I’m sure that much will be much written about the new good faith estimate. Personally, I think the RESPA folks did an excellent job. It’s not easy to reform in 1974 law, especially one has been abused so significantly in the last few years. But for those of us in the Title Insurance and Closing Industries who have dealt with a HUD-1 for many years, a mandatory,uniform GFE makes sense. Its outline matches nicely with the RESPA HUD-1 closing statement. I especially like the “Summary of your loan” section, where it outlines the terms of the deal giving the initial loan amount, long-term, initial interest rate, if the rate can rise, prepayment penalties and whether or not the loan has a balloon. This is the gist of the deal. And I like the fact that it covers escrow accounts.
As a longtime closer, the standard GFE makes sense to me. The obvious omission, I know, is that the annual percentage rate (APR) is not shown. I know many think that is a huge problem, but I disagree. It is a very difficult task to explain to people in any sort of terms that are relevant to them, what an APR is. After all, in the real world, few people keep their house, let alone their loan for a full 30 years. So to them, that enormous dollar amount that you have to explain, saying how much they could potentially spend for the home over a period of 30 years including the original price, 30 years worth of interest, and various and sundry closing costs, is totally irrelevant to them. In reality, even for those of us killed in the industry, the good faith estimate is not an easy form. And I’m not sure that the consumer, even a very savvy one, will make good use of the form by obtaining and comparing it among several lenders. Americans tend to be rather lazy in that matter. Even though getting the right mortgage is the most important purchase of your life, (certainly more important that the price of the house) the task feels somewhat less exciting than watching paint dry on a wall.
But overall, I like the form and I think they did a good job. Now all we have to do is re- program all of those computers and regroup to explain the changes.