Effective January 1, 2010, HUD is requiring mortgage originators use a new Good Faith Estimate which was designed to reduce the confusion for consumers and HUD claims that the "new Good Faith Estimate will help borrowers save nearly $700".
The new GFE is drastically different than the current form and in my opinion, it's not all for the better. To begin with, the new form is three pages long instead of the current single page form…this seems to be the wrong direction for reducing paperwork for American borrowers.
The intent of the new form is to "help consumers shop for the lowest cost mortgage and avoid costly and potentially harmful loan offers". If you are a long time reader of The Mortgage Porter, you know that I strongly feel that you should select the person who is going to help you with your mortgage, possibly the largest debt in your lifetime that is attached to your most valuable asset, by rate and cost could be one of the most expensive mistakes you ever make. Other factors are overlooked when you're chasing the bottom dollar or a rate that you're not in position to lock when rates are changing 3-4 times per day on average in this turbulent market.
What's more important than rate and fees? How about making sure you're working with an experienced and qualified mortgage originator who can navigate your transaction to closing for starters. It is more important than ever to select a mortgage originator who stays current on underwriting guidelines and who will roll up her sleeves to work for you. If you're working with an originator who cares about her clients returning to her, has referral business (does not have to rely on cold marketing or junk mail to find clients) and who is ethical; then a fair competitve rate and fees will follow.
Don't get me wrong, you should compare…but compare more than rates and fees. Not shopping the mortgage originators qualifications and focusing only on the dollar may wind up producing a "potentially harmful loan offer" that is not suited for your financial scenario.
I will be reviewing the new Good Faith Estimate in a series of posts here at The Mortgage Porter. Stay tuned.
This is a good thing. This will help the communication between the lender and consumer. This will stop the “bait and switch” and keep the wool from going over the consumers eyes.
Anthony A
Sacramento, CA
Hi Anthony, after reviewing the new GFE several times and writing 6 articles about them in my series (more are qued to be published); I’m not sure I agree with you.
I think there is far too much emphasis on shopping rates–which is a moving target. Working with a SKILLED mortgage professional who has the expertise, knowledge, available products and who offers a fair rate is what’s most important.
Add a box to this all ready too long GFE where borrowers can compare the skills of the LO in conjunction w/the rates and I’ll be happier.
I don’t like the attempt to wipe out the YSP.
The only thing that’s going to happen is that the Broker Fee will be higher in order to absorb the credit of the YSP. How is this going to help.
We don’t claim to have the lowest rates in town….we claim to be the best. Our income on most loans is a combination of Fees and YSP. And the cost of the loan still beats most banks.
So how is this helping my clients? It’s not!
I’m now having to manipulate numbers to make the same income or charge higher fees and give a par rate.
So what if the USDA borrower doesn’t have enough cash to pay me? I currently give them a little higher rate and earn the YSP. Now I’ll have to credit the borrower the YSP and still make no money at all.
Somehow this just does not seem to make any sense.