Good Faith Estimates

New RESPA laws (Real Estate Settlement Procedures Act) regarding Good Faith Estimates went into effect January 1, 2010. Residential lenders and mortgage brokers must now use a new standardized Good Faith Estimate form (GFE) that clearly discloses the terms of your loan and closing costs.

Settlement/title agents must also now use a new statement that mirrors the GFE and disclose any variances in the statement to the borrower. It is estimated by HUD that the new changes should save borrowers approximately $700.00 in closing fees as a result of certain costs and fees that have been eliminated.

Hire Your Own Attorney

Many settlement agents are attorneys, but it is recommended that you hire your own real estate attorney to review your GFE and closing documents because your attorney can advise you if there are any truths and lending violations. If there are, you can rescind your loan.

“The best way to protect yourself is to be educated on all of the possibilities. Make sure to keep an open line of communication with your lender on the subject. If you have hired an attorney to represent you against the bank, be sure to express your concerns about any future liability,” says, Joel Jacobi, loan modification attorney at American Residential Law Group.

Benefits to Borrowers of the New GFE

The new changes make it easier for borrowers so they can shop around and compare loan products, fees and costs. There are no hidden fees. Lenders must disclose everything. This should help to eliminate predatory loan practices against borrowers, especially those with less than perfect credit scores.

Truth and Lending Regulation Z

Although The Truth in Lending Act (TIL), also known as Title I of the Consumer Credit Protection Act has been protecting consumers for more than 30 years, the new GFE will further protect borrowers against credit terms and costs and should prevent predatory loan practices.

Regulation Z applies to individuals or businesses that offer or extend credit when the following four conditions are met: (i) the credit must be offered or extended to consumers; (ii) the offering or extension of credit must be done on a regular basis; (iii) the credit is subject to a finance charge or is payable by a written agreement involving more than 4 installments; and (iv) the credit is primarily to be used for personal, family, or household purposes.

There are certain provisions that apply if a credit card is involved even if there is no finance charge or it is not payable in more than 4 installments or if the credit card is for business purposes.  There are also certain requirements that apply to persons who are not creditors, but who provide applications for home equity plans to consumers. For more information about TIL Regulation Z, please go to the HUD website at www.fdic.gov.

Your lender, title company or real estate attorney can all answer your questions regarding the GFE.

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