New Rules Mean Fair Play

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.

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