RESPA Changes

Beginning January 1st revised RESPA guidelines go into effect changing the Good Faith Estimate, GFE, and HUD-1 settlement statement used in the real estate industry.  The goal of RESPA, the Real Estate Settlement Procedures Act, is to help consumers be better shoppers of financing options in the lending process.  Here are the revised forms:
Good Faith Estimate
HUD-1 Settlement Statement

The new GFE grows from one legal-sized page to three letter-sized pages.  And despite growing in length, it surprisingly contains fewer numbers than the old GFE form.  The new GFE has created a bit of confusion, as illustrated by the FAQ document HUD has created and continues to update regarding its completion, which at the writing of this article is 51 pages long.

Here are the highlights of the major changes of the GFE form:

1. All lender charges are totaled on one line. 
2. The form does not total the monthly payment including; principal, interest, mortgage insurance, taxes and insurance.
3. The purchase price of the home is not listed.
4. Signature lines are not allowed for the borrower to acknowledge receipt of the form.
5. The initial deposit of taxes and insurance for a borrower’s escrow/impound account are no longer listed separately, but summed together.
6. Seller paid closing costs is not listed.
7. The owner’s title insurance policy which is paid for by the seller in a purchase transaction is listed as a buyer’s charge.

The line of the new GFE that sums up all the lender charges will include all of these common fees from a lender: the origination fee, and any or all processing, underwriting or administrative fees.  No longer will the origination fee be referred to, as it was historically, as a percentage, usually 1%, of the loan amount.  This change will increase the “origination fees,” which could also have positive tax implications for borrowers.

The majority of information that has been excluded with this new GFE form, like the total monthly payment, is still contained in the loan application.  Loan officers will simply emphasize this information in a different place then they typically have.

It can be easy to allow these changes to taint our attitude about our current lending environment, but we know that a negative attitude won’t help our borrowers.  These changes illustrate more than ever how critical it is to have a trustworthy and knowledgeable loan officer handling your financing needs.  As licensed mortgage professionals, we at Resident Lending Group are excited about and prepared to navigate this next season of changes in mortgage lending.  We will continue to help our clients better understand the mortgage process and help them secure the best financing available.

Building relationships with our clients to provide successful home ownerships.