In an effort to eliminate eleventh hour surprises at the closing table, that is, closing fees and charges being sometimes twice what was previously quoted. The federal government, as of 1/1/10, has mandated mortgage lenders to provide a good faith estimate (GFE), detailing loan fees and settlement charges.
This GFE is nothing new, but now it’s a government mandate, and the charges at closing must now be exact, or no more than 10% from the initial (GFE). Previously, no federal rules where in place and lenders where not held responsible. Now, if the charges at settlement exceed the estimates, the lender- not the customer- must now eat the difference.
However, like in any contract-a loophole. By borrowers not providing all the information necessary to fill out the GFE, there is no “application” and therefore no requirement to issue a GFE. So lenders have come up with a substitution for the GFE, a “worksheet” and “loan scenario” forms that come with no legal requirements for accuracy. Typically they are only issued when shoppers do not provide – or are not to provide – key information that constitutes an “application” under HUD’s definition in the rules.
Bottom line- If you you’re looking for the hard facts, demand a GFE, by name. If loan officers only provide you worksheet estimates, there is a reason for this. Don’t fall for hook-low ball estimates.