Easier to read and understand Good Faith Estimate and HUD-1 Forms
Effective January 1, 2010 the Department of Housing and Urban Development (HUD) will require closing cost to be spelled out on a revised and consumer friendly version of the good faith estimate that borrowers are supposed to receive within 3 days of applying for a mortgage. Good news for the consumers but not many lender’s like the changes, which is not surprising.
The fees are divided into three catergories:
- Fees that cannot increase from upfront estimates to closing, including lender or broker’s mortgage origination, processing, and underwriting charges, as well as lender or broker’s “points” based on the interest rate quoted and local transfer taxes.
- Fees that can increase as much as 10 percent from upfront estimates, including services such as appraisals, title insurance, and recording fees from local government agencies.
- Fees that can increase without limit because the amount is difficult to predict in advance, including home owners insurance, daily interest charges on loan, and initial deposits by the borrower into an escrow account.
The idea behind the new HUD-1 form will be that the borrower can easily compare what they were told the settlement fees will be with what the actual closing statement reflects. Below is an excerpt from HUD regarding the changes.
WASHINGTON – For the first time in more than 30 years, the U.S. Department of Housing and Urban Development today issued long-anticipated mortgage reforms that will help consumers to shop for the lowest cost mortgage and avoid costly and potentially harmful loan offers. HUD will require, for the first time ever, that lenders and mortgage brokers provide consumers with a standard Good Faith Estimate (GFE) that clearly discloses key loan terms and closing costs. HUD estimates its new regulation will save consumers nearly $700 at the closing table
View sample forms of Good Faith Estimate or HUD-1 revised forms from HUD.
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