Monday, Jan. 4, 2010
Written 10:22 a.m.
CHANGES AFOOT: The federal government has revamped the initial batch of paperwork that the lender gives you when you apply for a mortgage.
The good faith estimate of closing costs, or GFE, is an itemized list of the fees, taxes, insurance premiums, commissions and points associated with getting a mortgage. When New Year's Day dawned, new rules governing the GFE went into effect.
Since at least the beginning of President Bill Clinton's first term, regulators have tried to make the GFE more consumer-friendly. The new GFE comes courtesy of the Bush administration, and the Obama administration's decision not to shelve it.
As I mentioned, the new GFE is designed to be more consumer-friendly. Specifically, this means three main things:
First, there are certain fees that the lender charges -- origination and document preparation fees, for example -- and the lender has to abide by its estimate for each of those fees.
Second, there are certain third-party fees -- for title insurance and appraisal, for example -- and the lender has to be fairly accurate with those. When you add all those third-party fees together, the final bill can't be more than 10 percent higher than the estimate.
Third, the GFE encourages borrowers to compare multiple loan offers. A page of the document has a fill-in-the-blank section where you can compare various combinations of rates and fees.
I'll have an article with more detail, and I hope with a downloadable copy of the new GFE, in coming days.