The U.S. Department of Housing & Urban Development approved (some time ago) two updated forms that are CENTRAL to the real estate transaction. These two new forms will go into effect on January 1, 2010:
The new forms (and accompanying rules) are intended to help home buyers (who are obtaining mortgages) to better understand and compare their mortgage options. In theory, this will allow them to obtain better loan terms, lower interest rates, and lower settlement charges (closing costs).
The new Good Faith Estimate (GFE) is now a standard form across all lenders. In the past a borrower would receive a GFE with a different format from each lender that they visited — each having a slightly different set of disclosed loan terms, or vocabulary for referencing such terms. Now, a buyer can compare two proposed mortgage scenarios from two different lenders and be able to quickly and easily compare the exact same terms from each. I see this as a huge improvement for the financing process (for buyers), as in the past there has often been much confusion about how to determine which proposed loan program is better than the other.
Here is an excerpt from Page 1 of the new Good Faith Estimate, which (surprisingly?) is quite intelligible!
But there’s more! Beyond a buyer’s (borrower’s) loan terms and closing costs being easier to comparison shop, and easier to understand . . . there is also more accountability on the lender to make sure that those terms and costs stay intact through to closing.
Some of the costs CANNOT change from the Good Faith Estimate, others can only change by a certain percentage, and others that can change without limit. This is a big improvement from current HUD guidelines whereby there was no guarantee that any of the closing costs or loan terms from a Good Faith Estimate would be carried through to closing.
I believe the financing process will be much easier for buyers to navigate as we move through 2010!