Mandate for Lenders

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.  

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