Best Mortgage Rates and Terms Easier to Find
Comparing mortgage rates in 2010 will be much easier. HUD has implemented major revisions to mortgage disclosure forms under Regulation X, the Real Estate Settlement and Procedures Act (RESPA). In 2010, lenders are required to communicate the terms of mortgages in specific ways that are designed to make it easier for borrowers to understand them. Why the change? Prior to the revision, HUD used to simply require that lenders disclose their fees. Now, all mortgage lenders are required to use the same standardized form that expresses their fees in the same manner. There are four key changes associated with the new Regulation X requirements.
New Good Faith Estimate (GFE) and Settlement (HUD-1) Forms
The new forms include a three-page Good Faith Estimate that puts the most important information front and center -- no more paging through endless boilerplate, special riders, and fine print to get to the pertinent features of your loan. Instead, information about rate adjustments, prepayment penalties, balloon payments, or the possibility of negative amortization are easy to see. In addition, the disclosure of lenders' fees makes comparing loan fees very straightforward because they are summarized in an "adjusted origination" charge. Finally, a feature called the "Shopping Cart" on page 3 lets you compare up to four new mortgage or refinance quotes.
Changes to these forms require that:
- All lenders disclose fees the same way.
- Loan feature information be prominently shown on the forms.
- Total lender fees be combined and shown as a single amount.
- he GFE be reconciled to the HUD-1, and that they must match (within certain tolerances).
Title and Escrow: The Settlement Service Provider List
Lenders must provide a list of settlement service providers (title and escrow companies or attorneys), and you may choose any provider you like -- your provider does not have to be on the list. If you choose one on the list, your settlement fees are guaranteed not to exceed the stated charges on the GFE by more than 10%. If you choose a provider not on the list, that cost limiter no longer applies. However, there is no promise that the providers on the list have the best prices, and there is no guarantee about the quality of their service. Settlement charges are frequently the most expensive cost of refinancing a mortgage, so it pays to shop for your title company as much as it does to shop for your lender.
Redisclosure of Mortgage Rates and Fees
If there are no changes to your loan after you have been provided with a GFE, the lender must charge what it disclosed -- even if the listed expenses are mistakenly underestimated. If there is a legally defined "change of circumstances," the lender must redisclose its fees and terms within three business days of that change. A "change of circumstance" can be any of the following cases:
- An act of God, war, or disaster.
- A change in information provided by you (if, for example, you changed employers).
- A change in the loan amount or appraised value of the property.
- You lock your rate or your rate lock expires.
- You request a change in the deal structure (you want a 30-year loan instead of a 15-year, for instance).
Mortgage Fee Tolerances
Some charges, such as origination fees, discount points, and transfer taxes, must be exactly what was disclosed -- no increase at all is permitted. Others, if the service provider is listed on the lender's Service Provider List, can increase by a maximum of 10%. Changes exceeding that 10% threshold must be absorbed by the lender. Charges for any services that you can shop for -- such as homeowners insurance -- can change at settlement, and the added charges will not be paid by the lender.
The biggest source of complaints about the mortgage lending process is that the final costs are often much higher than what was disclosed initially. The new regulations should reduce confusion about fees and loan terms, and make direct comparisons much simpler. You can view the new forms on the HUD Web site and see how they should make shopping for your next mortgage refinance, or new home loan, a more pleasant experience.
