Exactly how good is the new Good Faith Estimate?

Two months since the new RESPA rule took effect, some mortgage lenders report consumers are asking more questions throughout the homebuying process, while others say consumer confusion has simply taken a new shape.

The new rules will hopefully ensure fewer surprise fees, but does the new Good Faith Estimate make it easier for consumers to understand the terms of their loan program?

“One of the major flaws on the GFE is that it doesn’t include a line for the total monthly payment, including principle, interest, taxes and insurance,” our very own Todd Ewing told the Washington Times in an interview. “The monthly payment is expressed only as principle, interest and mortgage insurance premiums, which doesn’t really clarify for borrowers how much they will need to pay each month.”

The new Good Faith estimate has increased the amount of time it takes for a transaction to close, a New York Times article reported, because lenders must obtain a guaranteed quote for settlement services before sending the form to the borrower. The same article also reported consumers are asking more questions about closing costs than before because closing costs are represented as a lump sum on the new Good Faith Estimate instead of an itemized list like before.

The new Good Faith Estimate that went into effect January 1 was a response to consumer’s primary complaint at the closing table: hidden or surprise fees.

Whereas in the past the GFE was an estimate of likely fees with no requirement of accountability, the new GFE holds mortgage lenders to a stricter standard. In some cases there’s zero tolerance for going over the estimate, and lenders can incur heavy penalties.

How has the new RESPA rule affected you?