Tacoma Home Loans

There have been major overhauls in the mortgage industry over the past several years with loan programs going away, qualifications getting more restrictive and an increase in documentation and disclosures for borrowers.  The US Department of Housing and Urban Development (HUD) has introduced new elements to the Real Estate Settlement Procedures Act (RESPA) many of which went into effect on January 1, 2010.  Many people are wondering what kind of effects this new regulations will have on mortgage lending and real estate transactions.

The first and most noticeable changes are in the standard paperwork for any mortgage loan, specifically the Good Faith Estimate that is provided to any borrower as part of a loan application after January 1st.  A Good Faith Estimate must be provided to any borrower within 3 days of making a loan application.  What used to be 2 pages with line item detail has been expanded to 3 pages in an effort to more specifically identify loan related costs and compensation.    It offers “tradeoffs” on page 3 which the loan originator/lender can choose to complete or not identifying loan options with less fees/higher rate or higher fees/lower rate.  It also offers a “shopping cart” for the borrower to fill in details from other lenders estimates to comparison shop.  These additions are nice benefits to the borrower if they take the time to review them and fill in the comparison section.

A difficulty that any borrower may run into is that any Good Faith Estimate is only binding for as long as identified by the loan originator or if the rate is already locked.   For example, if a borrower requests an estimate for a loan and receives it on a Tuesday but the rate has not yet been locked in (likely), comparison shops for several days and comes the loan originator to lock on Friday – it’s entirely possible that the rate/fee structure initially quoted would no longer be available.  Origination costs/lender compensation CAN NOT change between a rate lock/acceptance by the borrower and settlement so a new Good Faith Estimate would need to be issued if there were changes in either the rate or fees from the initial estimate provided.   This provides insurance to the borrower that there won’t be any suprises at closing with increased/undisclosed loan fees.

All loan originators/brokers/lenders/bankers are bound by HUD to use the new Good Faith Estimate for all new loan applications after January 1st.  While it is different than previous versions and may be confusing to some borrowers it’s intention is to make the loan details more specifically identified and not allow for hidden costs/fees.

As a borrower if you have any questions about the details on your Good Faith Estimate ask your loan originator directly. If you see unusual things on an estimate or areas that appear to be “missing” numbers or details it’s likely that the person issuing the GFE either improperly or incompletely filled it out.  Beware of those lenders who seem to be lacking in disclosure of loan details and terms of the loan they are offerring.  Feel free to share an estimate like that with another originator to verify it’s legitimacy.   I encourage all borrowers to shop around and get quotes from at least three lenders before doing a refinance or purchase.    More to follow this week in regards to current rates/mortgage market trends for 2010.

If you live in or are moving to the Seattle area please find more information about Seattle Home Loans.

In addition to being a Realtor, Michael Pollock is Licensed Loan Originator in the state of Washington (#510-LO-35045)