Better Numbers Brings Better Clarity
Effective January 1st, 2010 RESPA (Real Estate Settlement Procedures Act) will be adding an additional requirement of Lenders. Beginning in 2010 Lenders will have to ensure that their Good Faith Estimate (GFE) be accurate and timely.
The Good Faith Estimate has been a voluntary disclosure that Lenders would use to help buyers have a rough idea of what their closing costs would be. Many times these documents were useless. The Lender puts some routine numbers in and rarely updated the form that held no liability to the Lender for incorrect amounts. It was considered by many as the most worthless document in the real estate transaction.
Full Disclosure
The new Good Faith Estimate (below) will need to be created and delivered to the buyer within 3 days of the lender receiving a buyer’s loan application. The GFE will be updated if there are any increase in costs and if the numbers are incorrect the Lender will have to pay the difference. There are many caveats to this requirements, such as the interest rate increasing over a preset amount, etc… But overall this is a great move and holds the Lender to a much higher standard and significantly reduces the potential for junk fees and loan fraud.
The Agent’s Responsibility
This change will put a bit of pressure on the Realtor to get any contractual changes and settlement fee changes to the Loan Officer much quicker than before. Hopefully all Realtors are educating themselves on the changes and the process.
The new GFE will match the HUD-1 Settlement Statement (also below) that you receive at the time of closing listing all the fees and disbursements related to the transaction. The line numbers on both forms will match to ensure it’s easy to compare the numbers on each document.
It’s great to see this move. Anything that can be done to bring clarity and greater responsibility to the often complicated real estate transaction is a welcome change.
