Posts Tagged ‘GFE’

« Older Entries

The New Good Faith Estimate 2010

March 3rd, 2010

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.

2 comments »

Posted in Know Your Mortgage, Mortgage Industry, News, Real Estate Industry, Understanding Your Mortgage

Tags:

Looking Back at 2009

January 21st, 2010
  1. The $8000 first time home buyer tax credit that didn’t have to be paid back is introduced.
  2. Foreclosures declined but short sales were on the rise.
  3. Stated income loans went away, making it difficult for self-employed income borrowers to get a new mortgage.
  4. New mortgage guidelines tightened up.
  5. Large investors (unless they are cash buyers) got bumped out of the market.
  6. Resurgence of the small/first-time investor.
  7. Resurgence of the USDA 100% financing mortgage for rural areas.
  8. The Government injected lots of capital into the mortgage backed securities keeping interest rates low.
  9. The Government injects billions into the banks in the form of the TARP (Troubled Asset Relief Program) with the intent to modify existing mortgages.  The banks modify only a very small percentage of these mortgages.
  10. Fannie Mae and Freddie Mac introduce the DU Refinance + and the Home Access Programs designed for home owners to refinance who initially had 20% equity when they first got their mortgage and have seen their home values decline.  Program is a moderate success.
  11. Rates went up and rates went down.
  12. The Home Valuation Code of Conduct (HVCC) is introduced in May.  Appraisals must now be ordered through Appraisal Management Companies (AMCs). Many reports indicate this system is very flawed and has lead to higher costs to the borrower in obtaining a new mortgage.
  13. The Mortgage Disclosure Improvement Act (MDIA) is introduced in August.  It gives borrowers more information upfront before any money can be collected, but adds costly time to the mortgage process.
  14. The Government extended the $8000 First Time Home Buyer Tax Credit to June ’10 and added a $6500 repeat home buyer tax credit.  Experts say there will not be any more extensions.

No comments »

Posted in Know Your Mortgage, Mortgage Industry, News, Real Estate Industry, Understanding Your Mortgage

Tags:

Looking Forward to 2010

January 21st, 2010
  1. Good Faith Estimate (GFE) 2010 is introduced January 1, 2010.  Six items now required before the loan originator can provide you with a GFE: Name, Property address, Estimated Property Value, Loan Amount, Income, and Social Security Number (Credit Report). Fees locked for 10 business days from issuance of GFE.  Designed to protect the consumer from an increase in fees and encourage comparing options.  Most likely, will lead to less comparing since a GFE can’t be issued until the loan originator can pull credit.
  2. Legislation on the table to repeal HVCC.
  3. Federal Reserve Board debating over Yield Spread Premium (YSP).  In the past, YSP was a credit that had been paid to the loan originator by the lender.  GFE 2010 changes YSP from a loan originator credit to a borrower credit.
  4. HUD to suspend the 90 day anti-flipping rule for one year starting February 1, 2010.  Existing rule prevents a home owner from selling a home that they have owned for less than 90 days.  Lenders still have to approve this new rule.

No comments »

Posted in Know Your Mortgage, Mortgage Industry, News, Real Estate Industry, Understanding Your Mortgage

Tags:

Interest Rate vs. APR

September 24th, 2009

Today, The Kunselman Team is going to explain a sometimes confusing part of the mortgage process.  The differences between the interest rate and the Annual Percentage Rate (APR) can raise some questions that can be difficult to explain.

Most everyone understands what their interest rate is.  It is the rate of interest that they will be charged for the money they borrow.  It is also used to calculate your monthly payment.  Annual Percentage Rate or APR even though is sounds similar can be quite different.

APR is a calculation of the annual cost on a loan over the full term of the loan and it is found on the Truth in Lending Disclosure (TIL).  The APR not only factors in the monthly interest cost, but the upfront costs of the loan too.    The idea behind the APR is that if you are trying to compare two or more loans, this APR should give you a better idea of which is the better program from a strict numbers perspective.  Let’s look at two example loans. One has an interest rate of 6.00% and an APR of 6.50%.  The other loan has an interest rate of 5.75% and an APR of 6.75%.  Strictly on a cost perspective, loan number one is the better choice because it’s APR is 6.50% compared to the seconds loans APR of 6.75%.  The reason behind this difference is in the fees that the brokers are charging on the two loans.

Something to keep in mind also is that the new Mortgage Disclosure Improvement Act requires that if the initial APR that a lender disclosed to you changes by more that .125% by the end of the transaction, you the borrower must be notified and given three business days to review the new figures.  It is not uncommon that there could be a slight change in the APR because legitimate fees do come up during the loan process.  If there is a large change, it would be wise to sit down with your mortgage broker and get clarification on why there was such a large change.

We hope that you found this information useful and as always, if you would like to see what it feels like to work with a mortgage team that can bring a little sanity to an insane world, give The Kunselman Team a call.

No comments »

Posted in Know Your Mortgage, Mortgage Industry, News, Understanding Your Mortgage

Tags:

On Your Marks, Get Set…Wait!

September 24th, 2009

Anybody that has tried to get anything done with their mortgage recently understands that things have been moving a little slow.  Well good news, the politicians in all their infinite wisdom decided that you the consumer need EVEN MORE TIME to make a proper decision about your mortgage.  The fact that on average a mortgage takes 3-4 weeks to complete and that after you sign documents on a refinance; you still have an additional 3 days to decide whether or not you want the new loan.

The Home Economic Recovery Act (See the name even sounds good) or HERA as it is also known, went into effect on July 30, 2009.  On average we are expecting that HERA will add 5 to 10 days for your new mortgage to close.  What that really means is that now instead of being able to lock rates for 30 days, many loans will have to be locked now for 45 days.  The longer the lock, the more it costs.

Now I understand what the intention behind this new law was to try and protect consumers but they are going about it the wrong way.  There are enough laws on the book.  What would be more helpful to consumers would be to enforce the existing laws.  All the laws in the world mean nothing if they are not enforced.

Something that would make more sense is giving the consumer a way to file a complaint if they feel they were tricked or lied to.  If the Department of Real Estate received enough complaints, then they could investigate a particular broker’s business, instead of changing the rules to punish everyone.  Because as I have stated before, those people who obey the existing laws will obey the new laws and those who don’t obey the existing laws, will not obey the new ones either.  They will just figure out a way around them.

No comments »

Posted in Mortgage Industry, News, Real Estate Industry

Tags: