- New GFE and Settlement Statements
HUD is now requiring lenders and brokers to provide borrowers with and easy-to-read format for the standard Good Faith Estimate. Borrowers will now be able to understand the answers to key questions:
- What is the term of the loan?
- Is the interest rate fixed or will it change?
- Will there be a pre-payment penalty if the borrower chooses to refinance or pay off the loan at a later time?
- Will there be a balloon payment?
- What are the total closing costs?
Also added to this change, HUD will limit the amount of estimated charges can change and this will help to reduct the amount of closing costs.
Closing costs will be consolidated into major categories to prevent junk fees and estimated settlement charges will be totaled on the first page to more easily be able to compare costs.
To help borrowers compare their Good Faith Estimate to their HUD-1 Settlement statement, there will be reference notes to the relevant line on the GFE.
Loan originators will be required to provide their Good Faith Estimate three days after the loan originator received the necessary documentation.
The new standardized GFE and revised HUD-1 will not be required until January 1, 2010.
