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New mortgage rules should lower consumer costs
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The US Department of Housing and Urban Development (HUD) issued new mortgage reforms that are designed to help consumers shop for lower cost mortgages and avoid harmful loan offers. For the first time HUD is requiring a simplified version of the Good Faith Estimate provided by mortgage brokers and lenders to consumers which will disclose key loan terms and closing costs.
HUD estimates that this new regulation will save consumers nearly $700 in closing costs.
The new Good Faith Estimate form is just three pages long including a borrowers instruction sheet which should help consumers understand their loan. It should make it easier to compare estimated and actual costs.
In particular, the new forms will clearly state:
the terms of the loan,
whether the interest rate is fixed or adjustable,
whether there is a pre-payment penalty if the borrower refinances
whether there is a balloon payment,
and what are the total closing costs.
The new standarized Good Faith Estimates and HUD-1 Settlement Statement will be required beginning January 1, 2010.
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