The Government's New Good Faith Estimate and Your Sanity

Just ran through yet another class on HUD's new Good Faith Estimate. Talk about putting the client in a hard spot. The powers that be in Washington seem to think that the fees being collected on a mortgage transaction are the most important thing. Unfortunately for the client, the government does not think that showing how much you actually need to "close" the loan or are getting back on a refinance is all that important of all. They also don't think a client wants to see the payment.

Funny thing, what are the first questions my clients over the past decade ask? What do I have to bring to the closing or am getting back at closing? What will the payment be? What's my rate? Rate is the only real answer you going to find on the new estimate.

Additionally, the government, in its effort to making lending more transparent and "shop-able" has actually made it less transparent and the estimates less accurate (loan officers will be padding the gfes to the ultimate worse case scenario not the typical one. We have a lot of clients that come in before they start looking for a home. They want to know what the fees, down payment, and payment are going to look like. Legally I can't give them an estimate unless they have a specific property! No kidding! Worse yet, it is now almost impossible to obtain a pre-approval (and do mean approval not pre-qualification). In the past if you had a client that was on the edge (a marginal deal), you would collect all of his information, pull a credit report, run whatever automated underwriting software you had, and then send the file for credit only approval (loan approval with no property determined). Lenders are now in a position that they cannot accept a credit only file for review. End result, the client has to hope that the pre-qualification is on the mark, or put his earnest, money, appraisal money, and inspection money on the line!

Also, as a loan officer I would generate GFEs for Realtors, prospective buyers, to give them a ball park on costs, fees, and payments. No MORE! Now I have to have a complete application and a property before I can do a GFE. I think it puts consumers in a bad spot. I am looking into ways to get a worksheet of some sort into the hands of the people that need them.

HUD despite the amount of time spent creating these new guidelines failed to see the negative impact on the borrower.