Will Loan Officers Find a Way to Manipulate the New GFE and HUD-1?

As we draw closer to the new year, effective January 1, 2010, you will hear more talk about the new GFE, Good Faith Estimate (the statement documenting the proposed costs at closing) and the HUD-1 Settlement Statement (the closing statement documenting the actual costs at closing). These forms apply to all 1-4 family residential transactions introduced by RESPA, the Real Estate Settlement Procedures Act.  These changes are very significant to the mortgage industry and the homebuyer who over the last 30 years has found the documents nearly unchanged and very intimidating. 

The new forms are designed to protect and provide the consumer with the ability to easily compare lender offerings and make better financial decisions. I personally am looking forward to seeing a loan officer use it correctly, whereby the use of the free Lender Comparative found on the Make No Mistakes website becomes obsolete. In two recent closings, the loan officers knew they were in a competitive situation and used the forms incorrectly in order to appear as the best product offering.  Most consumers still rely on the lowest interest rate and continue to fail to look at all aspects of the mortgage offering such as total closing costs.  Using the Lender Comparative provided my clients the real ability to see the true cost of the loan and more importantly gave my client the insight and confidence to ask the right questions about specific fees, which in the end reduced their out of pocket expenses by over $6,000!

According to a recent article written by Stewart Title, lenders may begin using the new GFE at any time, and if a new GFE is issued to a borrower, the title agency must use the new HUD-1 for that transaction. But loans officers beware, according to HUD (Housing and Urban Development) the proposed reform intends to impose penalties for violations of specific sections of RESPA.

For more information on the proposed GFE and changes to the HUD-1, can be reviewed in their entirety at www.hud.gov.