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This is the 3rd installment of text taken from the Federal Register about
changes to the settlement process. This section deals with requirements for
the “Good Faith Estimate”. It’s a lot longer – 4 pages now.

The next post will have comments by the public about the proposed changes.

III. GFE and GFE Requirements-

Discussion of Public Comments

A. Overall Comments on the Proposed Required GFE Form

Proposed Rule. HUD proposed a four page GFE form. The first page of the GFE
included a summary chart with key terms and information about the loan for
which the GFE was provided, including initial loan balance; loan term;
initial interest rate; initial amount owed for principal, interest, and any
mortgage insurance; rate lock period; whether the interest rate can rise;
whether the loan balance can rise; whether the monthly amount owed for
principal, interest, and any mortgage insurance can rise; whether the loan
has a prepayment penalty; whether the loan has a balloon payment; and
whether the loan includes a monthly escrow payment for property taxes and
possibly other obligations. The first page of the form also included
information regarding the length of time the interest rate for the GFE was
valid; the length of time the other settlement charges were valid;
information about when settlement must occur if the borrower proceeds with
the loan; and information concerning how many days the interest rate must be
locked before settlement. At the bottom of the first page, the GFE included
a summary of the settlement charges. The adjusted origination charges listed
on the second page, along with the charges for all other settlement charges
listed on the second page, would have been totaled and listed on this page.

The second page of the GFE included a listing of estimated settlement
charges. The loan originator’s service charge would have been required to be
listed at the top of page two, and the credit or charge (points) for the
specific interest rate chosen would have been required to be subtracted or
added to the service charge to arrive at the adjusted origination charge,
which would have been shown on the top of page two. Page two of the GFE also
would have required an estimate for all other settlement services. The GFE
included categories for other settlement services including: Required
services that the loan originator selected; title services and lender’s
title insurance; required services that the borrower would have been able to
shop for; government recording and transfer charges; reserves or escrow;
daily interest charges; homeowner’s insurance; and optional owner’s title
insurance. The GFE would have required these charges to be subtotaled at the
bottom of page two. The sum of the adjusted origination charges and the
charges for all other settlement services would have been required to be
listed on the bottom of page 2.

The third page of the GFE would have required information concerning
shopping for a loan offer. In addition, page three would have included
information about which settlement charges could change at settlement, and
by how much such charges could change. Page 3 also would have required the
loan originator to include information about loans for which a borrower
would have qualified that would increase or decrease settlement charges,
with a corresponding change in the interest rate of the loan.

The fourth page of the GFE included a discussion of financial
responsibilities of a homeowner. The loan originator would have been
required to state the annual property taxes and annual homeowner’s flood,
and other required property protection insurance, but would not have been
required to state estimates for other charges such as annual homeowner’s
association or condominium fees. The GFE included a section that advised
borrowers that the type of loan chosen could affect current and future
monthly payments. The proposed GFE also indicated that the borrower could
ask the loan originator for more information about loan types and could look
at several government publications, including HUD’s Special Information
Booklet on settlement charges, Truth in Lending Act (TILA) disclosures, and
consumer information publications of the Federal Reserve Board. The March
2008 proposed rule invited comments on possible additional ways to increase
consumer understanding of adjustable rate mortgages.

Page 4 also would have included information about possible lender
compensation after settlement. In addition, page 4 would have included a
shopping chart to assist the borrower in comparing GFEs from different loan
originators and information about how to apply for the loan for which the
GFE had been provided.

Continuing Education for Title Agents

Free classifieds for the
Title Industry

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