GFE and HUD-I gets a makeover
Hi all,
I’ve been away for quite some time now. But let’s hope I’ll be able to continue from now on.
Well, lots of changes are taking place in the industry, the latest being the decision of the Federal Reserve to revise the Good Faith Estimate (GFE). The GFE is an estimate of the closing costs one needs to pay while taking out a mortgage. Currently the GFEs offered by different lenders are not standardized and it’s very difficult to interpret them.
What the Fed plans to do is, revise the GFEs by the beginning of 2010, make it more standardized and also reduce the number of pages. In all, it’ll be a 3 page document that any borrower can understand easily. Apart from the GFE, the HUD will also standardize the HUD-I Statement.
What’s the new GFE and HUD-I Statement like?
The first page of the GFE contains a summary of the loan offer. This includes the loan term, amount, initial rate of interest, whether the rate is fixed or adjustable, and whether negative amortization is applicable. Also, it mentions whether one should pay taxes and insurance in an escrow and if there is a prepayment penalty or balloon payment.
The second page of the GFE speaks about the lender’s total origination fees, third party fees and taxes. There’s a box there which asks if the borrower intends to pay points to get a lower interest rate or whether the borrower will take a higher rate in return of reduced closing costs.
The third page provides 2 tables using which borrowers can compare and find out what’s the different in paying discount points, getting a lower rate and paying less in closing costs. The other table helps borrowers compare loan offers and choose the best.
The purpose behind revising the GFE and HUD-I Statement is to compare the numbers in the GFE with that of the HUD-I Statement. Let’s hope the new docs will help borrowers understand whether they can afford the loan.
Technorati Tags: gfe, good faith estimate, HUD-I Statement
February 19th, 2009 at 4:44 am
I hope it should work.