Still not understanding the new RESPA Rules or why you can not get a good faith estimate (GFE)? You are not alone!!
HUD issued a 57 pages of RESPA FAQs!!
A GFE shouldn’t be issued until the loan originator has a complete application. Once the originator has a complete application, they have 3 days to issue a GFE or deny the loan. In issuing a GFE, the originator creates liabilities for the lender that cannot be modified without a change in circumstances.
RESPA definition of change of circumstances:
(1)(i) Acts of God, war, disaster, or other emergency;
(ii) Information particular to the borrower or transaction that was relied on in providing the GFE and that changes or is found to be inaccurate after the GFE has been provided. This may include information about the credit quality of the borrower, the amount of the loan, the estimated value of the property, or any other information that was used in providing the GFE;
(iii) New information particular to the borrower or transaction that was not relied on in providing the GFE; or
(iv) Other circumstances that are particular to the borrower or transaction, including boundary disputes, the need for flood insurance, or environmental problems.
(2) Changed circumstances do not include:
(i) The borrower’s name, the borrower’s monthly income, the property address, an estimate of the value of the property, the mortgage loan amount sought, and any information contained in any credit report obtained by the loan originator prior to providing the GFE, unless the information changes or is found to be inaccurate after the GFE has been provided; or
(ii) Market price fluctuations by themselves.
I believe the intent of the new 2010 GFE was to universalize a form that would enable a consumer to compare lenders/brokers fee’s . Unfortunately the 2010 GFE is a cumbersome disclosure that has made it difficult for a lender to offer clients a useful to tool.
Pros:
1) Established what constitutes a complete application
2) Consistent look of GFE for all loan originators
3) Protecting consumer from inaccurate rate/fee quotes (GFE/HUD have tolerances they must comply with)
Cons:
1) Includes costs the buyer may not have to pay(depends on State/County home is in)
2) Does not include PITI (principal, interest, taxes and insurance) of home
3) Does not illustrate true cost to buyer.
4) Took 1 page form and made it into 3 pages.
If you want a good faith estimate, then be ready to provide a complete application. Some loan originators will offer you a cost worksheet prior to a complete application. If the cost work sheet is from a reputable source, then it could be a useful resource. It should include an estimate on the borrowers out-of-pocket expenses, as well estimate on principal/interested (based on loan amount/interest rate), taxes and insurance (estimate based on price/area of home).
If you are buying or refinancing on the West Coast (Washington, California and Oregon), please give me a call to discuss your options. I can be reached at 971-226-8403.
