Bottom line on the GFE-HUD is that there were simply too many holes in the old system of disclosure. Those holes got filled with all kinds of interpretations and gray area shananaghans. LO’s and their bosses were riding the deal all the way to the end and if they saw an opportunity to yank a little more money from their pigeon then you can bet your sweet bippy, they did. The new GFE-HUD is an effort to stop the madness and in part level the playing field so we are all talking oranges to oranges and to stabilize the process so that promises made by the lender are kept all the way through closing.
There are two areas that are causing immediate difficulties and disagreements. The first is the computation of all the fees associated with the acquisition including the owner’s title policy. In Texas it is typical for transactions under a Half a Million that the Seller generally pays for it. Its not automatic by any means, just typical. The new GFE-HUD puts the TP as part of the acquisition and doesn’t necessarily tag it as a Seller expense. Throw in the rest of the fees and the numbers are daunting. Ouch.
The bad news is that the GFE numbers have to match the HUD numbers. Ouch again. So if the LO failed to mention things like the owner’s title policy (call it roughly an additional 1% of the selling price) and it turns out that the Seller is paying it the fact is the final numbers have to match what was flashed when the LO was in the selling mode at the beginning of the deal.
The other area that is causing a log jam of snarling between the lender and the title company is the payment disclosure. The new GFE-HUD calls for a whole new institution, which we can affectionately refer to as PIMI. Hell, we were all used to PITI and now they change the way it works. “T” is a separate issue; it is till part of the escrows but not part of the main course. Lenders are having a hard time digesting this and in what they view as part of the lore they want the estimated “T” in play. No one ever cared about “M” per se – it was basically a non impressive number and the lender doesn’t want to hear from the Borrower when the number they signed off on at closing is another several hundred higher on the payment book. Two things are true: (1) there was a genuine need for some real reform in the mortgage loan disclosure business. There were way too many numbers in the ‘estimate’ that turned out not to be the case at closing. Even the seemingly known numbers were up for revision and seemed to appear to be the result of the mood of the LO. Of course, when the final numbers were delivered at closing the LO went into Defcom 6 and didn’t respond (not universally true, but there were enough cases that it constituted a real trend). Lenders are being held accountable through this process and they don’t like it which brings me to the second point. (2) This is going to take a while to get down and get right. In the end it is not just the way things are going to be for the unforeseeable future the buying public, the agents and the lenders are going to be able to handle it.
Its like a friend of mine used to say (probably still does): “its all good, brother.”
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