

Section B of Page 2 of the Good Faith Estimate (GFE) has 9 parts. Let's go through them.
Item 3 will be a list of required services that the lender will select. These are services necessary in order to complete your transaction. These charges are subject to a 10% tolerance at settlement, meaning that they may be up to 10% higher (but ONLY 10% higher) at settlement.
It is my understanding that the TOTAL of all items listed in these categories is subject to a 10% difference at closing. In other words, an individual item may in fact cost more than 10% more at settlement, but if another item or items from that section cost less than they were quoted, and the total costs for all items in that section still fit within the 10% tolerance, it can be allowed.
The good news is that lenders who want to be the most competitive may begin to shop around themselves for lower cost providers for these services, in order to keep the total costs they quote down as low as possible, making them look like a better option in a comparison.
Item 4, Title Service and Lender's Title Insurance is a total of ALL title charges except Government Recording charges (which are listed in Item 7). This item is also subject to a 10% cap at settlement, but only if the lender selects the title company or if you select a title company identified by the lender. If you choose your own title company, (not a company identified by the lender) there is no cap on the amount you may be charged at settlement. (Of course, you are most likely to select a company that will cost you less at settlment, but should you choose a more expensive company, the lender cannot be held to the estimate they quote you for using a lender identified company.)
Item 5 is the cost of Owner's Title Insurance. In some states (including Utah) this is most often paid for by the Seller. Even in such an instance, this fee will be listed on the Good Faith Estimate (GFE). Just remember that if this is true in your transaction, you may be able to deduct this amount from your total loan costs for the purposes of determining the cash you need to close the loan.
This item can also increase up to 10%, but once again, only if you (or the Seller) use a lender identified company. Otherwise there is no cap.
Item 6 are the required services that you can shop for. These are services that may be necessary for your transaction. These may include such things as:
These are just examples and are only subject to a 10% tolerance if you use lender identified companies.
Item 7 are the total of Government Recording Charges. These may also increase up to 10% at Settlement.
Item 8 are Transfer Taxes. Fortunately, in Utah, we don't have these. There are some states that do. If your transaction requires payment of a Transfer Tax, there is ZERO Tolerance on this item. It must be the figure you will be charged at settlement.
Item 9 explains the initial costs of setting up your escrow account. (These are your deposits into the account to cover property tax and insurance disbursements.) These are not subject to a cap, as the account will simply need to have enough money in it to pay such disbursements when the time comes. Still, most lenders should be able to get this figure pretty close to what it will be by estimating which month of the year you are likely to close in and the lender's own requirements for escrow account reserves.
Item 10 is the daily interest charge for your loan. Although the TOTAL amount listed here is not subject to any tolerance cap (because it will depend on which day of the month you close whether there are 0 or 30 days of interest charged) the daily amount of interest you will be charged cannot change (as it is a factor of your interest rate).
Item 11 is the cost of Homeowner's Insurance. A borrower usually pays a full year of premium up-front. This item is not subject to a 10% cap, as the borrower is able to select their own insurance and coverage level. (Coverage level must be adequate to protect the collateral for the loan, and usually is subject to approval by the lender.)

Page 3 of the new Good Faith Estimate (GFE) form contains Instructions, an optional Trade-Off table, and a Shopping Chart, as well as a disclosure that your loan may be sold after settlement. We'll cover page 3 next week.

Page 2 of the new Good Faith Estimate (GFE) will look significantly different from Good Faith Estimates of the past.
Section A has 2 parts.
Item 1 is the origination charge, or what the lender is charging you for the loan. This number includes ALL lender fees, combined into one figure. These fees include all the items one used to see listed on Good Fath Estimates as separate line items under such names as:
It may also will include any Yield Spread Premium (YSP), or money that a broker may collect as profit on the back end of your loan transaction. (If there is a Yield Spread Premium and it is not disclosed in Item 1, it will be disclosed in Item 2.)
These will ALL now be shown as one single fee, "Our Origination Charge", or basically, all monies paid to the lender and/or broker in order to obtain the loan.
Item 2 discloses your credit or charge for the specific interest rate quoted. What this table shows is that you, as a borrower, may have had an option to select either a higher or a lower interest rate from the lender's rate sheet.
If you were eligible for a lower rate than you have been quoted, or if there was a credit for the rate selected, that credit will be disclosed here in the second box.
If it will cost money in order to obtain the rate quoted (formerly known as "points") that charge will be shown here in the third box.
If the lender may also choose to select the first box disclosing only that the credit or charge for the interest rate they are quoting you has already been included in (either added to or subtracted from) the origination charge quoted above in item 1. If this box is checked, you may not know the exact amount of the credit or charge, but it shouldn't matter too much as it will all be included in the Total Adjusted Origination Charges in Section A, the total up-front costs to obtain that loan. If this box is checked, however, you may want to ask the lender if you would have qualified for a better rate.

Section A is pretty straightforward. Now on to Section B.

The bottom half of page 1 of the Good Faith Estimate (GFE) form begins with a Summary of your Loan Section. This is where a lot of disclosures regarding the loan will be made.

Some lenders require an escrow account. This section will disclose if an escrow account is required or not and reiterate your base monthly payment amount. Remember that if an escrow account is not required, you will be responsible to keep current all taxes, insurance and other property related charges. Even when one is not required, some borrowers choose to have one set up anyway.
In the event that an escrow account is not required, some lenders may offer an incentive to establish an escrow account anyway. Others may actually assess a penalty or fee in the event you choose not to establish an escrow account, even if not required by the terms of the loan. This penalty will appear as part of the total origination charge and/or will be reflected in the interest rate you are quoted and is said to help cover the costs of monitoring that the taxes and insurance on the property are being kept current by the borrower.

Finally, at the bottom you will see a summary of all Estimated Settlement Charges. These are broken down into 2 sections: Adjusted Origination Charges (All LOAN Costs) and Charges for All Other Settlement Services (All other Costs to close). Both are broken down on the next page of the Good Faith Estimate (GFE) which we'll examine next.


Let's examine the top half of Page 1 of the new Good Faith Estimate (GFE) form.
One of the first changes you will notice about the Good Faith Estimate form is that it now asks for the Loan Originator's email address.
It also asks for a Property Address. Remember, without a property address (the one the borrower intends to get the loan for), the Good Faith Estimate is non-binding, meaning the lender (or loan originator) is not able to be held to fees and rates quoted. However, prior to closing, a Good Faith Estimate will all the required information on it must be completed. This must occur at least 3 banking days prior to settlement.

The next section of Page 1 of the Good Faith Estimate form explains the purpose of the GFE and explains that a borrower can shop for the best loan. It also mentions that the GFE contains a "shopping chart" on page 3 of the form, which we will cover when we get there.

Next is a section explaining 4 important dates relating to the Good Faith Estimate and the loan.

Continue on for an explanation of the rest of the new Good Faith Estimate (GFE) form.

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