BluefoxToday blog : New mortgage rules from HUD questionable

New mortgage rules from HUD questionable

The recent mortgage and real estate troubles have sparked all sorts of efforts by the federal government to update existing rules and regulations governing housing transactions. In all honesty there certainly is some room for that, but there also were many other reasons to this ugly mess. In the spirit of doing something the Department of Housing and Urban Development, or HUD, burned the midnight oil for months and now it has released a new set of rules.  

Actually, what it did was to some degree revise RESPA, or Real Estate Settlement Procedures Act, that has been the benchmark for home purchase transactions since the 1970's. The purpose here is to give borrowers clearer information about the loans they are signing for. If that process can be simplified it works better for everyone; buyers, mortgage consultants, real estate agents, title. Everyone.

One of the main achievements of this revision is the new and improved three-page good faith estimate, the famous GFE. It supposedly puts in plain words interest rates, lender fees, possible prepayment penalties and potential monthly payment increases in case of Adjustable Rate Mortgages, or ARMs. It'll also curb to 10% that some fees can go up from the original quote. Mortgage brokers and lenders are advised to begin using these new forms by January 1, 2010.

Any time a prevailing practice can be improved is a good thing. The intention of HUD is commendable, no question about it. There is one big flaw in this undertaking, though. HUD has no legal authority to enforce these new rules. There is no legislation backing them up. HUD merely counts on federal and state regulators to demand adherence from the institutions they oversee. Well, this appears to be more wishful thinking than anything else. What is likely to happen is that some states pursue this directive with more punch than others. Consumers in states with a lax attitude toward this will see very little progress in the information they get during the lengthy mortgage application process.


Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst - syndicated mortgage, housing and property management blog
My cell: 702-499-1006

Comment balloon 6 commentsEsko Kiuru • November 13 2008 10:00PM


Esko, I was trained on this new GFE form and everything you said about it is what is coming in 2009.

Posted by Gary Woltal, Assoc. Broker Realtor SFR Dallas Ft. Worth (Keller Williams Realty) over 10 years ago

Actually, Esko we only have until December 5, 2008 in Washington State to employ these forms and most of us are already. Our state Dept of Financial Insitutions is making sure we do with random audits and prosecutions for failing to comply....which will be challenged legally ...anyone who has the energy left after picking up the 300 pounds of new legislation is certainly welcome to have their day in court!

Posted by Susan Templeton over 10 years ago

Esko even if every State does not jump on board it is still a step in the right direction from everything that I have heard about it.  But the proof of how good or bad it will be, will be when it is finally put into practice.

Posted by George Souto, Your Connecticut Mortgage Expert (George Souto NMLS #65149 FHA, CHFA, VA Mortgages) over 10 years ago


Hopefully it'll be fully adopted by all states.

Posted by Esko Kiuru over 10 years ago


You sure didn't waste any time on this which is good.



Posted by Esko Kiuru over 10 years ago


Overall it'll have a very positive impact on the mortgage process.

Posted by Esko Kiuru over 10 years ago