HUD issues new mortgage rules and Good Faith Estimate
“It has been a long road, but today we can finally announce a better way to buy homes in America,” says HUD Secretary Steve Preston. “Consumers need and deserve to know what they’re getting themselves into before they sign on the dotted line. After carefully considering the concerns of consumers and the different businesses in the housing sector, we have developed an approach that empowers the average family to shop for the most appropriate loan to meet their needs.”
Last March, HUD proposed reforms to the longstanding regulatory requirements of the Real Estate Settlement Procedures Act (RESPA), and last May, HUD extended the rule’s comment period. HUD received approximately 12,000 comment letters following the proposal of its new RESPA rule. In considering those comments, HUD says it made considerable modifications. For example, HUD originally proposed that settlement agents read a closing script at the closing table and that a copy be provided to borrowers. HUD ultimately discarded the script in favor of a new page on the HUD-1 Settlement Statement that allows consumers to compare their final loan terms and closing costs with those listed on their Good Faith Estimate.
The new Good Faith Estimate should clearly answer the following consumer concerns:
• What’s the term of the loan?
• Is the interest rate fixed or can it change?
• Is there a pre-payment penalty should the borrower choose to refinance at a later date?
• Is there a balloon payment?
• What are total closing costs?
To view the new standardized GFE and HUD-1documents, click on the following links:
New Good Faith Estimate: http://www.hud.gov/utilities/intercept.cfm?/content/releases/goodfaithestimate.pdf
HUD 1 Settlement Statement: http://www.hud.gov/utilities/intercept.cfm?/content/releases/hud-1.pdf
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