In federal rules that took effect Friday, Jan. 1, mandate a new standard, three-page Good Faith Estimate that urges consumers to shop around for the best loan and helps them compare lenders’ offerings. The rules are an update of the Real Estate Settlement Procedures Act, a 1974 law known as RESPA.
This seems to make a lot of sense, but Sue, our in-house lender says that the new rules are so complex that she is planning to take the training for the third time!
Although Good Faith Estimates have been in use for a long time, there never has been a standard form required of all lenders. Under the new rules, lenders and mortgage brokers are required to give consumers the standard estimate forms within three days of receiving a loan application.
Lenders are prohibited from increasing the origination fee from the estimate. Some additional charges, including title services and recording charges, can increase by as much as a combined 10 percent. Estimates for other charges, such as homeowner’s insurance and other services provided by third parties selected by the borrower, aren’t subject to such limits.
A finance professor emeritus at the University of Pennsylvania’s Wharton School recommends that borrowers focus on two items as they shop: the interest rate and the “adjusted origination charge,” which includes any points paid to lower the rate.
It seems like a good idea, but The Good Faith Estimate form requires lenders to combine all of the bank’s fees into one “origination charge,” which is supposed to enable consumers to compare one lender’s fees with another’s. The problem is that by lumping all the charges together, there is no breakdown in the form.
Sue says that her company, Princeton Capitol, is adding a second page with a full listing of charges. Sounds like a plan.
No comments:
Post a Comment