A new array of challenges has hit the battered mortgage industry. Pros and Cons alike are both heavy in the new version of RESPA, or the Real Estate Procedures Settlement act. HUD (housing and urban development), the overseer of these laws and policies, has had made some sweeping changes to the required documents.

The primary thing is the new Good Faith Estimate. There have been a multitude of changes to this document, and we don’t have space to cover all of them but here’s the highlights:

• 6 pieces of data must be collected before a GFE is required: borrower’s name, social security # for pulling credit, monthly income, property address, loan amount sought, estimated value of property.
• New Good Faith Estimate must be issued to the person applying for a mortgage within 3 days of application.
• After, origination, points, YSP and lender fees CANNOT CHANGE*.
• Effective now GFE’s and HUD sheets must contain much more info such as length of time rate/fees are good for and the prepayment penalty
• After, 3rd party fees such as title, escrow etc can change but have different tolerances (I E they can only change 10% from original and so on) depending on if the borrower picked that 3rd party provide or not.
• * Broker/lender fees can change in a few exception scenarios such as change in loan type, borrower request, new construction and a handful of other loopholes. However, there is still a process and the borrower must sign a letter of intent before a new GFE is issued.
• There is a 10 day waiting period after issuance of the original good faith estimate before a revised one can be sent for any reason.
• There is a phase in period for the new GFE which is complex by itself. See the links below for a full explanation.

I could go on and on. The mortgage broker I work for has had us go through several hours of classes and we have had more than a few meetings about the new Good Faith Estimate and all the changes. There is one vital analysis that we’ve made- since the GFE is triggered on 6 pieces of information, one being property address, this means on purchase preapproval situations wont require a GFE for compliance. For loan originators this is vital. If you are a realtor or loan officer you should check out this very excellent reference card here RESPA_MDIA Quick Reference Guide.

Some other documents for your review:

Settlement Booklet December 15 REVISED this by law must go out with all GFE’s

RESPA Manual FINAL pretty large

HUD’s consumer testing report of the new GFE while looking for something else, I stumbled on this crazy document. Behold.

And so, in summation: This new red tape will not be an obstacle to quality mortgage brokers who take pride in their ethics, morals and customer service. I do think that the consumer will receive both benefits and detriments due to the new RESPA. On the one hand it will be very difficult for shady loan officers to bait and switch anymore. On the other hand Real Estate is never without it’s surprises and I can see this being very difficult to work with. I estimate that these changes will add another 1-2 hours of compliance to my work week.