Helping Washington State homeowners learn more about their mortgage options.
This is a guest post from Kevin Nehls, friend, client and co-owner of Dog Daze Natural Pet Market located in Puyallup, Washington.
Come on out and stroll around downtown Puyallup for the Fall Art & Wine Walk which will take place on October 3, 2009 from 3:00 – 7:00 pm in downtown Puyallup. [Read more…]
Per HUD, a loan originator (mortgage broker or lender) must issue a Good Faith Estimate no later than three business days after an application or enough information is provided to the mortgage originator to complete an application.
An application is basically defined as having the following information (for purposes of providing a GFE):
Once a borrower decides to lock in their interest rate, if the rate, rate related fees or terms have changed, a new good faith estimate must be provided. (UPDATE FAQs issued on January 28, 2010 addressed this point).
If the loan is declined or the application is withdrawn from the borrower within the three day time period, then the good faith estimate is not required.
In addition, HUD makes it more difficult for mortgage originators to issue a revised Good Faith Estimate to borrowers. "Changed circumstances" (which I may have to write about in a future post) does not seem to include changes with underwriting guidelines or if a loan program is terminated from the lender (unless that's considered an Act of God). If a borrowers situation qualifies as a "changed circumstance" which would impact the terms of the mortgage, then a new good faith estimate would be required to be issued within three business days.
I prefer to provide a good faith estimate whenever someone is serious about receiving a rate quote–even if I'm missing any of the criteria above. A Good Faith Estimate is not a commitment to lend or a preapproval–in the preliminary stages, it's just that, an estiamte provided in good faith detailing the cost of the mortgage associated with the rate that is being quoted. HUD's latest FAQ (issued September 18, 2009) has a line that concerns me…and I'm not totally sure of the (or if there is) potential implication:
"If a loan originator issues a GFE, the loan originator is presumed to have received all six pieces of information…."
I'm not sure why that line was added to the many revisions to HUD's RESPA FAQs…we'll see if HUD sheds some light with more revisions which I'm sure we'll continue to have.
Update January 17, 2010: Now that the new Good Faith Estimate is requried to be used, most mortgage companies and banks will not allow it to be issued for purposes of rate shopping. Many are using substite forms for preliminary rate quotes.
Read this post for more information on Changed Circumstances and when a good faith estimate can be re-issued.
On October 12, 2009, King County's recorder's office is closed due to the Furlough. Snohomish and Kitsap Counties are closing early every Friday this month. You may want to make sure your transactions are scheduled for closing accordingly (and hug your Escrow Officer).
NAMB, the National Association of Mortgage Brokers, has a call to action that many people beyond the lending industry may feel strongly about: HVCC. The Home Value Code of Conduct is a controversial act that was created to not allow mortgage originators to be involved with the selection of an appraiser. Overall, the results have been a mess. Instead of punishing the few, the masses are taking the hit with many appraisals being done by those who will take the lowest bid and/or who are not familiar with the neighborhood where the appraisal is being done…while the Appraisal Management Companies, the channel where many appraisals are ordered, are taking about half of the appraiser's fee for placing the order–guess what? Most of the AMC's are owned by banks and title companies. AMCs are unregulated! HVCC is wrong and bad for consumers.
I have no issues with an appraisal that comes in lower than expected as long as it was done properly.
What can you do about HVCC?
Members of Congress are back in session and they need to hear from you–their constituents. HR 3044 is a bill that would put an 18 month moratorium on HVCC (the Home Valuation Code of Conduct). Please contact your Congressman today and ask them to co-sponsor HR 3044. I just sent an email to Congressman Jim McDermott…it took me less than 5 minutes.
And please be sure to sign this petition.
Feel free to share this post with your friends, family and co-workers…especially if they have been impacted by HVCC.
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. 
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.
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!
Mortgage Master will be closed in observance of this holiday. We will reopen for business as usual on Tuesday, September 8, 2009.
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 www.twitter.com/magnoliacougar
WARNING: This kitty does like to drop the f-bomb in tweets.
Rhonda Porter is a Licensed Mortgage Originator MLO121324 living in the greater Seattle area. Rhonda began her career in 1986 in the title and escrow industry and began her mortgage career in 2000. She enjoys helping people understand the mortgage process and started writing The Mortgage Porter in late 2006. Read More…
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