It doesn’t happen much anymore but years ago we would still see closing statements prepared by attorneys using their own forms. Can you really imagine working without standardization of settlement disbursements disclosure?
I remember life before the 1003. Conventional lenders had their own application forms. FHA and VA had their own forms. They were carbonized sets. One was green and the other was orange. I can’t remember which was which.
Go back in time and if you are old enough you’ll remember want ads in the local paper separated into sections by race and sex. I remember conventional mortgage applications that did not have a section for female income.
I remember training sessions in which loan originators were taught to ignore the age of a borrower or whether a female was pregnant because we had to change the industry norm.
The adoption of ECOA and standardized mortgage applications was wholesale change and it was a good change. It helped consumers and in the long run it helped the industry.
I look at HUD’s proposed GFE with the same perspective. Yes, it’s a change. Yes, it will take some getting used to, but in retrospect, I have to wonder how we ever dealt with non-standardized GFEs for so long anyway.
I can tell you as a settlement agent that I am looking forward to a standardized GFE tool which will help consumers understand their transaction before we go to the closing table and I am grateful for a standardized script and HUD-1 comparison which will serve to self-police the pre-closing consumer friendly procedures and thereby restore public faith.
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3 responses so far ↓
1 Gina Gardner // Apr 2, 2008 at 3:05 pm
I remember taking 1003s on the back of cocktail napkins at ski resorts. A standard GFE and TIL disclosure would be nice — The APR disclosure really needs an overhaul; I think lenders should be required to disclose all their costs (and they should be counted in the APR no matter what they are called) and the third parties or vendors should provide theirs to the lender and be held accountable for deviations. And APR shouldn’t depend on what day of the month you pull the disclosure (prepaid interest shouldn’t be part of the calculation and there should be a statistically “most likely” or “expected value” for the financial index rather than what it happens to be the day the disclosure is pulled). Consumers are always told to “compare the APRs” when shopping for a loan, but APR can be different between 2 identical loans just because the disclosure was made on a different day or because one lender chooses to include different fees than another lender does.It makes shopping too hard for the consumers; that is why they think we’re screwing them when we aren’t.
2 Diane Cipa // Apr 2, 2008 at 3:35 pm
Well, Gina. You may get your wish. Under the proposed RESPA rules, the lender fees can’t exceed the GFE unless there are unforeseen circumstances such as a change in sale price. This means that the true origination charge will include all broker and/or lender fees so that consumers will compare apples to apples on the GFE.
Interim interest is in GFE along with escrow reserves. Consumers are directed to NOT consider these items for shopping purposes because they are subject to manipulation and are therefore unreliable for shopping purposes.
Third party fees that the lender SHOULD be familiar with are subject to a 10% tolerance.
By SHOULD I mean third party fees for providers that the lender is selecting themselves or to whom the lender has referred the consumer.
Interestingly, if the lender chooses NOT to make a referral to a third party provider, they are relieved of the tolerance test on those providers. In those cases, the GFE contains a quote, but the consumer shops for the provider on their own which puts the burden of ascertaining price in the hands of the consumer.
Finally, the only third party fees a loan originator is expected to nail are the recording and transfer tax figures. I hope that HUD will rethink the recording fee part of that scenario but I suggest that loan originators bone up on their transfer taxes and recording fees anyway.
3 Diane Cipa // Apr 2, 2008 at 3:40 pm
PS Since we may have consumers reading, so there’s no confusion…..a Form 1003 is a formal Uniform Mortgage Application which is not the same as writing borrower preliminary data on the back of a cocktail napkin.
The Truth in Lending disclosure [TIL] is currently in a standardized format as is the Settlement Statement {HUD-1].
We do not have a uniform Good Faith Estimate [GFE] and the lack of uniformity makes mortgage comparison shopping very difficult for consumers.
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