Club Chaos Agents - All Things Hollish, Wacked, and Jacked

Well written summary on the new GFE. I'm looking forward to part 2.

Jason

Jeff,  I will be looking forward to the part 2....   I think we both understand the reasons for the New GFE.   I would have no problem with the new GFE if "The Origination Fees" And "Service Providers we Select" were controlled.  Will look forward to Part 2. 

Good post Jeff. I think we are of the same opinion regarding the new GFE. I agree with the intent to help borrowers but once again think the new GFE falls far short of this goal. i am looking forward to part 2.

JASON... . thanks.. it's great to hear this coming from someone within the mortgage industry.and thanks for the compliment.

TIM... .  Well, as you can see, I have several problems with the GFE.... they missed some very important pieces in my opinion.  I can just see it now... from the borrower..."well, my GFE said my mortgage payment was $1,200 but when I got to settlement, my documents said $1,637."  You know how it goes, you could explain this to a borrower and it could go in one ear and out the other. Or, you might just have a disgruntled borrower who likes to complain and will say.. "I was mislead"..  because that section of the GFE, the escrow account info section is not 100% clear when stating the mortgage payment. Overall, I just can't believe that they didn't keep some of the important stuff on the new GFE, such as mortgage payment and the total monies needed.  thanks

ROY.... . I know many that have agreed with how you and I think... and it baffles many of us and actually angers myself.  Thanks for the polite compliment.

Again another good synopsis Jeff. You know my feelings-HUD's "good intentions" have harmed the marketplace and the consumer again, but why should that surprise us? What is sad, as you mentioned today, is that FHA Commish David Stevens didn't see this coming and try to fix it. He's one of us with street level experience, too bad he didn't want to jump in front of this train.

The worst part, as I see it, is HUD's original reason for doing this- to facilitate customers ability to shop for a mortgage, with the GFE in hand- has been totally reversed by an industry that is only issuing GFE's once a full application has been taken. Sounds like another screw up to me, what say you we give them our healthcare to manage too. Surely they could get that right. :)

Gerry Suarez, Jr.

Your FHA Loan Pro!

PS- aren't you glad I didn't even use the word of the day?!

Jeff - Its good to see you back to posting. Great details about the new GFE. I think the intentions were right, but there is still much confusion and even worse... no signature line.

I'm totally confused now. I've seen loan originators violating MANY of these points! Actually, the always have! My biggest issue used to be with not getting the GFA on time. But now we're seeing Bank of America and Wells Fargo trying to charge their customers an application fee.

Very nice Jeff.  Good explanation, worth re-blogging.

Great information!!! Our job is hard enough, but explaining the costs and fees assoiciated with a loan and with it not clearly outlined on the GFE, need I say more?

GERRY..... . surprises?  lol  I am tired of being surprised, but yes, why should we be surprised when the gov't comes out with something like this...  and your point about only issuing GFE's when application is taken is spot on. But then again, many lenders are using the old GFE forms and just calling them something else.  We use, "Itemization Fee Worksheet".  In any case, thanks for the polite compliment.

JOHN.... .  that is the problem, the intentions always seem good, but who thinks this stuff up?  Come on, to me, some of this is common sense.  And yes, no signature line>?  lol  Just as I stated, how does one prove if they ever got a copy?  And thanks for the kind words.

LISA..... . you should call me on this.  I still had a concern from a previous comment of yours and tried reaching out.  What issues do you see lenders not compiling with now?  I seriiously say that we report everyone and anyone... I will be bringing this up in my part 2.  As far as Bank of America and Wells Fargo trying to charge their clients application fees, the only fee that you can collect upfront is the credit report fee. The appraisal fee has to be collected 3 days after the application. thanks and give me a call some time.

GABE.... . thanks for that very polite compliment and for re-blogging this. Again, thanks...

Lisa sounds like you have had some bad luck with loan officers!! You need a good, dedicated go to guy/gal. The loan officer themselves will take care of 97% of the issues if they are professionally responsible.

Jeff - I try not to dwell too much on the new GFE and I've just been dealing with it. Otherwise it may stress me out due to its horrible final draft. Argh. Just like a government system.

Jeff, 

I am agreement on much of your blog post. However, I do want to point out a few things--  The following is a piece of your blog:

The new Good Faith Estimate does have standard sections that a borrower can compare easily with other good faith estimates.  The negative about this?  That the borrower will just see a total of the charges and it won't be broken down. This could be a great way for lenders to disguise higher so-called junk fees.  I will be breaking this down in part 2 tomorrow.

I disagree with this for this reason.  ALL fees charged at closing HAVE to be shown on the GFE, otherwise the lender is "out of tolerance" (only 10% difference allowed from original GFE to final closing statement). This means the lender cannot throw in "junk fees" at the last minute before closing. All fees will now show on the 1st block" or "section A"  on the GFE.  Now, as the borrower is comparison shopping, IF the lender is charging junk fees, the total in block 1 will be significantly higher than other lenders. Make sense?  There is NO DISGUISING junk fees any longer--

Point two I have in response to your blog is this.  We as lenders HAVE to "overestimate" as opposed to "underestimating" if we want to avoid paying the customer a refund.  If you think about what a loan officer makes on each deal (for a lot of bankers, just a percentage of that 1% fee), having to pay out a refund from the profit significantly cuts into income. Because we make so little on each deal, refunding any amount could negatively impact our business.  For instance,  on a $150,000 loan, we charge a 1% origination, or $1,500.  We do not pocket the gross of that, as there are costs to us (uw fees, tax transcript fees, ect) that sometimes come out of that amount. Let's just say a $200 UW fee comes out of that $1,500, netting $1,300.  The loan officer typically makes 40-60% commission on that origination and the broker or bank keeps the remainder.  This nets the loan officer approximately $650 on this deal.  If we have a Good Faith Estimate that is out of tolerance, by say $200, that $650 turns into $550 (if split with the bank or broker) or $450 of the "mistake" comes out of the loan officer's pocket.  For the hours that some files take, this is not very much profit.   This is the reason that loan officers will be careful to try to overestimate rather than underestimate.  Auditors will not allow loan officer to repeatedly grossly overestimate, i am sure, in the long run. Think about the average number of properties a realtor closes a month, and well, you do the math to compute what that loan officer may be making.

There are a lot of great things about the new GFE, but there are alot that is lacking. It could potentially hurt the lenders' profit. there are many expenses that could come up during the process that the lender will not be allowed to charge on the final closing statement.  For this reason, you will most likely see fees go up or pricing go up for banks and lenders.

My two cents, Wanda

Jeff, I spent a lot of time working on my post over this past weekend.  The problems with the G.F.E. abound.  It's outrageous in true practicality.  It's ashame.  The consumer is hurt.  The industry is hurt and there's just so much that needs to change in order for this to be of any practical value to the consumer.  Good post that expains the "need to know" for the consumer.  But I will say that the G.F.E. is anything but providing truths to the consumer.

CHECK THIS OUT:  Some banks are now declining loans due to too many credit inquiries.  The GFE is encouraging buyers to shop for mortgages, and as a result, more inquiries show on the report.  Why you ask?  Because multiple mortgage inquiries looks like the buyer is trying to purchase several homes at one time without disclosing to the other bank.  Plus, it makes an underwriter think the multiple inquiries look like the buyer is getting denied and then moving onto the next lender.

Lets not forgot that a buyer can't see a GFE until he is in contract....which is too late to pick a lender by then.

Seriously, the people who literally drafted this new GFE should lose their jobs.  I like the intent but the exection is an insult to common sense.

Looking forward to part 2!

Thanks!

ERIKA... . it's not just explaining this, it's the many changes that have taken place in the last 12 months and the changes that will be taking place in the next 3 to 4 months. And the new GFE in my opinion just added to this effort.  I think the MDIA act was good enough... but this new GFE?  In my opinion, adds to the problems.

STEVE.... . as many knew, including yourself, I didn't stress as much about the GFE when it first went into effect. I actually sat back and watched others try to make heads or tails of this two-headed monster. My biggest concerns are the different dates on the GFE....  and the fact that you don't have total cash to close and the total mortgage payment. You and I both agree, that this was a horrible draft and yes, those people should be shot. Even for the fact that this was tested amongst other loan officers.  Sorry, but who the hell were they and had they been drinking for days?  lol

WANDA.... . I agree about the fee tolerance. But I guess my point wasn't clear. It's not the fact that the client will know by the total that shows up in each box, but that you can't determine from the new GFE the true costs.  Letters A & B could be misleading to some if they don't get a break down of these costs. My whole point again, when talking about the new GFE and only the new GFE, you don't see a true breakdown of all costs. You see totals. 

Example : Letter B are the borrowers charges for all other settlement services. In my opinion, since there are more boxes for the new GFE as opposed to more lines on the old GFE, I feel that many people will just look at the larger boxes with the totals.  And if this is the case, some fees might be higher than other fees and you won't know the difference. I have done a few tests on my own, when handing out the new GFE... I always go into detail and explain things.... my last 5 clients?  I didn't go into detail at first, to see what they picked up on and what they looked at.  They looked at the large charges in the big boxes that were highlighted.  if I am over-estimating to cover myself, my total box will look bigger and could hurt me. I still would prefer the old GFE because it was easier to break down and show the different costs.  On the old GFE, the best and easiest was to say, all lines associated within the 800's are the lenders charges.  You don't get that true distinctive difference now. To me, it's like a smoke screen.  That is just my opinion.

In regards to your second point... from reading your response, it sounds like we agree on that topic. I didn't go into detail because this post was already 1,000 words. The readers attention span doesn't always last as long.

Overall, I think the new GFE is worse than the old one. You want to talk about fees and compliance's?  I think the MDIA act was a great addition, at least giving borrowers 3 days of awareness if the fees changed. The fact that you don't see a total payment and your total costs... with no space for a signature, made this new GFE worse than the old one. But before I go, I do love the summary of loan section on the first page.  This clearly states the type of program that you have, if your interest rate would adjust and such.  Thanks for your input and feedback.

LARRY... . we seem to agree overall and how this actually could hurt borrowers. Yes, there are some positives to the new GFE.... but I don't like the grouping of the fees into 2 large boxes and not show the total monies needed which would include the down payment. People generally remember what they see and not what they hear.  Time will only tell, right?

BRAD.... . sorry, but I have not heard that one at all... and I am part of a group of loan officers from across the US, coming from 10 different lenders. Yes, the new GFE is encouraging more buyers to shop, and that was the governments intention... aactually on the top of their list.  But you should know that you can have as many credit pulls in a 30 day period and it will not affect your credit score. Yes, there will be alerts in regards to the credit pulls... but from an underwriter denying the loan because of this?  It if gets a DU approval or not, and it still makes sense, then how can one assume that it was turned down by another lender?  Again, I have not heard this kind of thinking from one underwriter and or lender... or investor.

You then went on to state this... : "Lets not forgot that a buyer can't see a GFE until he is in contract....which is too late to pick a lender by then."

And who says this?  Did you read the part about the 6 triggers?  All you need is an address and a GFE needs to be given out. I never read any where that you must have a contract before giving out a GFE.  Now, there are lender overlays and maybe your lender requires this.  But if you educate the client properly, being too late to see the costs of the mortgage in my opinion is not true. As I stated, most lenders that I know of are sending out the old good faith estimates, but the name of the form is different.

Overall.. I do agree that those that approved this form should be questioned... thanks for your input.

Makes me glad I do not do loans and I know so many good lenders from Active Rain.

Jeff,

Thanks for taking on this issue. The new GFE and RESPA crap is going to cause alot of confusion and possible monetary loss to lenders (like we need more, right). FLAGGED FOR FEATURE!

JP

Hi Jeff,  As usual you give us a very well written analysis in this post.  Well done !

Thanks for this post Jeff, You allways give somuch good information in your post. I look forward to part 2

WANDA ...  comment # 12 -

Please check out this comment from another blog. Maybe this helps clarify what I was trying to state and what you disagreed with me about.  Comment from another blog.

I just wanted to point out that I can't see how you can say on the new GFE, that the costs are as clear as it was on the old GFE...  Again, unless I am missing something.  thanks

BILL.... . not sure if I will get to this today.. if not, it will be posted tomorrow.  thanks

GENE.... . I wonder if I even want to do loans now... lol

JP... . There will be some losses due to this new change... and one thing that I didn't mention was that companies will raise rates and or fees if there happens to be consistent losses. I know that I am a stickler for details, but this will be hard to stay on top of.  I do see a few loop holes that I didn't discuss and I guess time will tell.  thanks

BILL... . thank you very much for those kind words and for the polite compliment.

MICHAEL....  . I hope I get to it soon.. lol  I should be posting part 2 by tomorrow and thanks for the kind words.

Larry Bettag has further discussed some of my disappointments in this post.  Please read :

It's Official, the New Good Faith Estimate Hurts the Consumer and the Industry!

Jeff,  The cost estimate on the new GFE DEFINATELY are not as clear.. We cannot show the complete breakdown of fees in BLOCK 1..

What I was disagreeing about is the fact that some lenders can hide JUNK fees in this area.. True, in reality if they can with a borrower that is not savy to the 1% origination and standard fees and/or they are not shopping other lenders.  If they are shopping other lenders, they would clearly see block 1 as being much higher.  The lender coudl not throw their junk fees in at the end of the transaction, which has been typical of predatory lenders prior to the new Good Faith.

I cant tell you how many times I have seen borrowers using out-of-state lenders or predatory companies- get to the closing table and finding out their rate isn't what was originally disclosed, or the fees are doubled--this was in the old world before the RESPA reforms.

I hope this makes sense

Jeff,  The cost estimate on the new GFE DEFINATELY are not as clear.. We cannot show the complete breakdown of fees in BLOCK 1..

What I was disagreeing about is the fact that some lenders can hide JUNK fees in this area.. True, in reality if they can with a borrower that is not savy to the 1% origination and standard fees and/or they are not shopping other lenders.  If they are shopping other lenders, they would clearly see block 1 as being much higher.  The lender coudl not throw their junk fees in at the end of the transaction, which has been typical of predatory lenders prior to the new Good Faith.

I cant tell you how many times I have seen borrowers using out-of-state lenders or predatory companies- get to the closing table and finding out their rate isn't what was originally disclosed, or the fees are doubled--this was in the old world before the RESPA reforms.

I hope this makes sense

Thanks for the shout out Jeff.  It is scary what our leaders are doing.  I could design a form that is so much simpler.  I wonder how much it cost in time, costs and committee meetings and hearings to make something so atrocious.

Thanks for posting. We learn a lot from Active Rain blogs. Best Regards,

Working on part two and it should be posted either later today or tomorrow.  thanks

Jeff,

Of course it will cost more and make more paperwork.  I think they are trying to help but are misguided about how to do that...

Ann Hayden in Wildwood, MO

Looking forward to Part 2 Jeff ...

thanks so much for explaining what our government has been doing -

How do people get by with spamming on Active Rain?

Jeff,   I know this is an older post.   Not supprisingly when I Googled "trigger points for GFE" this post came up in the #1 Spot.  

Please correct me if I am wrong.  Am I correct in saying the an 8th trigger point would be that the consumer requests a GFE and without that consumer request, Loan Officers have no requirement to create a GFE. 

The reason for my question is the newer software my company is using triggers a RED FLAG Disclosure Requirement when the first 6 items are input.