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Flagstaff New Home Builders
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Details on the New Good Faith Estimate
RESPA (Real Estate Settlement Procedures Act) overview
Congress enacted RESPA in 1974 for two purposes: 1) To allow consumers to obtain information on the costs of closing so they could shop for settlement services. 2) To protect consumers from excessive settlement costs and unearned fees by establishing prohibited practices (unacceptable referral fees, kickbacks, fee splitting etc).
RESPA REFORM - New GFE & HUD 1 Settlement Statement
Why the change? To encourage borrowers to shop for a loan and establish a limit to the settlement cost variances from the upfront disclosure to final settlement.
What has Changed?
THEN Lenders itemized their fees on the GFE
NOW To help borrowers identify a total for each category, the new GFE requires
lenders fees be bundled in their respective section of the GFE.
THEN Only buyer paid fees were listed on the GFE
NOW The owner's policy remains a seller paid charge, however it must now be
itemized and shown on the GFE as a buyer fee.
THEN GFE reflected seller paid fees, earnest deposit, PITI & down payment + costs
to close.
NOW None of the above reflected on the new GFE.
THEN GFE's were given as a reference point, but were not binding.
NOW THE NEW GFE IS BINDING. Categories of allowable tolerance changes have been
established.
The only exception to the binding aspect is if an acceptable "changed
circumstance" as defined by RESPA rules occurs or the client does not
accept the terms within 10 days of date issued.
Then: GFE's were issued when requested, many times before credit was pulled and
and before a property was identified.
Now Lenders must provide a GFE within three days of receiving an "application"
the lender must, at a minimum, have the following 7 items to issue a GFE as
defined under the new regulations: Loan amount, property address, name,
social security number, income, estimate of value and any other information
deemed necessary by the loan originator.
To Fill the void of the Good Faith Estimate, many lenders will issue a Cost Worksheet to assist borrowers with an estimate of costs early in the process.
What are we experiencing today with the change?
Delay of closings due to the "shopping" mechanisms not starting until the GFE is issued.
Buyers needing to be encouraged to shop for loan prior to shopping for a home prior to offer.
Lender and Realtor communication is key! Prepare dialogue to address the "scary" GFE
The current AAR LSR calls for a GFE. This box won't be checked until the above 7 items are satisfied.
Congress enacted RESPA in 1974 for two purposes: 1) To allow consumers to obtain information on the costs of closing so they could shop for settlement services. 2) To protect consumers from excessive settlement costs and unearned fees by establishing prohibited practices (unacceptable referral fees, kickbacks, fee splitting etc).
RESPA REFORM - New GFE & HUD 1 Settlement Statement
Why the change? To encourage borrowers to shop for a loan and establish a limit to the settlement cost variances from the upfront disclosure to final settlement.
What has Changed?
THEN Lenders itemized their fees on the GFE
NOW To help borrowers identify a total for each category, the new GFE requires
lenders fees be bundled in their respective section of the GFE.
THEN Only buyer paid fees were listed on the GFE
NOW The owner's policy remains a seller paid charge, however it must now be
itemized and shown on the GFE as a buyer fee.
THEN GFE reflected seller paid fees, earnest deposit, PITI & down payment + costs
to close.
NOW None of the above reflected on the new GFE.
THEN GFE's were given as a reference point, but were not binding.
NOW THE NEW GFE IS BINDING. Categories of allowable tolerance changes have been
established.
The only exception to the binding aspect is if an acceptable "changed
circumstance" as defined by RESPA rules occurs or the client does not
accept the terms within 10 days of date issued.
Then: GFE's were issued when requested, many times before credit was pulled and
and before a property was identified.
Now Lenders must provide a GFE within three days of receiving an "application"
the lender must, at a minimum, have the following 7 items to issue a GFE as
defined under the new regulations: Loan amount, property address, name,
social security number, income, estimate of value and any other information
deemed necessary by the loan originator.
To Fill the void of the Good Faith Estimate, many lenders will issue a Cost Worksheet to assist borrowers with an estimate of costs early in the process.
What are we experiencing today with the change?
Delay of closings due to the "shopping" mechanisms not starting until the GFE is issued.
Buyers needing to be encouraged to shop for loan prior to shopping for a home prior to offer.
Lender and Realtor communication is key! Prepare dialogue to address the "scary" GFE
The current AAR LSR calls for a GFE. This box won't be checked until the above 7 items are satisfied.
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