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Good Faith Estimate Will Help Consumers Shop for Best Loan

Good Faith Estimate Form Now in Effect
Good Faith Estimate Form
Federal rules that take effect on Friday, January 1, 2010, mandate a standard, three-page Good Faith Estimate that urges consumers to shop around for the best loan and helps them compare lenders’ offerings. The rules are an update of the Real Estate Settlement Procedures Act, a 1974 law known as RESPA.

 Highlights of New Rules –

  • There will be a standard form for GFE – Good Faith Estimates form required of all lenders.  Under the new rules, lenders and mortgage brokers are required to give consumers the standard estimate forms within three days of receiving a loan application.
  • The Good Faith Estimate form requires lenders to combine all of the bank’s fees into one “origination charge,” enabling consumers to compare one lender’s fees with another’s.  Lenders are prohibited from increasing the origination fee from the estimate.  Some additional charges, including title services and recording charges, can increase by as much as a combined 10 percent.  Estimates for other charges, such as homeowner’s insurance and other services provided by third parties selected by the borrower, are not subject to such limits.   
  • The borrowers are recommended to focus on two items as they shop: the interest rate and the “adjusted origination charge,” which includes any points paid to lower the rate.   
  • HUD-1 form will be used by settlement firms in closings.  The new HUD-1 includes a comparison of the estimated and final costs, as well as a summary of the loan terms.

To read New RESPA Rule FAQs, please click here.

To read HUD’s new settlement cost booklet, please click here.

If the consumer suspects someone is potentially violating RESPA, one can either call 1-202-708-0502 or send complaint to:

Director, Office of RESPA
US Department of Housing and Urban Development
Room 9154
451 7th Street, SW
Washington, DC 20410

For more information, please visit US Department of Housing and Urban Development .

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