New "Good Faith Estimate" Form Takes Effects 1-1-10

Federal rules take effect on Friday, January 1, 2010, that mandate a new Good Faith Estimate ("GSE") form that urges consumers to shop around for the best loan and helps consumers compare lenders' mortgage offerings. The new rules were a part of an update to RESPA and were announced by the U.S. Department of Housing and Urban Development ("HUD") back in November 2008.

The complexity of sorting out the interest rates, fees, points, etc. is difficult for most consumers; and the lowest interest rate does not necessarily mean the best deal when the lender tacks on all sorts of fees to the transaction.

The new GSE is a standardized form that lenders and mortgage brokers will be required to give to consumers within 3 days of receiving a completed loan application. Lenders cannot increase the origination fee from the estimate, although certain additional charges, such as title services and recording charges may be adjusted to a limited degree. Estimates of other services provided third parties that the consumer selects are not subject to any such limits.

New HUD-1 forms used for closings will need to include a comparison of the estimated and final costs, as well as a summary of the loan terms.

Click here to access a link at HUD for the new GFE form.

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