Regaining faith in mortgages

For years, people have complained that there wasn't a lot of "good faith" in some of the so-called Good Faith Estimates that lenders supplied in order to give borrowers an advance idea of the costs attached to their mortgages.

All too often, consumer activists have charged, homebuyers would show up for their closings and find laid before them a vastly different set of figures than they'd expected -- with little more than a "sorry, that's just the way it worked out" from the lenders.

Sometimes that would be unfortunate, but true. Sometimes, the changed figures would be the result of sloppiness. And sometimes, they represented malfeasance by the lender or loan originator.

"People would go to closing 60 days (after getting the estimate) and get a settlement statement that didn't even remotely resemble what their loan offer was (giving them)," said Brian Sullivan, a spokesman for the federal Department of Housing and Urban Development. "Terms of the loan could change or the total settlement costs would increase."

Often, consumers grumbled at the surprises but just went along with it, thinking it was just another homebuying headache, Sullivan said.

"Mostly, people would hope for the best and at settlement they would close their eyes, hold their nose and sign on the dotted line," Sullivan said.

But new documentation from HUD aims to reduce some of that uncertainty. As of Jan. 1, 2010, all lenders are required to use a newly designed, three-page Good Faith Estimate that's intended to clarify costs and eliminate surprises.

Five things to know about the new GFEs:

1. The new form (a sample can be found at www.hud.gov/offices/hsg/ramh/res/gfestimate) is the first time that GFEs will be standardized, Sullivan said. Prior to Jan. 1, lenders have been free to design their own.

"They've been all over the map," he said.

One possible, though unlikely, variation might be seen by homebuyers who applied for their loans (and got GFEs) in late 2009 and went to closing in 2010, he said. ...CONTINUED

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