Good Faith Estimates
and HUD-1 Statements...Review, Review!
In a recent survey, over 70%
of all borrowers do not receive their Good Faith Estimate (GFE) and/or
Truth-in-Lending Statement within 3 business days after making
application as required by Federal Lending laws. Without a GFE or
Truth-in-Lending statement the borrower has no real way of knowing what
their interest rate will be and no way of knowing what the costs of
getting the mortgage are.
Another sad statistic is that
of those that DID receive the estimate within the required period, over
half were either blank, riddled with "junk
fees" or so lacking in information that they were deemed useless in
helping the consumer make an informed decision.
"Good Faith
Estimate"...or "Guesstimate"
You
can't blame Heather Andersen for feeling nervous. As she prepares to
close on a mortgage for the second time in her life, she worries about a
replay of the first.
The day
before closing on her first house five years ago, "I got a call that my
numbers were wrong," she says. The title company informed her that
her HUD-1 Settlement statement calculated that she would have to
go to closing with $3,000 more than she and her husband had expected to
need.
They
were bitten by an inaccurate good faith estimate. It happens to
thousands of people every year, and the victims have no recourse. Either
they pay up or the deal falls apart.
For them
excitement over buying that first house yielded to panic. They had
scraped together every last bit of savings for the down payment on the
newly built house. They didn't have a spare $3,000.
Federal
regulations require brokers and lenders to provide a good faith estimate
of closing costs, but there is no penalty for inaccuracy.
Lenders and brokers can provide a low
estimate, then spring an expensive surprise in the final hours without
getting into trouble with the feds.
U.S.
housing secretary Mel Martinez calls it "settlement sticker shock." He
has proposed making the good faith estimate binding, but has met
resistance from the title industry and its allies in Congress.
"Today, this estimate is more like a good faith guesstimate," Martinez
told a House committee last year.
Because
the government won't protect you from an inaccurate good faith estimate,
you have to watch out for yourself. You have to review the estimate
critically and ask questions.
All fees
are subject to change between the good faith estimate and the closing
table.
Hazard
insurance premiums and government fees such as property taxes are among
the most likely to be inaccurate in the good faith estimate. You can
always talk to the insurance agent yourself to find out how much the
insurance will really cost, and you can visit the county courthouse to
learn how much the property taxes will be.
In the
Andersen case, the $3,000 error involved property taxes AND added fees
by the lender that were NOT on the initial Good Faith Estimate.
The good faith estimate listed the property tax for an empty lot,
without a house. Looking back, she wonders why no one caught the error
earlier. When drawing up the estimate, was the lender dishonest or
incompetent?
"I think
it might have been a little bit of both," she says.
Either
way, there was nothing she could do about it but grit her teeth and find
the extra $3,000.
Required
by Law to be Given, but Not be Accurate!
The
good faith estimate is required under a law called the Real Estate
Settlement Procedures Act (RESPA). The law also bars kickbacks among
settlement providers and prohibits the property seller from requiring
the buyer to use a particular title insurance company. Those elements of
the law are enforced. But the law doesn't establish an
enforcement mechanism for ensuring the accuracy of good faith estimates.
Martinez, the secretary of the Department of Housing and Urban
Development, has proposed a new set of regulations governing closing
costs, explaining to Congress: "It isn't right that far too many
Americans sit down at the settlement table only to discover unexpected
fees that can add hundreds, if not thousands of dollars to
the cost of their loan."
Under
HUD's proposal, lenders either would have to abide by their good faith
estimates (with a bit of wiggle room on some of the itemized fees), or
they could dispense with the good faith estimate altogether and give
borrowers a binding, bottom-line closing cost, without having to itemize
fees. Lenders using the latter method would be exempt from the law's
anti-kickback provisions.
Martinez
estimates that the proposal, if put into effect, would reduce closing
costs by an average of $700 on each loan. The biggest winners
would be borrowers and large banks. The losers would be mortgage brokers
and small title agencies, which are fighting to dilute or kill the
proposed changes.
What Can You Do?
Deal with a
lender that is committed to providing you with honest and accurate
information, with little to no fluctuation from the initial estimate of
rate and fees from the initial application to closing.
Residential Mortgage Advocates™ have
signed a commitment to this and will work
for your best interests - never increasing fees without your knowledge
and never without a valid explanation.
Also, make
absolutely sure you get a copy of the Good Faith Estimate within 3 days
of application. Review this estimate for "junk fees" and watch for
those fees which are sometimes "padded" to increase the lender's
revenue.
Prior to
closing, call your escrow company and request a copy of the HUD-1
Settlement statement that will show all of your costs itemized out.
Make this request early enough so that you are provided with the
statement at least 24 hours prior to closing.
How We Can Offer Immediate Help!
We offer you the ability to
have an objective third party (us) review your Good Faith Estimate
or HUD-1 Settlement statement. You can
contact us and we'll
provide this review of either statement (unlimited reviews) for a
one-time fee OR contact one of our Member
Lenders or Realtors in your area and get
unlimited reviews for FREE! Get an objective
opinion from a qualified professional that has no financial interest in
your loan!
We want to make sure you are
not getting something you did not bargain for. Whether or not you
are working with a Residential Mortgage
Advocate™, we can assist you in reviewing these documents for
accuracy.
|
Email:
Contact@mortgagetrap.org |
Mail:
14300 Mundy Dr., Ste 813
Noblesville, IN 46060 |
We are committed to giving you
with 100% accurate information and assistance!
All lenders on this site have signed a
Residential Mortgage Advocate™ (RMA) commitment to be totally upfront about
their fees, rates and items they will need from you.
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