Federal rules that were put into place Jan. 1, mandate a standard, 3 page Good Faith Estimate that advises consumers to shop around for the best loan that assists them in comparing lenders proposals. The rules are an update of the Real Estate Settlement Procedures Act, a 1974 law known as RESPA.

What does this mean to you?

Whether working with a broker or a bank, the Good Faith Estimate, which shows all charges in connection with the proposed loan should line up so they can be compared “apples to apples”. 

The Good Faith Estimate form requires lenders to combine all of the bank or broker fees into one “origination charge,” enabling consumers to compare one lender’s fees with another’s. 

Furthermore, lenders are prohibited from increasing their “origination fee” from the estimate provided.  Some additional charges, including title services and recording charges, can increase by as much as 10 percent, but the lender has no control over these fees.

Bottom line is that this new form is still confusing for consumers.  It went from one page to 3 pages, but at least it is now a standardized form that looks identical from bank to bank. 

It is going to be interesting to see the new Good Faith Estimate in place because banks have been scrambling to figure out how they are going to implement it.  Borrowers should know that the loan process is not as easy at it once was and that the escrow timeframe has been moved from 30 days to 45 in most purchases due to new lending laws.  The best piece of this that I see is that borrowers will now see accurate escrow and title charges where before lenders would just throw in an estimate because they didn’t want to take the time to contact escrow or title.  For a sample of the new form, please contact Downtown San Diego Realtor, Chad Dannecker.