Good Faith Estimate Mortgage Disclosures

Changes are a-coming… On January first the federal government expects everyone to be using the new consumer-friendly Good Faith Estimate mortgage disclosures and the new settlement statements.

The issue here is important to consumers because the new paperwork provides numerous protections the old forms did not. Most importantly, they make it extremely difficult for loan officers to “low ball” the estimated fees and charges on the mortgage and then later hit homebuyers with surprise increases at closing.

Before, if the estimated fees from the lender were $2,000 but the total on the settlement sheet came to $3,000, the homebuyer would have to come up with the difference. That was abusive.

Under the new rules, starting January 1, the lender or broker will be subject to what are known as “tolerance” limits. Any charges over the limits will have to be eaten by the lender or broker - and there will be zero tolerance for increases on certain fees.

Other types of charges, such as for title insurance and settlement services, generally won’t be allowed to come in more than 10 percent above the upfront estimate.

All consumers making loan applications on or after January 1 must receive the new forms at application and at closing.

This is all good news for the consumer.

website translation