HUD is introducing a new GOOD FAITH ESTIMATE

By
Real Estate Agent with Realty Executives Elite

HUD is introducing a new GOOD FAITH ESTIMATE to help reduce the amount of surprises at the closing table.

The Real Estate Settlement Procedures Act (RESPA) was enacted in 1974 to provide consumers with improved disclosures of settlement costs and to reduce the costs of closing by the elimination of referral fees and kickbacks. Through the years, the Department of Housing and Urban Development (HUD) has issued regulations and policy statements to provide RESPA guidance to industry and consumers alike.

On November 17, 2008, HUD published a new final rule "To Simplify and Improve the Process of Obtaining Mortgages and Reduce Consumer Settlement Costs." The rule mandates use of a new Good Faith Estimate (GFE) and HUD-1 which go into effect on January 1, 2010.

Http://www.realtor.org/government_affairs/respa

Following is a link to the new GOOD FAITH ESTIMATE.

Http://www.hud.gov/offices/hsg/ramh/res/gfestimate.pdf

As I look over this new form I see it is designed to explain the charges in detail and inform the Buyer they can shop around for some of the services, to see if they can save some money at closing. 

Overall this is a very good idea.  I do see one item missing on the form which should be explained before the total settlement charges are calculated.  Real Estate Taxes.  This is the one area I see questioned most often at closing.  Many lenders will require the Buyer to pay a number of months of Real Estate Taxes at closing.  This is especially true at the end of the year.  Maybe HUD should require this detail to be explained before the lender makes the phone call to the Buyer, giving them the total amount they will have to bring to closing.  When this figure does not agree with the GOOD FAITH ESTIMATE, Buyers will continue to question the final figures.  How often has this happened to you? 

Real Estate Taxes may have been caused most of the confusion on the first place. 

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Ez1Realty Menomonee Falls Real Estate

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Rainmaker
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Robert Rauf
HomeBridge Financial Services (NJ) - Toms River, NJ

Dennis, The new GFE is 3 pages long, and has less room for lenders to explain the charges than the old form. and they forgot to put a signature line.  There will be a lot of confusion with this, and the tolerance for deviations in 3rd party charges is going to be very tight (attorney/title fees etc) and off by too much and you may see delayed closings. 

Also, when there is the new GFE, the HUD1 must match exactly. and there is also a new HUD1 that is part of this reform. 

prepare for a bumpy ride as the industry tries to figure this out.

Nov 24, 2009 09:46 AM #1
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Dennis Herman
Realty Executives Elite - Menomonee Falls, WI
Dennis Herman

I have heard of problems with closings on HUD owned properties.  I have not closed on a HUD property but from what I have heard, HUD does not follow their own rules.  Now this organization continues to dictate proceedures to the rest of the industry.  Seems like another example of the inexperience of governmment trying to run another business. 

Nov 25, 2009 08:49 AM #2
Rainmaker
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Robert Rauf
HomeBridge Financial Services (NJ) - Toms River, NJ

Exactly dennis, a litte too much regulation with Big Brother watching too closely. Hopefully it will pull back a bit as the dust settles.

Nov 25, 2009 09:36 AM #3
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Dennis Herman

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