The Federal Government has changed the forms used for lenders' Good Faith Estimates (GFE's) and closing statements (HUD-1) to improve the level of disclosure and make it easier to compare between different lender quotes.
Although their intention is good, these changes may cause some chaos until they sort out the problems they may bring to lenders, real estate agents and attorneys.
The New Good Faith Estimate (GFE) Form
The new GFE form is three pages long and is mandatory for all lenders, the intention being to allow consumers to be able to compare one lender's proposal to another. There are some costs that need to be pre-determined by the lender carefully, because those cannot change. And other costs that can only increase by a maximum of 10% from those quoted on the GFE. So lenders will have to do more work to get accurate costs on attorney's fees, property taxes, insurance and HOA fees before giving consumers a GFE.
The New HUD-1 (closing) Statement
The new closing statement (HUD-1) includes an extra page and divides closing costs in three groups: Closing costs that MUST BE IDENTICAL to those the lender quoted on their GFE; Costs that can increase only UP TO 10% above what the lender quoted on the GFE; and costs which can VARY from those quoted on the GFE.
If any of these limited variation costs changes beyond the allowable range, lenders will have to prepare a new GFE for the buyer, and the closing may need to be postponed. This may cause additional delays in closings (from 3 to 8 days), depending on the nature of the changes.