Starting January 1, 2010 HUD implemented a new RESPA rule to standardize the GFE and HUD-1 issued to borrowers for the purpose of a home loan.  Now unless you have been researching this information, are in the process of securing a home loan or work in the industry, that last sentence was most likely read like a law student’s text book and made absolutely no sense.  So, let’s break this down.

HUD stands for the department of Housing and Urban Development, and is the government agency that oversees the Federal Housing Administration (FHA).  The FHA is the specific department that insures home loans made by private lenders.  HUD passed some new regulations regarding how borrowers are informed of the details of mortgage loans back in November of 2008 and some of these changes are now being fully implemented.  (Some things take time.)  These rules are part of RESPA.  RESPA stands for Real Estate Settlement Procedures Act, and is a federal law that helps protect consumers from unfair practices during the home-buying and loan process. (We are not the only ones looking out for you.)

As part of this new regulation some significant changes have been implemented to two documents that are used within the mortgage process – specifically the Good Faith Estimate (GFE) and the Settlement Statement (HUD-1).  The GFE is a form that is issued at the start of the loan process.  It discloses to the borrower their estimated costs for fees related to obtaining the mortgage for their home that will be paid prior to or at the time of closing.  The HUD-1 is a final listing of the closing costs for the mortgage transaction.  It lists the sales price, loan amount, individual charges and total settlement costs related to the transaction for both the buyer and seller (or for just the single party in the case of a refinance).

There were two goals with this change: 

1. To standardize these two forms across all lenders to provide borrowers with an easier way of comparing loan offers.
2. To help borrowers determine that the loan they are getting at close is the same loan they were offered in the GFE. 

Every lender will now use the exact same form, with the exact same terminology and show, at close where and why any changes were made between the start of the loan process and the end.  This is a very good thing! 

A borrower can now compare a loan program from any number of lenders and intelligently compare fees, interest rates and programs in order to make an informed decision on what loan will be best for them.  At Awareness Home Funding, our goal has always been to educate our clients and to treat them fairly.  Now you have a way to prove to yourself that what we have been saying all along is true!  Check us out and compare our fees to anyone else.  We think you’ll be glad you did.

My guess is that the typical American puts more thought into the search for a flat-screen TV than into the choice of a mortgage lender.

Shopping for a TV is fairly straightforward. You read reviews online or in Consumer Reports; you eyeball a few models in the store to see if the image looks sharp; then you buy from whichever merchant has the lowest price. If the TV doesn’t work, the merchant gives you a new one.

Shopping for a mortgage is more complicated, less fun and infinitely more dangerous to your long-term financial interests. At the end of the process, you probably have no idea of whether you got the best deal available. Was the upgrade on those cherry kitchen cabinets really worth the high rate and fees you paid to the lender affiliated with your friendly home builder? Probably not, but that salesman sure was persuasive, and you were glad to be relieved of spending the next three days shopping for mortgages.

Now help is on the way from a most unlikely source: The U.S. Department of Housing and Urban Development, or HUD.

Federal rules that take effect Friday mandate a standard, three-page Good Faith Estimate that urges consumers to shop around for the best loan and helps them compare lenders’ offerings. The rules, announced by HUD in November 2008 but just taking effect this week, are an update of the Real Estate Settlement Procedures Act, a 1974 law known as Respa. (See WSJ story.)

One difficulty of shopping for mortgages is that the lender with the lowest rates often isn’t offering the best deal. High fees can wipe out the benefits of low rates, and little-noticed features such as prepayment penalties might blow up on you later on. Even for members of Mensa, it’s hard to compare different combinations or rates, “points” (paid in exchange for a lower rate), fees and other terms. Lenders often sprinkled in lots of confusing charges, such as processing and messenger fees, to pad their margins. Dickering over theses “junk” fees distracted borrowers from the bigger picture of total costs.

All of these complexities favor lenders, of course. The more confused you get, the less likely you are to realize you just got fleeced.

To address those problems, the new estimate form requires lenders to wrap all the fees they control into one “origination charge.” That lets you compare one lender’s fees with another’s.Jack Guttentag, 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.

Good Faith Estimates have been around for decades, but there was no standard format. 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 aren’t allowed to increase the origination fee from the estimate. Some additional charges, including title services and recording charges, can increase by as much as a combined 10%.  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.

Title insurance typically is the largest fee, and the new forms let consumers know they don’t have to accept the insurer suggested by the lender. Mr. Guttentag says title insurance can be “vastly overpriced” and consumers should take the time to shop for it.

Settlement firms, which organize the closings of home sales, will be required to issue a new version of the HUD-1 form used in closings. This new HUD-1 includes a comparison of the estimated and final costs, as well as a summary of the loan terms.

Will all this make a big difference? Mr. Guttentag, who has been exposing the tricks of lenders and brokers for decades, thinks the new rules will help, though they aren’t a cure-all.

Much depends on whether Americans want to put in a bit of effort rather than simply accept the often biased mortgage advice of a real estate agent, home builder, broker or banker. The real estate agent may urge you to use an affiliate of his firm, or recommend the lender most likely to grant a loan quickly rather than the one with the best terms. The builder wants you to use his in-house lender. The brokers and loan officers are working for themselves, not for you.

When you’re trying to pick a new TV, you don’t rely on a TV manufacturer to give you an impartial review of the alternatives.

The Department of Housing and Urban Development (HUD) has released an updated version of a booklet that’s intended to help consumers comparison-shop for a mortgage.

Much of the 49-page publication, “Shopping for Your Home Loan: HUD’s Settlement Cost Booklet,” is devoted to the new standardized Good Faith Estimate and HUD-1 settlement statement forms that lenders must begin using on Jan. 1.

The forms and other changes to implementation of the Real Estate Settlement Procedures Act (RESPA) are intended to help consumers comparison shop. HUD believes the new RESPA rules, which encourage lenders to package settlement services like title insurance with loans, will save consumers an average of nearly $700 in costs and fees per mortgage.

The new RESPA rules place restrictions on changes to estimated loan origination and settlement service charges as disclosed on the GFE. The RESPA rule changes also require that mortgage brokers disclose “yield spread premiums” — rebates paid by lenders when borrowers take out loans at higher interest rates than they could qualify for — and credit them against a borrower’s closing costs.

HUD has posted a RESPA “FAQ” — answers to “frequently asked questions” — and other information on a dedicated RESPA page to help lenders, settlement services providers and consumers understand the new rules.

Source: Inman News


Share the wealth:


Stay Informed. Stay Connected.

Become a Fan!

Follow Us!

RESPA is changing the guidelines for fees and this will help borrower’s lower their cost in closing loans. RESPA(Real Estate Settlement Protection Act) is governed by HUD. The “initial” charges on the GFE (Good Faith Estimate) will now be binding and these charges will be what you see on the final HUD1 at settelment. Great News for Consumers and Mortgage Applicants.  A report I found interesting informative and true about RESPA.

If you are one those who is seeking at lot of information about Mortgage Lending please take the time to search some areas that I have found to be beneficial. It is some great information from an experienced Mortgage Professional.

Important mortgage information, what do you know?
Mortgage Loan Modification Information
Choosing the right Lender

One cannot know enough these days about mortgage lending, protect yourself and be at ease about what you know. Prepare yourself and ask questions and get answers…it is about your life.

Statistics now show that approximately 8 out of 10 loans written between 2000 and 2005 have some type of violation written into them. This could lead to cash back to the client, principle reductions, Loan Modifications and in some cases complete relief of the loan liability. This can save thousands of homeowners from being thrown into the street; the biggest problem is your bank is not going to tell you this because they can lose their note on your home.
If you received a mortgage in this time frame you stand a good chance of saving your home from the Sheriffs gavel or the Mortgage Company taking your home from you.
If you have a mortgage and you took out the mortgage in the years 2000 to 2005 and you had either a sub-prime loan or maybe you were one of the people who took out a liar loan or a pay-option arm with the infamous 1% start rate This article is Written for you.
The Following Facts are for you to see if you are affected
If you think you might have an issue with your loan or don’t know if you have an issue, why not get a Forensic Audit!
What they are looking for:
Forensic Audit on all Loan Documents!
- Original closing Package
- TIL, GFE, APR, INDEX, Margin Calculations
- Rescission dates and notifications
- Appraisal and Escrow
- Looking for Ammunition for Negotiations
- Violations are RAMPANT!
- Estimates at over 80% have violations
- More thorough review of the case.
What happens if violations are found?
Studies show over 80% of Mortgage loan closing documents have violations!
- Monetary damages up to 3 years interest payments.
- HUGE leverage in Negotiations
- Lenders has 20 days to respond to a written request.
- Lenders have 60 days to Cure (fix) the problem.
- Loan Modification decision in less than 90 days.

If you don’t have the documents listed that okay the lender has to produce the originals including a copy of the note to the attorney who is furnishing the Forensic Audit.
- TILA, RESPA, Good Faith Estimate, Payment changes
- Adjustment period, APR, margins
Sample Results of an Audit that can change your whole outlook!
- If violations are found, the borrower may be eligible for complete relief of the predatory loan or a very favorable Loan Modification.
- Complete relief of the predatory mortgage is called as a loan rescission.
- Meaning the lender takes back the “predatory Loan” and awards or Credits back to the borrower all the interest made on the payments thus far, Loan Origination Fees, all applicable Lender fees. Penalties and attorney fees will also have to pay, this is not a joke but nobody in the banking industry wants you to find out about this huge problem.
Major VIOLATIONS DO happen!
Everybody Wins!
- The best part about it is now you can mediate the loan with your lender and fight for an affordable Loan Modification based on the legal violations on the loan.
- The homeowner has their loan fixed and may have their principle balance reduced.
- The lender does not lose their shirt because they have mediated the matter without employing their full legal staff on the file wasting operating expenses.
Remember this it will cost your lender around $70,000 dollars on average just to defend their position and take you to foreclosure not to mention and penalties for violations by not properly disclosing the loan. The laws of disclosure are very clear and must be followed by every loan ever written.
Benefits of Forensic Modification If violations are found that will save your home!
- Faster results than standard Loan Modification
- Most cases resolve in 90 days max
- Better leverage for negotiations
- Power shift to clients benefits
- Legal department/not loss mitigation department
- Client could be awarded damages
- Client could rescind the loan (walk away)
- Nobody is really doing them yet!
- Short cut!
If you have a Mortgage that you received between 2000 and 2005 you stand a good chance of savinig your home. If you know of someome who is in trouble pass this article on to them or send them to http://usahomeloanmods.com/robbins/ So they can get a copy if a Free Report Called “Saving My Home” or RT-@timrobbinssr