Loan Updates for 2010 – The Loan Terms Will Be Clearer for the Borrower

HUD is requiring that loan originators provide borrowers with a standard Good Faith Estimate that clearly discloses key loan terms and closing costs and fees.  Loan originators must provide borrowers with a new HUD-1 settlement statement. The new 3-page form will allow the borrower to compare loan terms and make a more informed decision.

Of key interest are the fees.  Typically, a loan has 2 types of fees : origination fees or the fees associated with the lender providing the loan and settlement fees/closing costs or the title fees, appraisal fees, etc.  In the past the fees were an estimate and open to many surprises.  Now, the fees must be exact.  If the borrower accepts the loan as presented, the lender must provide the loan with the costs listed. NO SURPRISES.

If the lender provides services, they must be charged within 10% of what was listed. So if an appraisal is $500, it must cost no more than $550.

The new form will have a page that clearly lists the initial loan amount, the term length in years, the monthly payment, the initial interest rate, and whether that interest rate can rise plus any prepayment penalties or balloon payments. 

There’s also a “shopping chart” on the third page in which up to four different deals can be placed side-by-side and their costs easily compared.

For more information contact: Mary Lou Yoch, Frost Mortgage Lending, (949) 584-8865