Why good faith estimate needs overhaul

Part 1: A new era of mortgage market reform

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(This is Part 1 of a three-part series. Read Part 2, "HUD aims to crack down on loan overcharges," and Part 3, "Kill mortgage broker deception.") Since its last effort to reform market practices was defeated by the industry in 2002, HUD has been promising to come back with some less ambitious, but hopefully more acceptable, proposals. They finally did, in March of this year. The proposals have three major thrusts: one is to convert the good faith estimate of fees and charges (henceforth GFE) into a document that borrowers can use to shop alternative loan providers (henceforth LPs). That is the subject of this article. The second thrust is to protect borrowers against various types of opportunistic pricing that the current GFE facilitates. The third thrust is to make mortgage broker pricing transparent, which the current GFE does not. The current GFE does not have the critical summary information on loan features that borrowers need to shop effectively. ...