Homebuyers should be prepared for major changes in the timing of mortgage approvals and closings starting after New Year’s Day. Due to recent legislation passed by Congress with the intent to further consumer protection, lenders and mortgage brokers will be required to provide more accurate Good Faith Estimates to the buyers. These GFEs will be required to track the costs at closing set forth on the Hud-1 Settlement Statement.
As a result of these changes, certain charges will not be permitted to change at all from those disclosed on the Good Faith Estimate. These charges are those that are charged by brokers and lenders such as origination fees, application/processing fees and underwriting fees. In addition, inexplicably (as these have nothing to do with the loan), government transfer fees are included as well.
The second class of charges may vary in the aggregage by no more than 10% over the disclosed amounts. These charges are lender required settlement services such as bank attorney, title insurance and government recording charges. This limit does not apply if the borrower selects its own provider for any of these services.
The final class of charges that may vary are those for escrow reserves (i.e. insurance and real estate taxes), daily interest charges and homeowners insurance. In addition, if the interest rate is not locked at the time of application, the origination fees can vary until such time as the rate is locked.