Disclosure, disclosure, disclosure..... such a hot topic. Why is that? Well, HUD has decided to make some new changes to the Good Faith Estimate and to the HUD-1. HUD is stating that these are the first changes in over 30 years. HUD goes on to say that this new regulation should save borrowers $700 at the closing table. Huh? I don't consider myself to be naive or stupid when it comes to trying to understand the government's thinking. But how do you come up with $700?
Here is my problem with this new regulation. Not only is it more paperwork, that I think it will actually add more confusion, but that HUD is using a lame excuse so late into a problem that should have been corrected a decade ago. Below are the two new changes, please take a look.
Here is why I am up in arms about this. HUD Secretary Steve Preston said, "changes in the housing market and increases in home foreclosures demands action." I agree to disagree. It's all based on HUD's reasons.
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Let's take a much closer look at this. RESPA (Real Estate Settlement Procedures Act) was created in 1974. RESPA is a HUD consumer protection statute designed to help homebuyers be better mortgage shoppers, and is enforced by HUD. RESPA was basically designed to keep those in the real estate business from inflating the prices in order to give kickbacks. .
Here is where RESPA is suppose to protect the consumer. RESPA requires that consumers receive disclosures at various times in the transaction. For more on RESPA, please read : Real Estate Settlement Procedures Act
HUD believes that many of these foreclosures were due to lenders not disclosing correctly. A good example of this is that if I told you that you were getting a 6.5% rate and that it was fixed, but in reality, it was an arm. Another example is if I told you that your rate of 6.00% was with zero points, but when you got to closing, that you ended up being charged 1 point.
So what is my problem? Regualtion !!! You need to regulate change and not just make changes. You need to enforce them. Sure, many of us go through audits each year. But why was it never truly enforced? Example... when I give the borrower a Good Faith Estimate in the beginning, when they make a mortgage application with me, they get a copy of this. If anything changes on that GFE, the borrower is suppose to be notified and given new disclosures, and sign them. Rut Row... there is one of the main problems. This was not done often, nor was this checked in many audits. If you review the new good faith estimate, it says this....
The new HUD-1 settlement sheet will have the same numbers to correspond with the GFE. And if changes are made, the lender has 30 days to return any fees to the borrower. Okay, this part might not be so bad. But my frustration with all of this is that they should have been harsh with the disclosure issues in the last 20 years. They should have had one sheet with bold writing on it....
“If anything changes from your original good faith estimate… don’t close. Or, close and report this matter to X,Y, Z. That lender will have 30 days to make any corrections necessary.”
My other issue with this? I have no problem with the true transparency or those shopping for mortgages. My fear though, many consumers might even shop themselves out of a mortgage. Just because a loan officer gives you a good faith estimate and helps you fill out an application, doesn't mean that you will close on that loan. I am not trying to scare anyone out there, but this does happen. It happens more often than you think. But here is what HUD did, they have this included with the new forms.
Now, my question to you.... are we over-regulating? I just think some of this should have been changed a long time ago and that we are blaming the countless foreclosures on this issue. Did we forget that the economy itself has gone down the toilet? I do agree with this new proposal.
This is an excerpt from HUD's finale rule. The GFE will be given to borrowers at the time an estimate is provided and will more clearly answer key questions consumers have when applying for a mortgage:
- What's the term of the loan?
- Is the interest rate fixed or can it change?
- Is there a pre-payment penalty should the borrower choose to refinance at a later date?
- Is there a potentially crippling balloon payment?
- What are total closing costs?
My other problem which is talked about in the article below are these so-called "yield spread premiums" which are rarely understood by or fully disclosed to borrowers. Consumers deserve to understand this and they need to get credit for essentially paying these premiums. Again, I think we are adding more confusion to the problem. Those loan officers that don't truly educate their client, will get around this. I can see the explanations being bogus. Just my opinion.
For the whole article, please read :
So, what do you say? What do you want? How about a true professional that gives you more than just numbers, educates you. Maybe I am just angered at this, because I have been properly disclosing since 1992. And what's funny is that these changes don't go into affect until January 1, 2010.
In my opinion, if we want to regulate and prosecute, how about going after those that falsely advertise interest rates. Please read -- Real Estate professionals, please don't forget about the laws when it comes to mortgage interest rates and payments. This was written by : Kevin & Maryellen Garasky
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