HUD Feels Your Pain--And Does Something About It

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Shopping for a refinance mortgage in 2010? You can lose the Advil--comparing mortgage quotes won't be causing any headaches after January 1st, 2010. The new forms are easy to understand, and all the important stuff is right up front. In 2010, you won't have to wade through piles of disclosures, looking for evil fine print. And it won't matter whether the lender chooses to call a fee "administration," "underwriting," "extra silly charges" or "garbage," you get a bottom line figure that lets you cut to the chase and compare loans easily from one lender to the next.

Regulation X Gits Rid of Hidden Boogers

Changes to Regulation X means no more "gotchas" when you finalize your home loan--no surprise fees, no amazing interest rate increases, no "mis-underestimated" mortgage costs. It standardizes the way every lender discloses its loan charges and interest rates, so shopping your next new home loan or mortgage refinance should be almost fun. This is actually a good thing for lenders, too--the honest ones (the majority) won't be at a disadvantage to the few sneaky ones that routinely low-ball their loan offers.

(Drum Roll Please......) Introducing the New Good Faith Estimate (GFE) and Settlement (HUD-1) Forms

The highlights:
�� All lenders have to disclose their fees the same way.
�� Loan feature information (penalties, adjustments, negative amortization, etc.) is on the forms, front and center.
�� Total lender fees are shown as a single amount so you can make comparisons between lenders easily.
�� The GFE must reconcile to the HUD-1 within certain tolerances, so estimates must be fact not fantasy.

The Settlement Service Provider List--Buyer Beware!

Lenders have to furnish a list of service providers like title companies to you--choose any provider you like; they don't have to be on the list. If you do select a provider from the list, the fees are guaranteed to stay within 10% of the estimate. If you choose a provider not on the list, that protection goes away. But this is important: the providers on the list are the not necessarily the lowest-priced--unless you compare title and escrow services, you could pay more than you need to. And one bank in America provides a "list" but only has its own title company on it--definitely shop around in that case!

Mortgage Rates and Fees: Disclosures Up the Yin-Yang!

On your final closing documents, the lender's charges must be what was disclosed on your GFE--even if the charges were mistakenly underestimated. And any time there is a legally-defined "changed circumstance," the lender must update and re-disclose its fees and terms within three business days. What is a "changed circumstance?"

  • War, disaster, or "act of God";
  • Changes to information provided by you (if for example you switched jobs);
  • Different loan amount or appraised value of the property (which affects the loan-to-value);
  • Locking your rate or a rate lock expiration;
  • A change in the deal requested by you--for example, switching from a fixed to an adjustable mortgage.

A Little Tolerance

Some charges like origination fees, discount points, and transfer taxes cannot change at all. Others, if the provider is on the lender's list, have a tolerance of up to10%. Changes beyond that 10% threshold must be paid by the lender, not you. Check out the new forms. I think you and borrowers everywhere will approve.