Belonger, your blog entry isn't about "honesty, integrity, extremely knowledgeable," it's about the GFE. What I want to know is, do you disclose back end compensation to your customer, or do you let them think that 1% (or whatever you quote for an origination fee) is the sum total of compensation you're receiving for your honesty, integrity, and extremely knowledgeable representation?

(If I replied to everyone, I'd be on this blog all day and all night. I'm really only interested in what you, the blog author, do when you quote a rate that bears back end compensation. Do you insert it in the appropriate space on the GFE?) (Y/N)

May 20, 2009 01:10 PM

#50

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

CAITLYN... I lied, I said I wasn't going to reply. But this is the last time. Go back and read what I wrote. You are out of line now,because you want to read what you want to hear. Let me make it easy for you. I don't have to disclose it, do you understand that? I am a banker. I thought you knew it all and understood all of this. And you keep talking about points, 1 pt. This was an EXAMPLE.. besides, you are all over the internet, arguing with many authors, just to disagree. End of story and that's it. For any other answers, please read my comments. I wrote enough to tell you the real deal, but you again want to ignore much of this. I don't have time for this anymore. thank you.

May 20, 2009 01:20 PM

Ken Cook

Content, coding, marketing, host. - Marietta, GA

Content Marketer/Creator

May 20, 2009 03:04 PM

Anonymous

Caitlyn Coyle

Mr. Belonger, it's OK with me if you don't want to disclose total compensation from all sources. The consumer knows the realtor's compensation, escrow/title's compensation, appraiser's compensation, etc., but if you don't want to disclose--even if you don't have to--EVERYTHING you make, who am I to tell you that you should?

May 20, 2009 04:15 PM

#54

Thesa Chambers

West + Main - Bend, OR

Principal Broker - Licensed in Oregon

Jeff - I told Lisa Hill and I will tell you... thank you - I was just trying to explain to a buyer the importance of a good faith estimate... and now I have this to forward to her... thanks

May 20, 2009 05:19 PM

Anonymous

Jack Guttentag

I would like to add my two cents to this exchange about YSP. In my view, if a
borrower retains a loan originator with access to multiple loan sources to act as his agent in shopping
the market, in exchange for a fee agreed-upon in advance, that fee includes any
YSP collected by the broker originator, who has a duty to report what it is. That is the UMB
model. If a borrower does his own shopping, and knows how to avoid all the
pitfalls involved in developing comparable price data, YSP is irrelevant.

Nonetheless, I believe YSP should be disclosed, for two reasons. The first is
that not many borrowers are sufficiently effective shoppers as to make YSP is irrelevant to them. The
second is that the cost of disclosing YSP to those who don't need it is small, whereas the cost of not disclosing it to the larger group who do need it to protect themselves against being over-charged by their "agent" is large."

The argument is applicable to both brokers and corresondent lenders, though not to portdfolio lenders who have no YSP.

May 20, 2009 06:22 PM

#56

Jeff Belonger

Social Media - Infinity Home Mortgage Company, Inc - Cherry Hill, NJ

The FHA Expert - FHA Loans - FHA mortgages - USDA loans - VA Loans

JOE.... . I would totally agree with that statement, as I mentioned in this blog and many times over. Yes, there will be many that will disagree with me. But I think it's the best way to compare true apples to apples. thanks

BILL... . thanks for that polite compliment. I just can't stand incomplete and bogus good faith estimates. I know you wouldn't either, but this will never change. All we can do is just educate others on one of the most important issues, in my opinion. thanks

JIMMY.... yes, Lenn makes a great point, I wouldn't expect the realtor to know it all, but just to have a good idea. The problem with that though, is that if you don't know the program and or the pricing hits... such as on a conventional loan with 20% down and credit scores of 635... there will be a 3 point hit for this. Most realtors aren't going to know this. And you might give the borrower the wrong opinion and or advice then. Just food for thought. thanks

SCOTT..... yes, Lenn did stir up a hornet's nest.. I truly agree that first time homebuyers don't usually know how to read these. But how can it be easy when many loan officers don't even give you a copy... or that they give you a bogus GFE. In any case, thanks for the comment.

WILLIAM aka Bill.... . I would disagree, that the good faith estimate is useless with out the truth in lending disclosure. You can manipulate the TIL, the truth and lending disclosure. The days of interest... you can leave out certain items... etc, etc. It's not hard to look at the rate and fees. Besides, you have mortgage insurance in the TIL and it's based on 30 years. How many people keep their mortgage for 30 yrs? Just food for thought.

In regards to my example.. as I stated, it's just an example and it's not about my market. Besides, I do loans all up and down the east coast. Many people are doing zero point loans. To me, it comes down to my clients goals and what would make sense.

Overall, I agree, it doesn't stop loan officers from showing you the cheapest GFE, and then change it on the borrower. AT the end of your comment... thanks for the feedback, I appreciate that.

REBECCA.... . it's good to hear people that agree with this. :o) Seriously, I just love educating, even though some of this is my opinion. In regards to your question, yes, I will do a blog on that. Many might not like it or agree with it though... thanks

CARLA.... . it can be a compliance issue, depending on what you have done and the stage in which you are at with the lender. And yes, this topic seems to be very timely for so many. thanks

May 21, 2009 07:02 AM

Sharon Alters

Coldwell Banker Vanguard Realty - 904-673-2308 - Fleming Island, FL

Realtor - Homes for Sale Fleming Island FL

Jeff, thanks for a very informative post. As to the person who tried to hijack...well, let them go write their own post and see if it can get any attention on its own merit.

More than once, I have had to ask lenders - especially some at new construction - for a GFE for my buyers. And they stall! Which makes me even more determined to get one. I won't let them off the hook until they comply. Don't know what would happen to a buyer without representation, but I'm guessing they wouldn't end up with as competitive a loan. If a lender won't give you a GFE, definitely Run, Run, Run!

Sharon

May 22, 2009 04:34 AM

Bill Gassett

RE/MAX Executive Realty - Hopkinton, MA

Metrowest Massachusetts Real Estate

Certainly good advice Jeff. I do not know of too many people that like financial surprises!

May 23, 2009 06:00 AM

William J. Archambault, Jr.

The Real Estate Investment Institute - Houston, TX

Jeff,

I don't like the "T in L" the numbers are always a distortion of any thing the consumer will experience.

On the other hand, the "T in L" is the only place wherev the terms of the loan are discribed! I said: "with out it you can not be sure that you are comparing apples to apples!" Comparing the cost of a 30 year fixed rate loan to one that "balloons" or is only fixed for a short time often happens if you don't receive both forms.

In reading the comments it seems that the opponents disdain for YSP/SRP/GROSS-PROFIT, extends to the very consumers they claim to protect! The fiscal best interest of the consumer seem to be irrelevant to claim "I'm better than they are, because I say so!"

Bill

May 23, 2009 06:47 AM

Vicki Pedersen

Pedersen Real Estate - Riverside, CA

Providing Exceptional Real Estate Service

Jeff, Your post was terrific. I'm a fan of your posts and the valuable information that you provide to borrowers and to Realtors. I'm bookmarking this. Thanks.

Jun 29, 2009 04:54 PM

Shannon Ziccardi

"A Quick Note" ...in Tennessee! - Clarksville, TN

"A Quick Note" Mobile Notary ...in Tennessee!

I see things from the signing table perspective. It seems most of those commenting here believe that the GFE is always provided prior to closing. I actually find that to be humorous. Of the over 6,000 signings that I have conducted personally, the vast majority had borrowers signing the GFE while at the closing table-usually having been faxed to escrow just prior to the loan document signing and moments before any such signing takes place. Only on a very rare occassion has the borrower admitted to having seen the GFE prior to that time. Further, any resemblance between the GFE and the most current Estimated Closing Statement is purely coincidental. Remember, the GFE is Mtg Broker/Lender produced using "Ball-park" numbers. The Estimated Closing Statement is produced by Escrow having researched, updated and confirmed those numbers. The faces of "sticker-shock" I have seen are many. While the faces of the fully informed borrower have been few.

Aug 30, 2009 06:53 AM

Tom Burris

NMLS# 335055 - Baton Rouge, LA

Texas/Louisiana Mortgage Pro - 13 YRS Experience

My goal is to have a GFE within $100 of the HUD1 final numbers. I almost always get that accurate unless the Hazard Insurance is off by a bunch.... and I do mean a bunch, because I usually guess high on that.

In my career, I have never had a surprise closing number. Except when the seller realtor inserted a $200 rekey fee on one of my FTHBs AFTER final HUD approval. No coincidences here!!!

There is nothing 'ball-park' about my fees either........ They are 100% dead-on accurate. Now, inflated courier fees from title companies or some ridiculously high recording fee sometimes catches me off guard. But not my fees. Not the prepaid interest, not the taxes.

I do agree with Shannon that a lot of loan officers do not know how to prepare a GFE nor do they take the time to be accurate.

Have I been guilty of sending out a 'quick & dirty' GFE for rough numbers? Yes, I have!! Typically this is when the borrower is still shopping for homes and not under contract.

Aug 30, 2009 09:38 AM

Stephen Kappre

KW Hometown - Mantua, NJ

Helping You Home

I'm in 100% agreement with Tom - My estimates are usually within a couple $100 dollars. My fees as a mortgage company are ALWAYS accurate.

Aug 30, 2009 01:13 PM

Larry Bettag

Cherry Creek Mortgage Illinois Residential Mortgage License LMB #0005759 Cherry Creek Mortgage NMLS #: 3001 - Saint Charles, IL

Vice-President of National Production

Shannon....I'm shocked to hear what you say. If that's the case, then you must have atrocious lenders in your community. I mean just atrocious. I would say that this wouldn't apply here in Illinois. These lenders who are so off would be villified. I'm off almost always, but it's intentional. I OVER QUOTE so that the buyer is tickled when they come in with less. The biggest reason is that Illinois offers tax credits from the seller vastly in excess of the months that the lender is collecting. I quote a tax credit enough to wash the up front escrow being collected. Needless to say, I had the issues you talk about twice in my first year in lending....never again. If you serve, serve for the victory. BOrrowers who need to count every penny to get into home, I'll drill down to the penny. Needless to say......if lenders are good, they'll be accurate and work for the benefit to their clients.

Aug 30, 2009 02:22 PM