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New Good Faith Estimate 2010 Form

By George Souto

Mortgage and Lending with George Souto NMLS #65149 NMLS #65149

January 04, 2010 08:28 AM

The new Good Faith Estimate 2010 Form is now officially in effect. This new form became affective on January 1, 2010, and will in many ways change the way Lenders have been doing things. The new Good Faith Estimate 2010 Form will have both a positive and negative impact on both the Borrower and the Lender.

The positive is that the new Good Faith Estimate 2010 Form will now require ALL Lenders to use the same format. In the past it was some times difficult for a Borrower to compare loan costs between Lenders, because the costs were disclosed and broken down differently from one Lender to another. Now everyone will have to do it the same way and use the same form. The new Good Faith Estimate 2010 Form also will prevent Lenders from changing certain costs that are originally listed on the new Good Faith Estimate 2010 Form, I will list these later. The new Good Faith Estimate 2010 Form will also have an impact on the HUD-1, because now what was listed on the new Good Faith Estimate 2010 Form will have to be compared to that actual cost on the last page of the HUD-1. These are all positive changes that the new Good Faith Estimate 2010 Form will have in my opinion.

What isn't positive about the new Good Faith Estimate 2010 Form in my opinion is that it does not break costs down like the Good Faith Estimate Form that I have right now, instead groups costs together in several places. The new Good Faith Estimate 2010 Form will also cause Lenders to possibly not give Borrowers a Good Faith Estimate at the time that they are Pre-Approving a Borrower, because it locks them into certain things that they can't change later. It is good that Lenders can't just change their things, but there are situations that it might be out of their control why a cost changed and now the Lender is locked into what was originally disclosed under a different set of circumstances. For this reason Lenders may now choose to not issue a Good Faith Estimate until they are actually putting a loan into process. This in my opinion will make it more difficult for Borrowers to compare costs between Lenders prior to submitting a loan.

I am going to stop this post at this point, and continue it in one or two more posts this week. What I have found over a period of time here on ActiveRain, is that if you make a blog to long, fewer people read it. This information is too important, and will have such a big impact on Borrowers as well as everyone else in this industry, that I feel I need to present it in such a way that others will take the time to read, and not be turned off by its lenght.

So I hope that those that are reading this blog now will take the time to return and read the continuing blogs on the new Good FFaith Estimate 2010 Form. I promise that it will not be a waste of your time to do so.

Links to the other blogs in this series:

New Good Faith Estimate 2010 Form #2

New Good Faith Estimate 2010 Form #3

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Info about the author:

George Souto is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 or gsouto@mccuemortgage.com

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Mike Wald

Mike Wald, Scottsdale, AZ, mortgage consultant, 480-241-2632 - Scottsdale, AZ

In reading many of the responses, I can still see there is a massive amount of educating that needs to take place. The very first comment made by Lenn is correct, "Just becuase it's new, doesn't make it better".

The new form DOES NOT:

It does not show the monthly payment at all.
It does not show how much the customer needs to bring in at closing.
It does not itemize costs so the customer can see what they are, just lumps them all together.
It does not have a signature line.
The new form is now three pages instead of one.

Good luck to us all !!

Jan 05, 2010 08:03 AM

George Souto

George Souto NMLS #65149 - Middletown, CT

Your Connecticut Mortgage Expert

Christine the confusion has already started :)

Paul I will to, but I still don't like it ........ LOL

Roland, over all yes, but the grouping of costs instead of listing them separately provides less disclosure.

Tonia, thank you.

Pam I am trying real hard to do the same, but .................. :)

Tiffany you are welcome

Andrea, the length on blogs was something I learned real quick here on AR, especially since I have a tendency to move on when I click on a lengthy blog.

Stephen, somethings are clearer, but grouping costs creates new questions.

Lawrence thank you for your input. Having the same form goes a long way to keeping things apples for apples. that is a big positive.

Jan 05, 2010 08:15 AM

Tim Bradford

Cleveland, OH

NMLS 250013

George, I need to give credit to Posted by Benjamin Clark - Exclusive BUYER'S AGENT - Certified Negotiation Expert - SLC, UT for the Graphic.

One fear that I have is Buyers Remorse when they see the Settlement Costs totaled on the New Form. I do not know how you feel with regard to HUD's new settlement cost booklet and the fact only about 5 pages of the 49 pages relate to the GFE. The document deals with many subjects and it is the lenders requirement to give the booklet to buyers. I personally would recommend buyers receive the booklet well before they make an offer on a home.

I would be very interested in seeing the form you(your company) is developing. I will send you an offline message.

Jan 05, 2010 08:30 AM

George Souto

George Souto NMLS #65149 - Middletown, CT

Your Connecticut Mortgage Expert

Cheryl, they are having to guarantee some of the cost without knowing all the information on an initial Pre-Qual and they will most likely not be willing to do that.

Lewis, eliminating low ballers was it's primary goal and hopefully it has accomplished that. Time will tell.

Lenn, you are welcome to hijack my blog any time you have earned that right. Like you I don't like it when costs are lumped together, but that is what this new GFE does in many area's, and even if a Lender wants to break them down, they can't do it on the new form, because they are not allowed to add or delete from it.

Lisa you are welcome

Tony I don't know about that, but we will soon find out.

Ed, you put that simply but accurately :)

Jennifer in some cases it does offer more transparency, but it has less transparency in more places. An example will be two things that I will include in my next blog. No where on this new form is the Loan Type or Monthly Payment shown, and that is not good.

Mike ...... LOL ...... Good point I just made that comment about the Monthly Payment to Jennifer before I read your comment :)

Bill, and some times daily ....... LOL

Jan 05, 2010 08:34 AM

Jack Shull

Affiliated Bank Mortgage Lending - San Antonio, TX

This is going to be a challenging year.

This Good Faith Estimate was not looked at and approved by mortgage and real estate professionals but by beaurocrats who have no experience in our business.

*The total monthly payment is now shown since escrows are not part of this GFE.

*The sum of the closing costs are not disclosed.

*The costs are not broken down fully.

Jan 05, 2010 08:38 AM

George Souto

George Souto NMLS #65149 - Middletown, CT

Your Connecticut Mortgage Expert

Isabel I had not looked at it that way, but it is a point worth considering.

Tom, I guess my point is that they could have accomplished the standardization, which is good, by just having standardized on one of the existing GFE's

Wendi, Tim's comment was very good input

Vanessa, well that is probably not going to be happening any more until the Lenders get a better handle on this.

Jason the is very true, but they don't have to provide one with a Pre-Qual, and don't think they will, at least until they get a better handle on this new form.

Alan, good point ......... LOL

Mark that is going to be an issue.

Susan, we all are going to have to review it over and over in order to get a better handle on it.

Douglas, that and not including Loan Program and the PITI are big concerns with me.

Silvia, yes that is very very true.

Diane, if I ever finish responding to comments I will post it ......... LOL

Jan 05, 2010 08:52 AM

George Souto

George Souto NMLS #65149 - Middletown, CT

Your Connecticut Mortgage Expert

John, yes there is a lot to be said for that ........ LOL

Joetta, the things that are no longer broken down on the new GFE can be disclosed, but not on the new GFE. Lenders are not allowed to add or delete anything. So what it is, is what it is.

Maureen, yes it did seem so far off, but it is here now ........ LOL

Karen we just got the new ones in last week and I have not read it word for word yet, but i will be doing that this week. As far as Borrowers go, I have yet to have one tell me that they read the old booklet :)

Gene, problems with the approach taken is an excellent way to put it.

Nicholas, standardizing the form for everyone is a benefit, but you are correct about other changes not being a benefit.

Barbara, the new GFE does not solve the problem that you raise. Lenders can continue to make the same conditions that they have in the past.

Markita, I do think that the standardization is a huge thing, but I am of the same opinion as you that there are more negative changes than positive ones.

Jan 05, 2010 09:10 AM

George Souto

George Souto NMLS #65149 - Middletown, CT

Your Connecticut Mortgage Expert

Michael I deleted the comment because it was addressing something that was an issue with the old form, and the new form did nothing to change the way that Lenders and Brokers disclose there costs, and that is not the issue here. As far as Seller Paids go, they are disclosed on Page 4 of the 1003, but it would have been nice is they were disclosed on the new GFE as well, by putting a couple of additional lines on page 3 of the new GFE to not just show the total amount of settlement charges, but also the seller paids and the net amount that the Borrower is expected to bring to Closing.

Daniel you are right. The only place for a signature is on a forth page which discloses the vendors.

Mike it does shows the Principal & Interest, PMI, or FHA Monthly Insurance, but does not show the total payment with Taxes and Ins. But the intent of your comment is correct, it leaves out needed valuable information.

Chris those were excellent additions to my Post.

Tim, as I stated in a comment above, I just got the new booklet at the end of last week and have not gone through it line by line yet. It is a good suggestion to give this booklet to Borrowers before they apply for the loan, maybe then they would actually read it.

Jack like you said it is lacking some basic information that it should have.

Jan 05, 2010 10:15 AM

Guy Keith

RPM Mortgage - Long Beach, CA

One of the things this new form still does is make an uneven playing field between mortgage bankers and mortgage brokers.

Mortgage brokers are now required to give any yeild spread premium (YSP) to the borrowers. Period, no choice. Mortage bankers are STILL NOT required to disclose YSP and don't have to give it to the borrowers. So, what you have when comparing is the following:

A banker quotes a 5% rate that pay them a 1 point YSP. They also charge a 1 point loan fee as well, making 2 points, but because they are a bank, they only have to disclose the 1 point loan fee on the new GFE (it was the same on the old GFE as well). So to the borrower, the bank is making 1 point on the loan, when in fact they are making 2 points.

The broker, at 5% as well, has to show that they are charging 2 points on the new GFE. Then, they have to give back the 1 point YSP to the borrower. The borrower uses that YSP to apply to the 2 points there by paying only one point, but it still disclosed that they are paying 2 points. The result is the same, but the the broker is at a disadvantage because the banker can sell against this by saying they charge less, even though they make the same amount of money. The broker looks greedy for wanting the make 2 points and the bank looks like a hero only charging 1 point.

Is this the end of the world? Of course not, and full disclosure is a good thing. But, as usual, banks and brokers are not playing on an even field. If brokers have to give back the YSP, then the banks should have to as well. This has been a pet peeve of mine for as many years as we have had YSP disclosure requirements and the mighty federal government/HUD still refuse to open their blind eyes to this. Or, more likely, the mightly banking lobbyists poor too much money into the politicians coffers to make things fair.

Everyone is still working on fully understanding all these new changes and I'm sure lenders will lose money on loans because of mis-understandings or doing things incorrectly. This is the learning curve, but it will only slow down closing deals as lenders tread very carefully to make sure they have everything exactly right.

Jan 05, 2010 11:02 AM

Gene perez

Greater Mortgage Solutions & Valley Hills Realty - Santa Maria, CA

Well this is going to be one of those things were there will be lots of talk and I believe soon to come lots of complaining

Jan 05, 2010 11:07 AM

Jan Evett

The Premier Property Group LLC - Rosemary Beach, FL

Broker Associate, 20 years+ in real estate

It's very important that we (in the industry) take the time to understand the new form and all that implies. This morning at our office sales meeting, a local title company owner presented the new form and explained her views on the pros and cons. You've hit on the good and maybe not so good. I'll look forward to your following posts as well.

Jan 05, 2010 11:47 AM

Celeste "SALLY" Cheeseman

Liberty Homes - Mililani, HI

(RA) AHWD CRS ePRO OAHU HAWAII REAL ESTATE

Goodness...there's going to be some major hooha's over this. Let's see what all this brings :)

Jan 05, 2010 11:50 AM

George Souto

George Souto NMLS #65149 - Middletown, CT

Your Connecticut Mortgage Expert

Guy the post is about the New Good Faith Estimate, and what positives and negatives that it has compared to what was disclosed before. What you are talking about is the same for both new and old GFE's, no change. And the issues you raise are a topic for a different post.

Gene, I don't think that you will have to wait very long for the complaining.

Jan, I am sure that there are pro's and con's that we will not fully realize until we have been using the new form for a few months.

Sally .......... "hoola's" now I like that .......... LOL

Jan 05, 2010 01:17 PM

Esko Kiuru

Bethesda, MD

George,

The lack of the cost breakdown will puzzle borrowers and here is where mortgage consultants have to communicate all that info to them.

Jan 05, 2010 01:35 PM

Ray Saenz

Exit Realty Laredo - Laredo, TX

Homes for Sale in Laredo, TX - Texas, Realtor

Again George,
thanks for a well done informative blog about the new changes on the mortage industry, keep the good work my friend!

Jan 05, 2010 03:35 PM

Jim McCormack

Nashville Short Sale Specialist - Jim McCormack - Edge Advantage Realty, LLC - 615-796-6898 - Murfreesboro, TN

Nashville Short Sale REALTOR - Stop Foreclosure

Good post. Thank you. We all need to follow the new RESPA rules.

Jan 05, 2010 04:59 PM

Erin Newington

5305573559 - Grass Valley, CA

Sierra Foothills Realtor

Yep.... I don't think it puts all originators on level playing ground. If you are originating as a bank you still don't have to disclose your rebate (what the bank is paying you). So Banks can still hide a huge portion of what they are earning. I think it will put a kink in the chain for those originators who are low ballers! I anticipate a good month or two until we all get used to this new way of disclosing to the borrower. Lenders, HUD, Brokers, and Banks will all have their own way of interpreting these new disclosures. The biggest problem I have is the borrower is no longer required to sign it. Which is just ridiculous to me! Thanks for the post.

Jan 07, 2010 03:51 AM

Dana Devine

Charles Rutenberg Realty - Apollo Beach, FL

i can not believe this new stuff...how does the govt think of such stupid stuff....our tax dollars at work

Jan 07, 2010 10:25 AM

George Souto

George Souto NMLS #65149 - Middletown, CT

Your Connecticut Mortgage Expert

Esko, the lack of a break down makes is a big negative, that really needs to be changed.

Ray thank you, I will try to keep it up.

James you are right, we don't have any choice but to do that.

Colleen, I have done two other blogs after this one so you might want to take a look at them.

Bruce ..... Amen to that!!!

Erin, it is funny that the Borrower has to sign a BLANK page 5 of the 1003, but does not have to sigh the new GFE. Where is the common sense in all this.

Erica, thank you for helping to spread the word.

Dana I agree!!!

Jan 07, 2010 12:35 PM

Karen Rittenhouse

www.JKKPropertyInvestors.com - Greensboro, NC

Real Estate Investor

The constant changes just keep us all from being confident about what's going on.

I don't know that this new form will be much better but it certainly creates more questions and confusion.

Jan 09, 2010 01:29 PM