New Changes From HUD in 2010

The U.S. Department of Housing and Urban Development (HUD) has approved two new forms which will play a major role in real estate transactions.  Both the Good Faith Estimate (GFE) and the HUD-1 Settlement Statement have changed dramatically.  These changes were years in the making and became effective as of January 1st, 2010.

Here is a short overview and how it effects you, the client:

The Good Faith Estimate (GFE) is now a standardized form to be used by all mortgage lenders.  Before, each lender could use their own form.  The intent of this change is to help consumers better compare estimates from different lenders.  The largest change here is that there are line items on the GFE which either cannot increase and other line items that cannot increase by more than 10%.  These line items are taken directly from the GFE and transferred to the HUD-1 for settlement.

The HUD-1 Settlement Statement is now three pages vs. the two we’ve used for years.  This third page is to improve a borrower’s ability to compare the settlement statement and final loan terms to the GFE.  It is comprised of two sections; the comparison of the GFE and HUD-1 charges and a brief summeary of loan terms similar to the summary of the GFE. 

What all these changes mean is that now lenders will be held accountable for what they write on these GFE’s.  There may fewer surprises at the closing table with these standardized forms.  Also, the closing attorney will need to quote their title insurance and other fees well in advance so those figures can be placed on the GFE.