Will New Forms Mean Less Confusion For Buyers In 2010?
One of the ways the Federal government is trying to reform the housing industry is by adding more structure to the closing transaction. In particular, HUD is requiring two new forms for all closings after January 1, 2010. Those new forms are;
The Good Faith Estimate. When one applies for a mortgage, the lender is expected to provide an estimate of the expenses and fees involved in getting the new mortgage. Starting in 2010 those estimates will be given on a standardized form – the Good Faith Estimate. This form lays out all the charges related to the loan and note which charges can not change, which can change a small amount, and which have no restrictions. By doing this, HUD hopes to make comparison shopping easier and to help consumers understand the loan they are applying for.
The second form is a revised Settlement Statement or HUD-1 form. The HUD-1 is given to the buyer and seller by the closing attorney prior to closing [supposedly 24 hours prior - usually about 30 minutes prior] and is the official record of where all the money comes from and where it ends up. The new form has a new section which compares the actual settlement costs to the Good Faith Estimate and a final section which spells out the details of the mortgage in relatively clear English.
Overall, these changes are pretty positive. They make good strides towards making the money trail in a closing clear and in making the estimates given by lenders mean something. They certainly aren’t perfect — for example the Good Faith Estimate doesn’t actually tell the borrower what the mortgage payment is — but I expect a couple of quick revisions will take care of the main points.
For a great review of the new forms, including some sample forms, take a look at the Virginia Association of Realtors website. Since the forms are Federal, their comments should also be valid here in NC.
[Thanks to Tina Merritt and the Trump Blog for pointing out the VAR site]
Tags: buyers, mortgage news, sellers
