New RESPA Guidelines and Good Faith Estimate – Good or Bad?
December 21, 2009 by Danilo Bogdanovic
Filed under Mortgage/Lending
New RESPA (Real Estate Settlement Procedures Act) guidelines have come out and they will change the way Good Faith Estimates look beginning January 1, 2010. The changes will also increase the level of accountability that goes along with the lending process – for both lenders and borrowers. Some are “hootin n hollerin” about the changes while others are happy about them. Here are two people’s reactions to the changes…
“Hootin n hollerin” about the changes…
On the training conference call on Wednesday were originators from across the country who worked for direct lenders, brokers and banks. The common sentiment was that the consumer will in reality end up paying higher costs for loans as originators will not want to risk under-disclosing costs and fees, not just their own but those of escrow companies, title companies, appraisers, surveyors, etc, and be stuck with the tab.
- Excerpt from an article in The Orange County Register by Marilyn Kalfus
Happy about the new Good Faith Estimate and RESPA guidelines…
It completely evens the playing field on both sides of the table. It also comes with like a definition page that outlines what is encouraged to shop around for and what is not negotiable. No more “nickel and diming” over every line on the GFE.
The best part is that the definition of “application” has SSN as a REQUIRED field.
There are LOTS of skeptical people out there (rightfully so) that do not like to provide a SSN, but ask us to provide a “ball park” GFE based on the information provided. RESPA no longer allows a GFE to be offered without a SSN. This allows lenders to provide a responsible and more accurate GFE and prevents prospects from calling 10 banks asking for GFE’s just to see what their fee’s are.
Ooooh, just lots of good stuff – once again, for both borrowers and lenders…
Honesty, reliability and accountability is what the new GFE provides.
It puts the Good back in Good Faith Estimate!
- Christopher Koegler, Operations Manager – American Funding, Mclean, VA
I think that the new RESPA guidelines and Good Faith Estimate are good in theory, but theory and reality are two different things. We’ll have to wait and see just how they actually effect borrowers and the real estate industry as a whole.
What do you think?
P.S. Here is the new Good Faith Estimate (if you don’t see the embedded document below, click here)…
New Good Faith Estimate beginning January 1, 2010 –
Jeremiah Adams on Thu, 14th Jan 2010 12:33 am
This is one of the worst things that has happened in our industry this past year.It is very confusing to me as a broker and twice as confusing to the borrower.The general consensus from the borrower is we are trying to screw them.I have been in lending for 10 years and it is hard for me to understand how could a borrower that may finance a home 3 times in their life understand this.I beleive this was concieved with the big banks and HUD together.Since a bank does not have to disclose yeild spread they will always look like they are giving the borrower a better deal.
Michelle on Fri, 15th Jan 2010 1:26 pm
I have been processing for 6 years and this GFE is horrible. We now have to show ysp three different places so the 1003 and “new and improved” GFE match. Customers are complaining about how confusing it is. I agree with pp…if we are having a hard time understanding it how are we supposed to explain it to the customers? Customers can’t see the full payment including escrows, all charges associated with the loan and how much money they are bringing/receiving at close on one simple page anymore. And…a three page GFE that has no signature line? Can we say “HUD what are you thinking?”
Bonnie on Tue, 19th Jan 2010 7:42 pm
The new gfe is one of the worst things to come along (same as the HVCC). It is totally vague and confusing to clients. Major lenders are still telling us how to fill it out–wrong. The old GFE was clear and concise and easy for borrowers to read and compare. This gfe has everything lumped together, brokers have to disclose ysp, but banks don’t have to declare their srp so its discriminatory. Additionally, the way brokers have to show their ysp jacks up the apr which causes delayed closings due to RESPA issues (actual apr varying by more than .125). Who ever came up with this idea should have their head examined. It certainly didn’t make things transparent as supposedly it was intended. Its more confusing and muddier than ever for consumers and for those of us in the business, every lender is interpreting completion of the form in a different way–not exactly uniform is it? The whole thing should be scrapped, and shame on all the people wasting everyone’s time and money creating such a sham.
Joseph J Veverka on Mon, 31st Jan 2011 11:27 am
The required balance is BS. The required Balance is unfair in that it gives the bank hundreds of thousands of money in an escrow funds for the banks to play with. There is no such thing as idle money in finanical institutions. There is also no regulations that require the banks to keep those account balances idle till the time there due. They won’t pay interest on the excess money. In an economy where there is no free lunch the banks have found yet another way to put our money at risk. There is a reason banks are failing. When they are allowed to pool resources from all accounts and then invested them there is always a risk factor.