The Smooth Loan Process #2010-20

GFE Stands For Gone From Estimate

Back in my day (I love it when my dad says that), GFE stood for Good Faith Estimate. As most of us know by now, the Good Faith Estimate has undergone some changes that are mandated by HUD. The spirit of it was good. The execution is leaving a lot to be desired. The idea is to give the borrower a clear and concise summary of the terms of their new loan. That way there are no surprises at closing and no surprise interest rate changes after closing. Sounds reasonable, right?

Well, sort of. If we assume that the cause of all of the foreclosures in the Country were due to an unclear disclosure of the terms of the loan, then new forms would be warranted. HUD would have you believe this. I would say that's a stretch even for the most cynical of us. Using myself as an example, I have never had a client tell me that they were surprised by their payment or their terms when they got to closing. I have managed to accomplish this using the old GFE. Most other Loan Officers will tell you the same thing.

Maybe it's the Loan Officer and not the form?

For most buyers, the two most important things about their financing is the payment and the total out of pocket cash to close. These are two items that are mysteriously missing from the new GFE. How does that make things more clear?

I know that HUD's intention in mandating the new GFE was to prevent the dishonest loan officers from changing the terms on buyers before they got to closing. Unfortunately, HUD has made it easier for those dishonest loan officers. If we don't have to give you your payment or your total out of pocket costs, then what prevents me from changing the terms (other than ethics)? If the terms changed, how would you know?

The Smooth Loan Process lesson for today: Request an old GFE along with the new GFE from your Loan Officer. The old one is more clear.

Harold Perkins
Galaxy Lending Group, LLC
602-595-1233
Harold@HaroldPerkins.com