Archives for September 2009

Good Faith Estimate Part 6: Page 3 of the Good Faith Estimate

This is the last page of HUD's new Good Faith Estimate should hopefully be pretty self-explanatory…although it is new concept as compared to the GFE that we have been using.  

The first section covers which charges can increase, which have a limit of increasing no more than 10% and which can change.


If you decide to shop for your own title, escrow or home owners insurance and not use who the lender recommends, the lender is not responsible.  If you use who the lender recommends, the total of those fees cannot increase by more than 10% at settlement.  

The Tradeoff Table is intended to help you select between various ways of having your mortgage priced.  Your rate can be priced with or without points (or origination fees)–it is your choice.  The mortgage originator is only required to complete the first column on the left.


The Shopping Cart is intended for you to shop…shop…shop…to your hearts content.  If you're a long time reader of The Mortgage Porter, you know I feel strongly that selecting who is going to help you with your mortgage by rate and cost alone alone can be one of the most expensive mistakes you make.  Especially considering how challenging it is to accurately shop rates factoring in how often rates change and that unless you are locking in your rate at that moment, it's a moving target.   Good intentions–but wrong message. GFEShoppingCart

Why not add a box to this all ready long document where consumers can compare the qualifications of the mortgage professionals they're shopping? You're not at Target–you don't need a shopping cart.

Good Faith Estimate Part 5: Your Charges for All Other Settlement Services

Are you still with me?  I hope so.  I've been writing a detailed review of HUD's new Good Faith Estimate.  This post will cover the "other settlement charges" as shown on page 2 of the GFE (below).


Block 3 "Required services that we select" is where fees specific to government loan programs, such as the VA Funding Fee and (I'm assuming, since it is not specifically addresses in the FAQs) FHA Upfront Funding Fee or USDA Funding Fee.  This has been reflected under prepaids on the existing good faith estimate (see the last photo on this page, lines 902 and 905 of the old GFE).

Block 4 "Title services and lender's title insurance" is where the lenders title policy (typically paid for by the buyer) and where the escrow companies fees will go.  Below is a shap shot of our current–soon to be retired GFE section.  The escrow company fee is line 1101 and the lenders title insurance policy is line 1108.   Now it appears these items will be lumped together.   NOTE: the total closing costs shown below also include the Section 800/Lender Fees aka Origination  Charges.


Block 5 "Owner's title insurance".  This is the policy that typically, the Seller pays for–not the buyer.  Why it's on the buyers good faith estimate beats the heck out of me.

Block 6 "Required services that you can shop for".  Finally as the consumer you do have an official say in who your title and escrow provider may be. Some companies may offer a discount when you use both their title and escrow services.  However, should you decide not to use who is recommend by the lender, then the 10% limit on how high the fee may adjust come settlement time is waived. 

Block 7 "Government Recording Fees" is simply that…the cost to record your new documents

Block 8 "Transfer Tax".  I wonder if we are really suppose to include what the excise tax is on a purchase–again, this is a Seller cost and not a Buyer cost.


Block 9 "Initial Depost for your escrow account" is the cost associated with starting your reserve account including your home owners insurance and property taxes.   This is section 1000 of the old GFE.

Block 10 "Daily Interest Charge" is simply your prorated interest.  I do like the description provided on the new good faith estimate.  Shown on line 901 of the old GFE.

Block 11 "Homeowner's Insurance".  This provides a block for you to shop and I leave this task for my clients.  This cost does fall under those that can change at settlement if the borrower is not using the company the lender selects.

Our old GFE that will be in use until the end of this year (unless lenders require the new one in advance–which will not surprise me) has the reserves and prepaids reflected as photod below.


This section is being replaced with Blocks 3, 9, 10 and 11.

TMI:  I've got a case of heart burn…perhaps it's time to wrap up this post and tackle page 3 of HUDs new GFE another day!

Happy Labor Day

Mortgage Master will be closed in observance of this holiday.  We will reopen for business as usual on Tuesday, September 8, 2009.

A Long Overdue Friday Funny

If you live in the Seattle area, you've most likely heard about the cougar that's been spotted in the Magnolia neighborhood…but did you know that this tricky feline has her own Twitter page?


She's been taunting trappers and posting pictures of recent tasty tidbits with Twitter updates.  I'm sure this will make the evening news…in fact this kitty is following local reporter Rebeca Stevenson who recently received a tweet from King 5 (competing station and her former employer) that the cougar is on the prowl:

RT @KING5Seattle: .@StevensonRebeca — watch out for @MagnoliaCougar! Red lipstick and cocktail in hand. 🙂

It's all good fun and has really given me a good chuckle today.  You can check out what the "SEEADDLE Kitteh" is up to by visiting

WARNING:  This kitty does like to drop the f-bomb in tweets.

Waiting for the Jumbo Shoe to Drop

The Government has reached out to home owners who have conforming or FHAMortgageporterjumbo financing.  However if your mortgage is a jumbo (aka non-conforming); your options for refinancing are few…there is no HARP for you.   Many home buyers used various types of mortgages to buy their dream or "move-up" homes a few years back during the loosey goosey days of mortgages and now are either dealing with or waiting for these large mortgages to adjust.

Recently I've added Jumbo mortgages back to my Friday rate quotes, including fixed and a couple of adjustable rates mortgages.  The difference now is that people must actually qualify for their mortgage.  No more stated income or qualifying at a teaser low interest only payment.  And as I mentioned, there is no assistance for you unless your mortgage servicer is willing to do a modification.

As Diana Olick's video above addresses, banks have a large "bucket" of mortgages that are getting ready to go into foreclosure.  Many are jumbos.   Even if Obama's programs for loan modifications and refinances reached out to the high end home owner in need of a lower mortgage payment; if the home owner has lost their job, odds are against them.

The timing of no available mortgages for the high-end home owner couldn't be worse.   For the past few years, the pricing was not attractive for jumbos.  Someone with an option ARM, for example, would not want to nor probably qualify for the much higher rates if they wanted a more secure fixed rate product.   This also prevents the jumbo home owner from being able to sell their home should they decide they can no longer afford it.   Their home's potential prospects are limited to those with significant cash down payment to have a "high balance" loan limit (currently in the Seattle area, the 2009 high balance loan limit is $567,500). 

The Seattle-Bellevue area also has a significant amount of high end homes.  How many are waiting to go into foreclosure?   This is one sector of the market who odds are will not see a bail out.

Good Faith Estimate Part 4: Your Adjusted Origination Charges

Page 2 of HUD's new Good Faith Estimate which will be mandatory effective January 1, 2010 begins with addressing the origination charges associated with the proposed mortgage.

GFEAdjustedChargesThe origination charge shown in Block 1 includes the following:

  • Origination fees (currently shown on line 801, or 808 if you're working with a mortgage broker).   Origination fees do not include "discount points" which are paid to buy the rate down.
  • All originator charges (as what is currently itemized in Section 800 of the GFE, shown below).   According to HUD's New RESPA FAQs, these fees include:
    •  Processing
    • Administration
    • Underwriting
    • Document Preparation
    • Wire
    • Lender Inspection
    • and other misc. fees.


So instead of seeing an itemized list as we currently do on the soon to be extinct GFE (above), you're going to have this cost lumped together in Box 1 above.   In some ways I think this is good–I've recommended many times that consumers who are shopping lenders should do so by the total closing costs shown in Section 800.  Now consumers won't have a choice but to view those fees as one lump sum in relation to rate.

The total sum of closing costs in Section 800 of the "old GFE" is $5318.  This is what you will find on the new GFE "Block 1".

Block 2 of Your Adjusted Origination Charge is intended to help consumers understand how their rate is priced.  

The first line "The credit or charge for the interest rate of X% is included in "our origination charge".  For example, if on Block 1 above, I had $4000 listed (as I do on the old GFE line 801); the borrower can assume there are $1318 of lender charges in addition to the origination fee.

The second line states "You receive a credit of $Y for this interest rate of X%.  This credit reduces your settlement charges".   This section would be used in the event there is Yield Spread Premium/YSP (rebate pricing) or if the mortgage is being priced as a "no cost" loan.

The third line "You pay a charge of $Y for this interest rate of X%.  This charge (points) increases your total settlement charges".  Of course this is referring to discount points which are intended to buy your rate down.

What are your thoughts about the new changes?  Would you rather see your closing costs from Section 800 itemized or lumped together?   My next post will cover "Other Settlement Charges".