It is important that everyone understand that “business as usual” is long over. The new forms will be used. There are major changes in the way the process will unfold.
Come January 1st, 2010, as a REALTOR or a consumer at the closing table things are about to change as far as the Good Faith Estimate (GFE) and Settlement Statement (HUD-1). Links below will allow you to print these out to familiarize yourself with them. Both now are three pages in length. The highlights:
- Revised Good Faith Estimate (GFE)
- GFE tolerances on settlement costs (1/8 point allowed to be in error)
- Revised Settlement Statement (HUD-1)
- Revised definitions for application, Good Faith Estimate, and Mortgage Broker
- Additional definitions for changed circumstances, origination services, loan originator, prepayment penalty, third party, title service and tolerance
- Elimination of 1% origination fee cap on FHA loans
RESPA (Real Estate Settlement Procedures Act) forms apply to federally insured or backed loans such as FHA/VA/Conventional and NOT cash deals. There is also a 30 day cure period to give lenders after closing the ability to meet the tolerance. The closing script is eliminated as it is contained in the revised HUD-1. Average charges can be used by service providers and is not limited to loan originators.
Bottom line is it looks like the new GFE and HUD-1 want the borrower to be as crystal clear on everything related to the loan. It looks like the fastest you could go from app to close is about three weeks. On page three of the new HUD-1 boxes compare GFE and HUD-1 costs. On page 3 of the GFE they clearly in the instructions state what charges CANNOT increase past the GFE, can increase up to 10%, and what charges can change. It is VERY clear. The only thing weird I saw on both the new HUD-1 and GFE is it never clearly says the PITI monthly payment but just principal, interest, and mortgage insurance in the loan terms.
It looks a lot different for most of us, but print yourself out a copy and take a look. January is NOT that far off.
With closings averaging 130 pieces of paperwork both the REALTOR and the consumer need to know about these documents ahead of time. One last tip for both groups in this area, be sure to show up at the table with a U.S. government issued ID with a picture and your signature. This is mandatory for identification purposes. Good luck and happy closings!!!