Tuesday, March 2, 2010

More on the new GFE

This is a pile-on to Chris’ recent post explaining the new Good Faith Estimate form . . . .  I just received an email from a Loan Officer (“LO”) friend reviewing some rule clarifications issued by HUD after a February 18, 2010 meeting with a bunch of FHA mortgage investors.


LO Question: “When are consumers entitled to receive a Good Faith Estimate (GFE)?”


HUD Answer: If a consumer has an executed purchase contract, a GFE is required. Until that point, LOs can issue “worksheets” which are “useful for generic rate quotes.”


HUD guidelines for “worksheets” - -





  • Worksheets should not look like GFEs,


  • A worksheet should never should be used "in lieu of" a GFE,


  • Consumers do not have to show an “intent to move forward” with a mortgage in order to obtain a GFE.


I’m assuming the Loan Status Report (LSR) in use in metro Phoenix which must be submitted along with any purchase offer falls under HUD’s “worksheet” rules.



What’s It Mean for Home Buyers?


Loan Officers can still give you a rate quote that’s not binding. However, once you have an executed purchase contract on a specific home, Loan Officers must issue you a GFE and per HUD’s new GFE rules, those numbers can’t change very much.


Buyer, if you got an LSR/worksheet that said 5.00 interest rate and $1,200 in closing costs. . . but when you got your signed purchase contract on your Dream Home you got a GFE that showed closing costs of $5,300 on a 5.375% rate. . .  you can cancel your purchase without penalty.



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