After almost two years since the new Good Faith Estimate (GFE) and Truth In Lending (TIL) have gone into effect, Washington is coming to the realization that everyone in the Lending Industry came to the minute that the revised forms were unveiled. The Lending Industry has been stating for almost two years that these forms do not do what they were meant to do. In fact these two forms not only fall short of what they were intended to do, they may even be accomplishing the opposite.
The reasoning behind the new GFE & TIL was to bring about more transparency. So the new GFE went from a one page document to a three page document, and the TIL from a one page document to a two page document. The TIL may have actually moved closer to accomplishing the intent of the document, but it still fell short, but at least it was a step towards more transparency. The GFE on the other hand was a completely different story. Here are some of the reasons why:
- No where on the form is the Loan Program Listed (it was on the old form)
- The total monthly payment (principal, interest, taxes, insurance, & MI) is not disclosed. Only the principle, interest, and if applicable, MI are disclosed. Borrowers want to know what their total monthly payment is going to be and not just the principal, interest, and MI (the total payment was disclosed on the old form)
- Many of the fees are not individually disclosed, but grouped into one total (they were all individually listed on the old form). Example:
- Lenders Fees are combined and given as one total
- Title Insurance and Attorney Fees are combined and given as one total.
- Escrow for Tax and Insurance are combined and given as one total.
So now Washington has finally come to the realization that if they want more disclosure and transparency, that they need to talk with, and listen to the advice of those who work with these document daily. The new effort is to combined the GFE and TIL into one document, and to clearly state, and provide the transparency that was intend with the present documents.
The drafting of this new document is underway, with hope to roll it out in the near future. I for one am looking forward to seeing what it looks like, and will reserve judgment until I see it. But if the points that I made up above are address and correct, this documents will make a marked improvement to finally start to provide the transparency that is long over do in the Lending Industry.
******************************************************************************************************************
Who To Call For Your Mortgage Needs In Connecticut:
George Souto NMLS# 65149 is a Loan Officer who can assist you with all your FHA, CHFA, and Conventional mortgage needs in Connecticut. George resides in Middlesex County which includes Middletown, Middlefield, Durham, Cromwell, Portland, Higganum, Haddam, East Haddam, Chester, Deep River, and Essex. George can be contacted at (860) 573-1308 gsouto@mccuemortgage.com, or visit my McCue Mortgage Homepage.
******************************************************************************
Info about the author:
George Souto NMLS# 65149 is a Loan Originator who can assist you with all your #FHA, #CHFA, and #Conventional #mortgage needs in Connecticut. George resides in Middlesex County which includes #Middletown, #Old Saybrook, #Middlefield, #Durham, #Cromwell, #Portland, #Higganum, #Haddam, #East Haddam, #Moodus, #Chester, #Deep River, and #Essex. George can be contacted at (860) 573-1308 or souto@snet.net
George, if only they would do focus groups and test a new document with consumers and propfessionals before they release it. The new forms are extremely confusing and do not have some very important facts, as you stated.
Sharon
Perhaps if politicians had to apply and qualify for a loan like everyone else, instead of getting the sweet heart deals we have heard so much about, the forms would be what we in the industry know they need to be. Just saying. Once again some politician who has never worked in the industry they are trying to regulate makes up another form. I truly hope they get it right this time, but I'm not holding my breath.
George -- If only the government understood that quality not quantity is what counts, Increasing the page count on each of these forms doesn't make either better. Combining the two makes sense if the transparency is there.
George ~ This is good news for consumers... I don't know why they don't ask the folks in the field and even consumers.. what works. I am keeping my fingers crossed. The current forms are not doing what they were intended to do..
George - I was one of those that thought (and still think) the new GFE is a joke. I would love to see it put to death. Personally, I thought the old one was just fine and still use it now as an itemized fees worksheet.
George,
Of course they did the opposite.... :-)
Ann Hayden in Wildwood, MO
George, maybe too many legislators connected to the banking industry worked on them the first time
It's about time, but I'm not sure the Government will get it right, more likely they will mess it up and we'll have huge delays while everyone gets used to the new form.
I have no confidence in elected officials to properly identify any of our problems, to correct our problems, or to ensure that the cause of our problems is properly addressed to prevent a reoccurence of these problems in the future. Your post just confirms it. Thanks for posting.
George - it has taken me nearly all of the 2 years to figure out the new GFE. I hope the new one coming out does not have a learning curve. :)
Yes the government screwed it up last time, but they'll get it right this time! And if they don't, NAR will be there to make sure that they do! And monkeys will fly out of my butt and bring me all the buyers I can handle!
Here's another crazy idea: Put how much cash the borrower will need at settlement like the old GFE
Well, that's some welcome news George. It would be nice to see an easily understandable GFE.
George, combining the forms makes sense. Hopefully, they will also incorporate some of the information from the previous GFE form.
George, once again the government did not look in the correct direct for the answers. Maybe now (after two years) they will get this right. I just don't understand why they didn't do this in the first place, and why it took them so long to come to the same conclusion we did in a matter of days... NOT YEARS.
The government threw darts at lenders for not clearly disclosing and then forced them to use documents that are more confusing than ever - just one more example of government involvement in issues they have no knowledge of and spending our tax dollars while they are at it. I try very hard to maintain a positive attitude - but when it comes to the government realizing these forms don't work - not feeling it - SO unlikely they will improve anything.
George,
Good information , I was not aware of the fact that a new GFE was under consideration.
The GFE we are now using is definitely more confusing to borrowers The old GFE broke down the costs. The new GFE lumps them together.
The disclosure differs between brokered loans and lender funded loans, and on Gov't loans it shows financed MI as if the borrower will pay the fee out of pocket.
One of the worst changes is it doesn't have a signature line and if the borrower signs it we are out of compliance!
I don't know what idiot thought that one up.
I have been telling borrowers since the change, the good faith estimate has become the worst case scenario. The is noting "good" on the form at all. The other item you forgot to mention is there is no place for the borrower to sign the form unlike previous versions.
Looking forward to the consolidation. Thanks fo the news.
George,
This business is full of change thats for sure. Thank you for the update on the next change coming to the lending world and for our buyers.
Thank you George for the update. We await the change with baited breath. Focus and testing groups would be easier and cheaper to do, but I'm sure these politicians/attorneys will come up with a really well scripted and formatted form for all of us to understand...Not.
This is great news indeed! I recently had a client who was upset with ME for not understanding what his final monthly payment was going to be including taxes. I had given him the tax numbers, but I didn't realize that the taxes were not part of the discussion that he had with his lender. He felt like the taxes put him over his max monthly payment budget and it was frustrating for all of us because he was already committed to buying the property.
Let's hope this all becomes a lot clearer soon!!
Yes, these new forms do little to protect the public or ourselves, AND they also make it easier for escrow and lender professionals to make simple mistakes in the form due to lack of itemization.
It is this itemization that makes it easier to double check our figures for accuracy. A group of professionals comprised from every state would make an excellent group to "beta test" thse forms and make suggestions before they are put into some ridiculous law.
JMHO-YMMV,
Dan Walker
George, It would certainly be nice if the new form included those things you mentioned with clear disclosure. It certainly seems like it would take simple and total disclusure which could be included on a one page document! Thank you for the head's up! i can't wait to see the revision.
Well written.
i have been saying that since DAY 1 when this came out.
These caused more confusion with the borrowers.
Mortgage professionas should have been consulted when this was being done(same with LO compensation this past April) but why would anyone listen to the people who actually do this for a living?
one could hope.....
Very good post,
Its about time! I'm glad I end up doing my own closing cost estimate for the consumer because the new GFE is so far from understandable to the average person its not even funny
Today (September 19) is the last day you can post comments about the new prototype disclosure forms (read about it in this article: http://blog.dankrell.com/2011/09/novel-idea-consumer-friendly-mortgage.html).
Well, it's great that the government regulators have decided to try to fix a problem they created. I hope they don't end up making it worse.
Hopefully, this new document will be accurate..... but keep in mind WHO is developing the form!!!
I agree with Sharon (Comment 1) --- focus groups would be a tremendous idea!
Wouldn't it be nice if the government listened to the professionals BEFORE making these kinds of decisions in the future. Reminds me of the situation with Fannie Mae right now. They own almost 250k homes and don't know what to do with them. Um, I know...should have approved those short sales....
I hope they re-vamp the HUD-1 in the process. Surely another example of the government trying for more transparecy but making the whole statement more confusing for everyone especially the consumer.
George, thanks for letting us know there is a ray of hope. The current GFE & TIL only confuse the consumer more than ever.
Thanks for this update on these two....I've reblogged your post for readers in my area, Triad North Carolina!
George when ever government gets involved things get larger but more complicated. It was a good idea, it meant well but the execution of it seems to fall flat. Thanks for sharing this story
Thanks George. I am interested to see how this turns out.
Do you really think that a President who is conteplating the elimination of the mortgage interest deduction, really gives a flip about getting some pesky loan for right?
George, thank you for the heads up. After living in DC for 25 years, the odds are the new and improved forms for transparency and disclosure will only become longer and more complicated. Anything created by a committee tends to lack vision, efficiency and common sense.
Repealing this mess along with other regulations will lower costs for the borrowers as well as make things easier to understand.
Whoever thought these forms were of value is an idiot
I have yet to have a borrower push me into explaining the new GFE. I show them the old GFE and say "Here is the new GFE..... it will only confuse you" and leave it with them.
I don't want to get political on your article..... But this can be changed on elecion day. ;-)
I can only hope that they listen to people who are in the business and deal with this on a daily basis. Consumers are more confused than ever and the "new" forms only made it worse. Thank you for the information that consolidated forms are in the works. I'm going to re-blog this for my clients in the Northern VA/Washington DC area!
Don't forget - the new forms also FAIL to tell you how much money you need at closing - the old GFE did. The only two questions the GFE really needs to answer:
After 8 years of work, the government agency managed to take a 1 page form that answered those questions, expanded it to 3 pages and left those two answers out. Thanks!
I have no hope for this one...
Like disclosure was ever or will be transparent! NO BANKS have the keys to the house and THEY JUST ROBBED US ALL!!!!!!!!
You can check out the latest two proposed forms at the following link.
http://www.consumerfinance.gov/knowbeforeyouowe/
Great article. But actually Barbara (#3) summed it up in her first sentence..........."If only the government understood"............Enough said!!!
Good post, George. And, Fairway Independent Mortgage does kind of sum it up for many -- 1) What is my monthly payment, 2) How much money do I need at closing. These are the two primary questions, of course. However, the lending industry was not being totally transparent to borrowers and foisted hidden costs on them at closing that left people in a bind at the closing table. Undisclosed yield spread premiums; last minute changes in costs that were not previously disclosed - the LO (loan originator) industry was due for a review and overhaul to facilitate disclosure. They got a goodly portion of that, on the first pass. Now it looks like another review and update is in order. Good.
Maybe the consumer protections that need to be in place finally will be. Looking forward to the updates and thanks for posting, George Souto!
George thanks for bringing this to ever ones attention. We can't influence Washington unless people like you tell us what is going on. Washington should hasn't.
I think sometimes less is more. Most buyer's just want to know what their interest, payment, and out of pocket costs are going to be, and the rest of it is less important. The more transparent they try to make it, the more complicated and confusing it becomes.
All of these proposals are classic DC. They take 2 pages, turn them into 5 pages which we have to supplement with another page (Initial Fee Worksheet which is the same document as the old GFE) so that the numbers make sense and the two figures the borrowers want to see (total PITI payment and total cash to close) are disclosed, and then add on an "anti-steering" disclosure mandated by the Federal Reserve Board to improve our "transparency" and help the borrowers "better understand". Nothing coming out of DC is transparent. Not the current forms and not the new CFPB proposed forms. The CFPB is proposing that we quote homeowners insurance within a 10% tolerance, which is a new requirement for us if this CFPB proposal sticks. The CFPB is still lumping figures together, and any new version will likely require the old detailed GFE now known as the Initial Fee Worksheet.
And the new Obama jobs bill takes again from homeowners choosing to take out a mortgage, reducing the mortgage interest deduction and capping the reductions on the ultra-wealthy. Really? How is taking a few hundred dollars from homeowners choosing to mortgage helping create jobs? Pay for things on the backs of homeowners. Sounds like a grand DC plan.
Could it be that the title companies/attornies/escrow firms wanted the fees obscured? Yet another way to make it hard to know what you are in for... sadly, this is the state of our industry and its lobbyists...
George,
Notice that the Paperwork Reduction Act didn't apply here as in most cases where it's actually needed. Now we'll probably end up with a 10 page form that still won't have the information consumers need.
Government written guidelines are the equivalent of sanitation workers writing procedures manuals for brain surgeons.
No offense to sanitation workers!
it would also be a significant step in the right direction if the new regulations require lender disclosures everytime credit is pulled that give the potential borrower specific instructions on what information they must provide that will obligate their potential lender to provide them the HUD standard Good Faith Estimate. For GFE's to be useful and effective, they must become commonplace.
Hurray! Hope it will be a real improvement.
What a complete waste this whole 2 year period has been. The new documents provide less information to home buyers, create more delays, and cure costs for lenders on items they have no control over. Classic example of the law of unintended circumstances. Let's hope the vetting of the news forms is better than the previous ones.
Great post. Can't wait to see the final result. Better yet, I'd like to read your comments.
Great post - well thought out & great points.
Seems like nearly everything our goverment tries to fix only gets worse.
PS Not sure how you are ending up with the spam postings for online stores, if people have to log in to post...???
Thanks!
Hey George, Hope that they get it right this time.. Isn't it funny that all these rules and regulations come from people who have never been on the front lines and worked with it on a daily basis. My wife is in the local school district and all their decrees are the same way. They come down from non educators. Simply amazing!
I have seen the rough draft. Same crap different format.
Still don't address what people need to see - to know what they are getting.
We have people putting this together who have never been in Real Estate or Lending, just like we have people putting together Jobs bill, that have never ran a company.
Post office is doing well- wonder what health care will look like?
My point is let people draft this stuff that are actually in the business!
By the way I didn't have my CPA draw up the plans and finish my basement- I had a Certified Contractor.
Great Post!
I think your idea to wait until the forms arrive so we can then judge them is a good idea. I've gotta say though, I will be really surprised if the forms end up being much of an improvement. We can only hope.
The camel is a horse designed by government committee! The government most likely needs 100 new employees to come up with the combined form - and never talk to those who use them. How about accountability for the government employee - a loss in pay when they screw up!
As a mortgage lender since 1995, I have asked all past clients which new version they like. Let's ask the consumer what they want, of course we as lenders understand it we look at this stuff all day long.
Its not in the paperwork it is in the person who describes it.
I know many Loan Officers that don't even understand all the disclosures.
Today we spend a ton of time originating the loan including keeping it together up to close.
Well, at least they understand that in their last attempt they didn't make anything better. I'm betting the form gets longer still, but hopeful that it will be more user friendly.
I can't believe the original form was created without input from the parties that USED the form in the first place. Let's hope this one is an actual improvement.
Good post George - The forms are definately more confusing for borrowers. Most borrowers shrug when they are told that all fees are lumped onto the GFE regardless of whether buyer or sell is paying the cost. I think the only reaso the GFE flys is that there is no place for the borrower to sign. Maybe next time some indusrty input will be used.
George,
Great Point!
What comes out of Washington always seems to be slanted to the needs of special interest groups rather than to the needs of the "people" (at least on the first go-round). Let's hope that they get it right this time!
P.S. Let's hope that NAR's "Political Survival Initiative" keeps this in mind as they attempt to sway opinion in Washington.
George...I hope they also address the confusion many buyers have regarding the Owner's Title Policy...I'm not sure why the Federal Government felt they needed to dictate who was to purchase that coverage. Here in AZ, it is normally provided by the Owner (seems to make sense to us!) and it's SO CONFUSING when the escrow officers have to charge it to the buyer and then back it off.
Great post, thanks for the information.
Thanks for the education. I learned a lot about this subject that will help me answer clients questions. Great post will have to read your other entries.
Timely post and I am eagerly awaiting something better. The present document is confusing, incomplete and the absence of the payment info is just wrong.
So true George. I think you stated what we were all thinking. I think the gate was left open for a lot of non-disclosure. I was trying to figure out accurate closing costs the other day and had to look really closely. Hope they get it right next go-round! Thanks for the post!
I look forward to having a document that is easier for our clients to understand.
Hi George, Thanks for an excellent review. We spend so much time to accomplish so very little ! Adding pages to a disclosure form doesn't necessarily mean we get better info - only more info.
The CFBP has two of the latest "prototypes" online where you can view, comment, and vote on your favorite.
Go to http://www.consumerfinance.gov/knowbeforeyouowe/ Do it now! They need your input!!
This is the fourth round of draft comparisons, and what I find truly odd, is that the current form is different than the last two we voted on. I thought they were getting close with the Camellia form in round 3. Now they've gone and added a "TIP" - Total Interest Paid (over lifetime of the loan). You think you had problems explaining APR... wait till the consumer sets their eyes on this percentage! Oy vey :0
Jana
Explain all the title insurance charges also.....
If it is from the Feds...you know it is a mess from the get go. Doesn't matter what industry...they can mess up opening a paper bag.
Uhm - guys - hate to say this - but Washington is involved, I seriously doubt there will be a solution in the near future, just check how long this is taking... 2 years to crank out a form...
Ya, there's something wrong.
sounds like they are moving in the right direction but unfortunate that they are stumbling along the way
What should we expect, an efficient and comprehensive regulation from the government? There's a reason why layers and layers of regulations are created by government agencies, have you figured it out? They want to perpetuate their existence. Vote the bums out, two year term limits for all politicians and no perks or lifetime benefits.
Maybe because it is Monday? I don't know - I'm not feeling optomistic about anything they try to do in Washington. Making the GFE 4 pages (including the service provider list) and making us disclose six to eight of them in a file due to every little change is annoying at best.
Consumers care about what their costs are and what their rate is, period. What the new GFE did was further complicate the disclosure of how brokers are paid while continuing to allow them to believe bankers aren't paid.
Not allowing fees to go up within 10% range could have been accomplished without all the aggravation of continually disclosing and re disclosing, chewing up trees and time, not to mention more importantly every new GFE produced creates an opportunity to make a mistake.
I produce a GFE and then the lender does one. With every change we do it all over again. Add to that we have to go on some lender websites with which we are not all so familiar and make changes in fees. It is a total waste of time, resoures and money.
My experience so far - errors made are being absorbed by the lender because they are making the errors when they re disclose. How long will that go on until they ratchet up rates or fees? When a borrower knows what he is getting he should be charged that vs getting a credit at close because something was left off a new(er) disclosure. When lenders raise rates and fees, it will affect EVERY borrower, not just the one who happened to get the unexpected $900 credit.
Like I said, maybe because it is Monday? but my feeling is the ultimate goal is to frustrate brokers so much that they throw in the towel and go work for the banks who do not need to disclose what they make on a loan.
The banks are not even using the new disclosures as intended. They are using WORKSHEETS instead of a GFE. The GFE is not being given to the buyers in most cases until the week before close. We can change the rules, unless we put TEETH into the rules the games will just continue to play the game.
I have to smile when I see post #89. The banks are not using the appraisal independence rule as required, but what is anyone going to do about it? The same will apply to GFE changes.
When I talk to a borrower to whom I'm quoting a better rate than the local bank, but they get obsessed with the fact I'm getting paid to work and they know it vs the banker who is also getting paid but does not need to disclose how much, it is quite simply just annoying.
i used to be a Lic. Mortgage Broker until dec. 2010. i used to use Calyx program for all the loans. The GFE and TIL got printed according to the information we put in when taking the 1003 loan ap. it was everything we needed and customers were told +/- what was going to be in the closing statement, and they were happy with that and we all went to closing. Everything there was disclosed. I think that the reason these bureaucrats "created" the new GFE and TIL is to confuse people as well as create more paperwork for everyone concerned. Forget about the fact that more trees have to be cut to accomodate the extra paper.
Jerry Dragoon, GRI
Broker/Owner Select Properties of South Florida
They other key thing to note about the new GFE form... there is no where to sign the form. Sure, the borrower signs a letter that reads they 'received the GFE' but who is to say that the lender gave the right GFE or did not change anything? It would make more sense to have the signature right there on the form.
Thank you for the heads up.
I tend to rather know the details. For example I want my tax and insurance funds separately. Like you, however, I reserve judgement.
I've always had the opinion that forms were meant to help us rather than be our masters. The forms in question are our masters.
Good to know. Forms should be something we can trust, not something to be suspicious of.
I have all the confidence in the world that they will screw it up again. This is what we spend all our tax dollars for after all!
The bureaucrat that though that things would be simplified and more transparent by making the form longer is a complete moron.
George,
Thanks for providing this update. It's true. We knew from the minute we saw the present GFE that it wasn't done well.
Hi George - It's really coincidental that this weekend I was looking over the GFE and TIL from two different lenders for someone and I thought it was not helpful that the forms weren't the same so it made comparing very difficult. When they make up new forms, I hope that everyone uses the same one so it will be easier to compare. Congratulations on another great featured article!
should we expect antyhing less form Washington??? Most in Washington believe that GFE is an acronym for GirlFriend Experience!!! LOL
Your points are good, but in addition to that you have the arbitrary time constraints that make lenders crazy! When you lock the loan, even if it is the same rate you initially disclosed, and you blow the 3 days- oh my! you are out of compliance! They create havoc as the borrower wonders why he keeps getting so much mail!
It's a start for sure. Thanks for explaining.
George, first of congrats on a well deserved feature...you really said what so many have been thinking. I surprised that it's taken this long for the powers that be to realize what a mess that made of it. The new UAD for appraisers...in my opinion...is going down the same path.
This is great. Please keep us updated. Thanks for the post.
By GEORGE you have it!
I hope its an improvement
Great Post!! Thank you for sharing George!
It's the old -we're from the government,we're here to help you ! Taking 1 page forms up to 2-3 pages should have been their first clue !
"In fact these two forms not only fall short of what they were intended to do, they may even be accomplishing the opposite."
This is exactly true. The new GFE drives me absolutely crazy. Even after two years and doing transaction after transaction I still think it's confusing and definitely not easier or more transparent. The fact that fees are "bundled" and aren't listed separately is ridiculous. -Kasey
George,
It is a head-scratcher, to put it mildly. You just wonder how it ever got approved. There are knowledgeable mortgage people in the government.