Is The Good Faith Estimate..........Good?

In an article by Jack Guttentag for Inman News (http://www.inman.com/buyers-sellers/columnists/jackguttentag/why-good-faith-estimate-needs-overhaul), Mr. Guttentag is asking for an overhaul on the Good Faith Estimate document that gives a potential borrower the estimate of costs when buying or refinancing a home. Mr. Guttentag feels the GFE in it's current state confuses the borrower more than it helps them and that the GFE should be an easy to read document that a borrower can use to shop for the best rates and costs on their future home loan.

Believe me, if anything would make it easier on a borrower I'm all for it. We make borrowers sign so many papers now at closing, it is ridiculous. The borrower doesn't ever have trouble with the note or the actual mortgage document ("6.5%, 30 year fixed. I understand"), it is all the disclosures or the CYA docs we make them sign that make the borrower's head spin.

The problem with Mr. Guttentag's position is that there are too many variables that affect mortgage costs. Most of the costs we have are what I call "pass through" costs (appraisal, title work, flood cert, recording, survey...etc.). We get the invoice and pass the cost on to the borrower. The other costs are fees that vary such as processing fee, underwriting fee and the title company's closing fee to name a few.

Closing costs are costs that are generated by the borrower when obtaining home financing. But what about escrows? (funds collected at closing by the lender so the lender can pay the taxes and insurance). Are the escrows a "cost"? Not really, but if the borrower needs to pay this at closing, you better show this on the GFE. I have seen competitor's GFE's and the escrow section can be hazy at best.

And what about real estate costs? These are not "mortgage" costs but your borrower needs to know that they may need a couple thousand dollars for "tax prorations" (refunding to the seller for taxes already paid). Most loan officers won't put this cost on their GFE's because it is not a mortgage cost and they want to look "cheaper" than the competition.

I'm sure I have lost deals because I go out of my way to try to put all the costs on my GFE. I'm sure the competition has showed those buyers their GFE's without all the costs which makes my GFE look like my costs are way out of the ballpark. But I don't like surprises and I'm sure my clients don't either. Do I want to make a phone call that sounds like this: "Mr. Client, I'm sorry. You need $3000 more to close. Ooops!". I don't think so.

When Mr. Guttentag finds a way to get all the mortgage costs the same, let me know. Because it's a "Good Faith Estimate", not a "Good Faith Written In Stone No Matter How Much The House Costs And What The Taxes Are". Loan Officers need to do a better job on disclosing all the costs.

See if you can get regulation for that, Mr. Guttentag.


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Thanks for reading!

Dan Tenchall
Great Lakes Mortgage Funding

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