On January 1st , 2010, HUD implemented a new disclosure designed to simplify the understanding of the cost of a loan. The document is called GFE 2010. Many things are different between the old Good Faith Estimates (GFE) and the new one, but here are some of the main differences.
1. Lenders will no longer be able to just hand out a good faith estimate to a borrower without having these six things: Property Address, Borrower’s Social Security Number, Borrower’s Monthly Income, Estimated Value of the Property, Loan amount and the borrower’s name.
2. Once a Lender give a borrower a GFE, all the fees located in Box 1 cannot change. This is good because there will no longer be any unexpected increase in lenders fees at the closing table.
3. Yield Spread (money paid by the bank) will no longer be paid to the loan originator; it is given as a credit to the borrower.
4. All other settlement charges (Title services, appraisals, inspections, etc.) can only increase by up to 10% on the final HUD. This will also help to reduce deception by some loan originators who would drastically understate these fees.
While the intent of this new disclosure is so that the consumer can more easily shop for a new mortgage, the odds are that it will actually reduce the amount of “shopping” for a new mortgage. This is because, the borrower must now give your social security number to each company they want a Good Faith Estimate from. This is so the lender can pull the borrowers credit to make sure they can provide the loan they are giving the GFE for. Anyone who has ever applied for credit knows that too many credit pulls can be detrimental to your credit score, so many borrowers will just pick one lender (hopefully someone they know and trust) and just run with it.
The other important thing to keep in mind about the new GFE 2010 is that, IT WILL ADD TIME TO GETTING A NEW MORTGAGE! As with most new government rules, they are difficult for most people (even lenders) to understand. It is now more than ever, extremely important that you work with a mortgage professional (like The Kunselman Team) that can help you to navigate the mine field of the mortgage process. One wrong step can blow up the new mortgage.
If you have any more question about the new GFE 2010 or any other new rules, please feel free to contact The Kunselman Team so we can help you understand.
