Making Sense of the New GFE, HUD-1

By Robert Freedman, Senior Editor, REALTOR® Magazine

In this video how-to, you’ll find a page-by-page walk-through on what goes where.

The new Good Faith Estimate and HUD-1 settlement form have been in effect since January 1. The federal government’s intention was to make it easier for your customers to understand what they were getting when they applied for mortgage financing. The government also wanted to minimize the surprises to your customers when they get to the closing table and see very different (read: higher) charges on the HUD-1 than what was included on the GFE. Has the government succeeded?

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Is the New GFE an Improvement?

Happy New Year, everyone!

As usual, we’re ringing in the new year with a lot of unfinished business (health care reform, financial institution reform, and so on). One thing that was finally settled, however – after years of debate — was the federal government’s changes to the Good Faith Estimate and HUD-1.

Not so fast. It’s hard to find people in the real estate business, particularly mortgage brokers, who are happy with the changes. Wes Cordeau of Houston wrote to me in response to an article in REALTOR® Magazine:

“Unfortunately, the new GFE does not address two points of major importance: 1) How much to close and 2) How much is the monthly payment? In fact, the new GFE addresses closing costs in such a way as to confuse the borrower immensely, because it addresses the costs as ‘Total Settlement Charges” and does not include some important offsets, yet makes us include items that are historically paid by the seller. On page 1, it addresses the monthly payment in two sections–one concerning only principle, interest, and mortgage insurance and the other addressing only payment of escrows for taxes and property insurance. This is more confusing to the consumer! Everyone in this business understands that taxes, insurance, and HOA fees can can add hundreds to the monthly payment, yet they’re not addressed clearly in the GFE.

The fact that a three-page document has 42 pages of explanatory handouts and 51 pages of FAQs (four per page) tells me that this is the most ill-designed form I have ever seen!”

Although I haven’t experienced the forms as a consumer, having listened to Phil Schulman’s 90-minute explanation at NAR in San Diego (worth the time; you can access it at REALTOR.org’s RESPA page), I agree with Wes that the “simplified” forms raises as many questions as answers. Yes, the language is generally more clear, but I wish HUD had done some focus groups with consumers and real estate practitioners before they gave the forms the green light.

What do you think? Are the new GFE and HUD-1 an improvement over what we had before? Or are they going to cause new problems and delays at the closing table? What changes would you recommend?

Note: REALTOR® Magazine on Jan. 13 completed a video walk-through of the new GFE and HUD-1. Watch the how-to video to get a better understanding of how the forms are to be filled out.

New “Reg. Z” Rules Could Slow Closings

By Robert Freedman, Senior Editor, REALTOR® Magazine

Starting tomorrow, July 30, you could see transactions slowed as lenders try to navigate changes to rules (”Reg. Z”) on consumer disclosures under the Truth in Lending Act (TILA). By being aware of new time pressures lenders are under, you can help your clients understand what’s going on if transactions you’re working on get delayed prior to closing.

Here’s what’s happening under these “Reg. Z” changes: Read more

Final RESPA Rule Rundown

By Sarah Trzepacz, Content Strategist, REALTOR.org

Expert Phil Schulman drew an over-capacity crowd to his session on HUD’s recently issued final RESPA rule. During the session he described changes in the six main components of the rule, identified winners and losers in the latest round of amendments, and walked the crowd through the new GFE and HUD-1 forms.

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