What’s Wrong with the New Good Faith Estimate?

January 5, 2010 by 4 Comments

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.

Filed Under: Disclosure Forms, Good Faith Estimate, Residential Purchase

Good Bye to 2009. Hello to 2010!

January 1, 2010 by Leave a Comment

I must confess, even though 2009 brought many challenges to the mortgage industry, it was a pretty good year to me.  I have been very fortunate to have worked with some wonderful clients over this past year thanks to referrals from past clients or real estate professionals and to those of you who read this blog and decide to select me as your mortgage professional.  I thank all of you.

During 2009, I was honored to receive recognition beyond my wildest imagination. My peers, Washington Association of Mortgage Professionals, awarded me the Jim Fitzgerald Distinguished Service Award.   I also received social media kudos from the Seattle Weekly as Seattle's Best Tweeting Mortgage Brokerin 2009 and Inman News included me on their list of the 50 Most Influential Online 2009.

If 2010 is anything like 2009, I'll count myself a lucky woman. 

2010 will continue to be an interesting year for the mortgage and real estate industry.   I predict that at the first of the year, we will see many Washington State mortgage originators call it quits due to the new licensing requirements along with RESPA reform (the new good faith estimate).  This job isn't getting any easier.   I'm sticking around.

Happy New Year! 

Filed Under: Interest Rates

Mortgage Master will be closing early today

December 31, 2009 by Leave a Comment

Mortgage Master will be closing early today at 1:00 pm and reopening for business on Monday, January 4, 2010 at 9:00 a.m.

I wish you and yours a very Healthy and Happy New Year!

Filed Under: Interest Rates

Mortgage Master will be closing early today

December 24, 2009 by Leave a Comment

Mortgage Master Service Corporation will be closing today at noon to celebrate the holiday season.  We will be reopening for business as usual on Monday, December 28, 2009.

From Mortgage Master and our family to yours Merry Christmas and Happy Holidays.

Filed Under: Interest Rates

T’was the Week Before Christmas

December 22, 2009 by 2 Comments

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,

HMDA, REG B.

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<

Filed Under: Current Affairs, Disclosure Forms, Just for Fun

My “Ideal” Home Purchase Time Line

December 18, 2009 by 3 Comments

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.

HUDTimeline

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

Mortgageportertimeline

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. 

Filed Under: Disclosure Forms, Good Faith Estimate, Mortgage, Opinion, Rant, Residential Purchase

HUD’s Home Purchasing Time Line

December 17, 2009 by Leave a Comment

HUD has unveiled their new "Shopping for your Home Loan – HUD's Settlement Cost Booklet".  What was once a ppamphlet that was included with your loan application has been replaced by a 49 page booklet.   This revised guide for borrowers was created to accompany HUD's new Good Faith Estimate which goes into effect on January 1, 2010. 

HUD's new guide is to help consumers navigate the new Good Faith Estimate.  I'm not going to go all the way through it on this post, I do want to point out issues with HUD's Home Purchasing Time Line (which you'll find on page 4).

 HUDTimeline

Do you see anything wrong with this picture?   Let's review step by step.

1. Determine what home you can afford.   I agree with this.  What home you can afford may be different than what home you qualify for.  You don't have to buy as much home as you may qualify for and you might qualify for less than you desire.  What's most important is being able to afford the home.   I think this step is referring to doing some serious gut checking and reviewing of your personal budget BEFORE meeting with a real estate agent or mortgage originator.

2. Find a real estate agent.  I think step two should be to find a mortgage professional instead of the agent.  They have the cart before the horse with this step.  The last thing a home buyer needs is to be shown a bunch of home they may not qualify for.  Meeting with a mortgage originator first will help them narrow down what programs they qualify for that will suit their financial needs (I think this is HUD's Step 5).  Agents may debate me on this because they like to direct buyers to their preferred lender.

3. Find a home and negotiate the terms.  This is unbelievable!  HUD is recommending that you enter into a binding contract before knowing if you're approved for the mortgage.  Yes there are financing contingencies, but you do not tie up a seller's property when you don't even know that you can close on a transaction.  Plus, most real estate agents will not show you a home until you have been preapproved by a mortgage professional.

4. Shop for your loan — compare multiple good faith estimates.  This is very flawed.  HUD's new good faith estimate carries RESPA reform which in a nutshell means that if a mortgage originator provides a borrower a good faith estimate, they are presumed by HUD to have obtained enough information from you to have created a loan application.  This creates a certain amount of liability for the mortgage originator that in this day and age, most will not accept.   Not to mention that rates change constantly, sometimes several times a day.  If anything, you should shop for the most qualified mortgage professional and not "the loan" or rate…this step should take place around Step 2.

5. Chose the loan that's best for you.  This should take place at step 2 or 3 (after you select your mortgage professional).  This is too late in the game to be determining your financing.

6. Loan originator processes the loan.  Your mortgage originator begins processing your loan at application for purposes of preparing your preapproval letter.  Your loan may actually go into processing and underwriting once you are proceeding with your transaction.

7.  Have house inspected.  This typically take place after you find your home and have negotiated your contract.  You're not going to want to be paying for an appraisal (which would take place at processing) if your potential home doesn't pass inspection.

8.  Shop for other service providers (title, attorney, escrow agent).  Is this a HUD after thought?  If you are going to shop for your title or escrow, you're going to need to do this prior to the contract being written as the purchase and sales agreement dictates who the providers will be (unless the agent writes "buyers choice").  Plus, HUD's new GFE dictates how much the title and escrow fees can change at closing based on if you shop or if you allow the lender to select these service providers.

9. Loan is approved.  There are different steps of loan approval.  This is most likely "final loan approval" meaning all conditions (documentation) have been provided and reviewed by underwriting.

10. Get insurances and do final walk through.  I recommend shopping and selecting your home owners insurance much earlier in the process.  Once you have a bona fide contract and your home has passed inspection, you can start shopping for your insurance agent. 

11. Go to settlement.  In Washington, you're probably going to your signing appointment at the escrow company a couple days before closing.   Sometimes signing will feel like it's at the eleventh hour!

12. Move in. 

Watch formy next post where I share how I think this purchasing time line should look. 

Filed Under: Escrow and closing, Good Faith Estimate, Opinion, Residential Purchase

Title, Escrow and HUD’s New Good Faith Estimate

December 16, 2009 by Leave a Comment

I have been wondering how HUD’s new GFE, which goes into effect on January 1, 2010 will impact title and escrow companies.   It appears as though HUD would like to see the borrower have the possibility of more control in selecting those services instead of the current system where typically in our area of Washington, either the real estate agents thumb wrestle over their favorite title or escrow company or the lender may select.  Rarely does the consumer have a voice in who will be providing the title insurance on their home or who will be the “neutral third party” facilitating the closing one of their largest transactions in their lifetimes.

From a local escrow and title provider The Talon Group’s blog:

The current local practice of the seller choosing title insurance appears to be at odds with HUD reform that attempts to put the buyer back in the drivers seat. HUD makes no bones about it’s intentions for empowering buyers to shop for the best deal possible when choosing title and settlement services. Also going into effect January 2010, lenders  will face strict guidelines and tight tolerances when listing these services on the new Good Faith Estimate.

The “tolerances” define what the variance in costs for title and escrow/settlement services may be between the (soon to be) binding good faith estimate and the settlement statement at closing.   The tolerances for title and escrow fees fall into a couple “buckets”:

10% tolerance:the accumulative fees for title and escrow services cannot exceed higher than 10% of what was disclosed on the good faith estimate.

  • the lender provides the consumer with a written list of their preferred service provider and is then subject to the 10% tolerance IF the consumer selects a service provider from said list.
  • the lender does not permit the consumer to shop and requires certain service providers to be used.  No list is provided to the consumer.

Not subject to tolerance; there is no limit to what the difference may be at closing verses what was disclosed on the good faith estimate.

  • The consumer selects their own title or escrow service provider that is not on the lender’s list. 
  • When the seller or real estate agents direct title or escrow services that are not on the lenders list, it is presumed that the buyer selected (or agreed to) these services and therefore, they are not subject to tolerance (no 10% cap on fee increases at closing).

With these tolerances set forth on the new good faith estimate, I wrote an article at Rain City Guide predicting that the big banks will use the new Good Faith Estimate as a reason to mandateto their mortgage loan originators they must only use their “in-house” or affiliated providers and may not recommend outside escrow or title companies for service–regardless of established relationships or a proven track record of excellent service.   I believe this will follow in the footsteps of HVCC where banks are using AMCs (appraisal management companies) that they have ownership interest in–even if the HVCC fiasco is fixed, I think you’ll see banks still insisting that an AMC is used and will use the new GFE to gain title and escrow revenue.  They’ve tasted the gravy.

Filed Under: Escrow and closing, Good Faith Estimate
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