New Mortgage Disclosures additional Wait Periods to Mortgage Transactions

MortgagePorterHourGlassHouseEffective on mortgage applications taken October 3, 2015 and later, lenders are required to use two new disclosures created by the CFPB. The Loan Estimate, which replaces the 2010 Good Faith Estimate and the RegZ/Truth in Lending; and the Closing Disclosure, which replaces the HUD-1 Settlement Statement.

The new disclosures, the Loan Estimate and the Closing Disclosure, have “wait periods” that restrict how soon a real estate transaction with a mortgage can close. The Loan Estimate is issued once a lender has received an application (the six points of information that creates an application per the CFPB) within three business days. There is a seven day waiting period that takes place once the Loan Estimate has been delivered before the borrower can sign their final loan documents (also referred to as “consummation”).

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Wanna close on your real estate transaction in 30 days? You better buy or sell before August 2015.

speedbumpNew disclosures created by the CFPB (Consumer Financial Protection Bureau) are set to go into effect on August 1, 2015. In my opinion, the new disclosures will be a huge improvement compared to the Good Faith Estimate that HUD created in 2010. At least the new disclosures will show the total payments due…and of course, they’re not perfect either. I’ll address the new forms on another post.

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What’s Wrong with the New Good Faith Estimate?

The new good faith estimate is getting plenty of protest from mortgage originators across the country…my biggest issue is that I cannot effectively use it as a tool to help people who are interested in buying a home or refinancing effectively see what the proposed mortgage scenario may look like. 

I received this email from a client I've been working with this morning:

"[We] are back on the search for a new home and we have found a couple that we would like to run past you.  When you have a moment, could you crunch the numbers for us and provide a good faith estimate on these two properties.  We would like to see one with the variable that the seller covers the closing costs and one with us covering the closing costs.  That will give us a good idea of what the middle looks like once we start negotiating."

The new good faith estimate from HUD does not show consumers:

  • seller contributions towards allowable closing costs
  • total funds due at closing
  • total monthly mortgage payment (PITI aka principal, interest, taxes and insurance)

For what my clients are interested in seeing, HUD's good faith estimate isn't very useful or meaningful.

I do like that the new GFE is a uniform document required to be used by all mortgage originators however it is not effective for consumers who actually want to compare potential scenarios. 

I find the new good faith estimate conflicted since it has a heavy emphasis on shopping rates (page 3 of the document includes a shopping chart), yet mortgage originators are (and will be) discouraged from using it for "rate shoppers" since the document is binding for a minimum of 10 business days even though the consumer does not have to sign it or commit.  It's one thing to be bound by our lender fees I quote (I've done that for years without this new document), however to be stuck with third party fees that I have no control over for 10 business days is something I'm not too happy about.

Many mortgage companies, banks and loan operating systems are in the process of creating forms that can be used for the purpose of rate quotes and/or illustrating what the new good faith estimate has missing.  This recreates the very same scenario which I thought HUD was trying to correct: consumers will have to sift through various documents which will not be uniform from lender to lender.  It's very puzzling to me and I'm sure it will be to the consumer as well.

T’was the Week Before Christmas

Editor's Note: We have some super talented people at Mortgage Master.  This poem was written by Shelli Nixon at our office and shared during our RESPA training today.   This is posted at Mortgage Porter with her permission to share with you!


T'was the week before Christmas

When all through the lands,

LO's and Closers were wringing their hands.

RESPA Changes are coming,

They all started to worry,

We'd better get trained, and trained in a hurry!

We all kept on hoping

There would be a delay.

But HUD said, "No Way," it's all here to stay.

"We love our new HUD

And our new GFE,

Don't fret, don't worry, it's as simple as can be."

We all shook our heads,

Threw our hands to the sky.

What were you smoking?  You must have been high!

You took a one page doc

And changed it to three.

Easier?  More simple?  How can that be?

The Regs don't match up,

So now what do we do?

HUD says, "No comment, It's all up to you."

No info on TILA,


We are totally screwed, why can't they see??

In a time when some borrowers

Think lenders are scary,

You've given 3 pages to make them more wary.

This doesn't make sense,

Not one little bit.

We are all trying hard to not throw a fit.

So we all do our best

To put borrowers at ease.

But make more reform, please, please, please!

Please bring someone in

Who knows what to do.

What is best for both borrowers AND lenders too.

We are all still waiting,

Though not holding our breath

And hoping the government doesn't "Reg" us to death.

So on this week before Christmas,

I'd like to wish you

Good luck with RESPA, I need it too!

~Shelli Nixon, Mortgage Master Service Corporation<

My “Ideal” Home Purchase Time Line

Previously I reviewed HUD's Home Purchasing Time Line, which I found several issues with if you're a home buyer in Washington State.  If I'm going to pick something apart, it's only right that I offer an example of how I think it should be corrected.

Below is HUD's suggested time line.


Here is how I see a successful purchase transaction evolving.  My modifications to HUD's time line are in blue below.


Rhonda Porter's Ideal Home Purchase Time Line   

Step 1: Determine what you can afford. Make sure you really consider how much home you can personally afford (not just how much home you qualify for or what a lender tells you).  Please do not stretch yourself to be "house poor".  Keep in mind the lessons that this economy is teaching all of us.

Step 2: Shop for a mortgage pro. Oh how I wish that instead of a shopping cart for rates (which is a moving target) and fees on page 3 of the new Good Faith Estimate, that it had a place for you to "shop" your mortgage professional instead.  Perhaps a place where you could compare resumes and available products instead of focusing so much on rate and fee.  The person who will be guiding through the process of obtaining one of the largest debts you may have in your lifetime should not be selected so casually.

Step 3:  Choose the best loan for you.  After selecting your mortgage professional; he or she should consider your financial goals and help provide you with information to allow you to make an educated decision on which mortgage program best suits your goals based on what you currently qualify for.  You need to know what your total payment will be and how much money will be required for your down payment and closing costs BEFORE you start looking for your next home.

Step 4: Find a real estate agent.  I recommend asking friends and family members who have recently purchased or sold a home and interview them.  If you need a recommendation for one around the greater Seattle area, please ask me!

Step 5: Shop for other service providers.  This has to happen BEFORE you prepare an offer on your next home assuming your lender permits you to shop (this is per RESPA guidelines–not a control freak mortgage originator).  If you select your own title and escrow service provider, there is no cap to how much their fees can change at closing.  If you use the providers from the mortgage originators preferred list, the accumulative fees at closing cannot exceed 10% from the good faith estimate.

Step 6: Find a home and negotiate contract terms.  Now you can start searching for your next home with confidence since you know what you can afford and you have your home buying team assembled.

Step 7: Have house inspected.  I recommend this even if your home is new construction.  I can tell you a few stories…but this post is all ready getting too long!

Step 7.5:  Shop and select your home owner insurance provider.  Do not wait until closing to do this.  Home owners insurance rates can vary and your credit score will impact your insurance rate.  Also if the home has a history with certain insurance claims, there could potentially be issues that are better to be aware of early in the process.

Step 8: Loan is processed.  Once we have a signed around agreement, your loan is processed and various services are ordered or set up.  This is also the time to review you lock options to determine whether you want to commit to an interest rate or float (not lock). 

Step 9: Loan is approved.  The loan approval may come back with conditions.  This happens after the underwriter reviews what has been submitted to them during the processing period. 

Step 10: Do the final walk through. 

Step 11: Go to settlement.  Prior to your escrow appointment, I recommend that you obtain a copy of your estimated HUD-1 Settlement Statement 1-2 days in advance so that you have time to review the final figures.  Be sure to let your mortgage professional and escrow officer/settlement agent know that you expect this as the lender will need to provide your loan documents to the closing company a few days earlier than "the norm".  The same is true if you want a complete copy of your loan documents to review prior to your signing appointment.

Step 12: Move in!  Yay–this can be such an exciting time!  Typically there may be a few days between signing your closing documents and moving into your new home. 

Review of HUD’s New Good Faith Estimate: Part 1

UPDATE August 31HUD just issued their 2nd revision to the RESPA FAQs…let's hope the third time is a charm. 

As I mentioned in a previous post, I'm going to be doing a series to review the Good Faith Estimate that will be mandetory on new residential transactions effective January 1, 2010.

The top of the new form is not earth-shattering.  It includes contact information for the mortgage originator and the borrowers' name, property address and the date the GFE was prepared.  An improvement would be to have the estimate also include the actual time it was prepared as well since we are averaging 3-4 new rate sheets per day.

HUD created this new GFE so that consumers could shop by rate and fees, ignoring the qualifications of the mortgage originator.  On the top of the form, they encourage you get three quotes.


We'll delve deeper into the "shopping cart" in a future post.  Can you imagine if HUD also encouraged borrowers to compare the expertise and track-record of the mortgage originator?

The section "Important dates" is on the top half of the new Good Faith Estimate.


Item 1 is suppose to let consumers know how long their rate quote on said estimate is good for.   There is no way to guarantee how long a rate is good with a quote unless the borrower is locking at that instant–infact, rate changes can and do happen while you're trying to lock in a rate.   Mortgage originators do not have crystal balls to know when or if the next rate change is coming. 

Item 2 is suppose to give the consumer a date for how long the closing costs are good for.  Again, this is assuming the mortgage originator has some magically control over third party services, such as the appraisal, title and escrow.  We have no way of knowing for certain if rate increases or reductions are planned by the various companies that are involved with putting together a real estate transaction.  The estimate can only be reflective of what fees are at the moment in time that GFE is prepared. 

Item 3 is just intended to disclose the lock period.  The most common lock periods are 30, 45 and 60 days.  Without a closing date on a purchase, you do not know the lock period.   Some borrowers may decide to float (not lock) and home buyers without a signed around contract do not know what the agreed to closing date is.

Item 4 provides the consumer with a drop dead lock date.  I don't have an issue with this.  Consumers should know how long they can float should they decide to gamble the markets with mortgage rate.

Per HUD's New RESPA Rule FAQs, which they've all revised just 7 days after it was first issued, Good Faith Estimates expire after 10 business days:

If a borrower does not express an intent to continue with an application within ten business days after the GFE is provided (or such longer time period specified by the loan originator), the loan originator is no longer bound by the GFE.

I'm assuming this does not apply towards interest rates where the rates may be the same or we could have experienced 30 rate sheets within the said 10 business days.  I'm also concerned about this language as the loan originator cannot guarantee that certain loan programs and underwriting guidelines will be available within any time period.   Unless the borrowers information (credit, income, assets) and the mortgage world has not budged in ten days, I'm not seeing how a mortgage originator can be bound to the GFE.

I do stand by my good faith estimates, however until an application is made, all supporting information is provided and the rate is locked, there cannot be any guarantee.  There are too many moving parts and uncertainty.   Mortgage originators will need to state clearly to the consumer the rate is based on x, y and z and as long as all of these hold true, your estimate is "binding" for 10 business days assuming the rates are the same at that moment, underwriting guidelines have not changed and the program is still available (as I'm writing this post, I'm receiving notice from one of the lenders I work with that they are no longer offering the 40 year amortized mortgage).  Do you see an issue here?

Watch for my next post in this series where we continue reviewing the first page of HUD's new Good Faith Estimate.