GFE Being Replaced With Loan Estimate

The Good Faith Estimate, also known by mortgage industry professionals and mortgage loan borrowers as the GFE, was created by the United States Department of Housing and Urban Development in 2010. The Good Faith Estimate is being replaced by the newly created Consumer Financial Protection Bureau, CFPB, Loan Estimate. The CFPB’s New Loan Estimate will also be replacing the Truth In Lending form ( Regulation Z ).  The Good Faith Estimate was extremely confusing and difficult to understand and was flawed from the first day it was launched. The CFPB’s New Loan Estimate, when first previewed, seemed like it was a major improvement over the 2010 GFE. Mortgage loan originators need to get used to used to the new Loan Estimate form. The CFPB new Loan Estimate also seems to have its flaws and loan officers needs to learn to learn the procedures to the document.

CFPB’s Loan Estimate

The mortgage industry seems like it is overloaded with rules and regulations and there seems to be no end. Why change a system that is already working with new forms and new regulations? Mortgage regulators are creating new laws and changes to mortgage regulations to protect consumers but many in the industry think otherwise. Many mortgage industry experts believe that with new changes such as the new Loan Estimate, it creates more confusion to consumers and creates more work to mortgage companies and mortgage lenders which translates to higher fees to consumers. The CFPB is now making it mandatory and requiring that title insurance fees do not reflect any discounts.

Title Insurance Fee Disclosures

The amount of the title premium for the mortgage lender’s title insurance coverage needs to be disclosed without any price adjustment to the premium that may be made for the simultaneous purchase of an owners title insurance policy. What this means is that instead of disclosing the simultaneous issue policy rate that mortgage loan borrowers get when the borrowers are purchasing a house, the mortgage loan borrowers will be viewing the general scheduled rate which this rate is much higher. For example, a mortgage loan amount of $400,000,  a simultaneous fee issue of $700 will be disclosed with the old system. With the new CFPB’s Loan Estimate, mortgage lenders will be required to give the general schedule quote of a rate of $1,400, although the mortgage loan borrower will not be paying the higher rate. A simultaneous issue rate is normally provided systematically to home buyers when there is an owners policy and lenders policy, when if you are buying a house and you are getting a home loan, the mortgage loan borrower will be receiving the simultaneous issue rate every time.

Most owners title police is paid for by the home seller. The owners title police needs to be disclosed on the New CFPB’s Loan Estimate. With the old HUD’s Good Faith Estimate, it also required this fee to be disclosed.

This new law is labeled as ridiculous by many mortgage professionals because mortgage loan originators needs to explain to their borrowers that they are quoting a bogus fee of $1,400 when they are actually paying $700 and the reason the higher fee is listed is due to government regulations by the CFPB.

 

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