Thursday, November 13, 2008

Final RESPA rule issued

HUD ISSUES NEW MORTGAGE RULES TO HELP CONSUMERS SHOP FOR LOWER COST HOME LOANS: New 'Good Faith Estimate' will help borrowers save nearly $700 (HUD press release, 11/12/2008)

"For the first time in more than 30 years, the U.S. Department of Housing and Urban Development today issued long-anticipated mortgage reforms that will help consumers to shop for the lowest cost mortgage and avoid costly and potentially harmful loan offers. HUD will require, for the first time ever, that lenders and mortgage brokers provide consumers with a standard Good Faith Estimate (GFE) that clearly discloses key loan terms and closing costs. HUD estimates its new regulation will save consumers nearly $700 at the closing table.

And from Inman News, HUD: New Respa rule out this week:

"The new rules are intended to help borrowers avoid paying excessive loan origination and closing costs, and understand potential issues like payment shock from adjustable-rate mortgage (ARM) loans, balloon payments, and prepayment penalties for refinancing.

Preston said HUD plans to publish the new regulations under the Real Estate Settlement Procedures Act, or RESPA, in Friday's Federal Register. If Congress does not stand in the way, the RESPA rule changes would take effect within 60 days after publication."

(bolding mine)

The final rule deals primarily with the new Good Faith Estimate and revised Settlement Statement.

New Standardized Good Faith Estimate (GFE)
  • Make GFE easier to read/understand
  • Increased up front disclosures
  • Makes it easier to compare offers
  • Increased from 1 page to 3 pages
Revised Settlement Statement (HUD-1)
  • Easier comparison of charges between the GFE & HUD-1
  • Will limit the amount fees can change from GFE
  • HUD-1 terminology conforms more with GFE terminology
  • Increased from 2 pages to 3 pages.
The requirements on the new GFE and HUD-1 would not go into effect until January 1, 2010. Other provisions will be effective January 16, 2009

No complaints here about the changes. If it provides more consumer protection, more transparency and a clearer understanding of the loan product(s), we're all for it. Besides, as an UpFront Mortgage Broker, we're ahead of the curve.

The 341 page rule is HERE.

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