HUD aims to crack down on loan overcharges

Part 2: A new era of mortgage market reform

(This is Part 2 of a three-part series. Read Part 1, "Why good faith estimate needs overhaul," and Part 3, "Kill mortgage broker deception.") Last week I reported favorably on one part of HUD's current reform proposals. A new and substantially improved good faith estimate (GFE) would make it easier for borrowers to shop alternative loan providers (LPs). The proposed GFE along with new rules as to how it must be used will also eliminate critical weaknesses of the current GFE that encourage opportunistic pricing -- the practice of charging as much as you can get away with. The current GFE is an open-ended list of settlement costs with no meaningful subtotals, encouraging lenders to invent new charges. Further, all of the charges on the current GFE are "estimates" subject to change, the only barrier to abuse being the "good faith" of the LP. In all too many cases, charges are raised in bad faith and there is nothing that HUD can do about...