In direct response to the mortgage crisis, US Department of Housing and Urban Development (HUD) has issued new mortgage reforms.This is the first change in policy in over 30 years and should help protect consumers from accepting unfair mortgage terms and potentially save borrowers $700 in loan fees and costs.
The change requires lenders and mortgage brokers to provide potential borrowers with a standard Good Faith Estimate (GFE). Consumers will no longer have to go through stacks of paper to discover all the key terms and closing costs of a loan. According to HUD the GFE will list:
- The term of the loan
- Whether the interest rate is fixed or is changeable
- If there are pre-payment penalties
- If there are balloon payments
- Total closing costs
Additionally, there will be a 10% maximum increase cap on the amount charges can exceed estimates. Many consumers find the process of researching a home loan overwhelming, thus allowing for a margin of error in the mortgage selection process. HUD Secretary Steve Preston feels that by simplifying the process the average American family will be empowered to make educated decisions when loan shopping. Preston stated, With a standardized GFE, consumers can shop more effectively for the lowest cost loan.
As of March of this year, HUD started working on the Real Estate Settlement Procedures Act (RESPA) to help streamline the mortgage process for consumers. The GFE is the final alteration to the regulatory regulations of RESPA. Ultimately, all the revisions will improve the disclosure of the loan terms and closing costs so consumers will have clarity when it comes time to pay for or refinance their home.
For the full story and complete details, check out the Department of Housing and Urban Developments news release at "www.hud.gov/news/release.cfm?content=pr08-175.cfm".
