Here’s yet another change to the mortgage industry.  Starting on January 01, 2010 there is going to be a new GFE (Good Faith Estimate) for borrowers to understand.  We are going to try and review the changes with you so you get a better understanding of why the new GFE is here and explain what everything means.

Click here to see a sample (does not reflect your actual loan scenario)

The new GFE and the relationship between the HUD-1 and the Good Faith Estimate

To further protect consumers, the RESPA reform establishes tolerance levels for changes to costs laid out in the GFE so that no consumer will have to pay a wildly different amount for their actual closing costs than those previously detailed in the Good Faith Estimate.  Three separate categories of the tolerance levels were created.

Category I: Charges that cannot change from the GFE to the HUD-1;

1. Borrower’s origination charge
2. Credit or Charge for interest rate selected
3. Transfer Taxes

Category II: Charges that can increase in aggregate no ore than 10%;

1. Title Services
2. Lender’s title insurance
3. Appraisals
4. Credit Reports
5. Tax Service
6. Flood Certification
7. Mortgage Insurance Premium
8. Recording Charges

Category III: Charges that can increase with no cap;

1. Initial Deposits for escrow reserves
2. Daily Interest Charges
3. Homeowners Insurance
4. Lender Required services where the borrower shops for and selects their own third party provider
5. Services the borrower chooses to have that are not required by the lender

The GFE may be revised and reissued (in which event there could be increases in the charges) prior to settlement due to certain “changed circumstances”.  The HUD defines these circumstances as acts of God, war, disaster or other emergency; information about the borrower or transaction that changes or is found to be inaccurate after the issuance of the GFE (e.g., credit quality, loan amount, property value or other information); newly found information that was not previously relied upon as well as other possible circumstances.

The “Dodd-Lieberman-Isakson” amendment would extend the tax credit to June 30, 2010.  It would expand the credit to any homebuyer and raise the income limits to $150,000 ($300,000 for joint returns).  The amount of the tax credit would remain at $8,000.   

Prospects:  We still believe the prospects are good for extension of the tax credit.  There is real concern in the Administration about the strength of the economic recovery.  Treasury Secretary Geithner was quoted in the November 2^nd Business Week magazine stating: “we’re not going to make the mistake many countries made in the past of putting the brakes on too early and creating the risk of a weaker recovery with even higher levels of unemployment.”  On the negative side, the stories about fraud in tax credit program (e.g. children and current homeowners receiving the tax credit)  and concerns about the program cost obviously do not help. 

While the industry trade associations are making a major push for the expansion of the tax credit to all homeowners, it appears unlikely that it will be expanded beyond first-time homebuyers).  We will keep you apprised.

 Extension of Temporary Mortgage Limits

 We also could hear this week or next about whether the temporary mortgage limits will be extended for another year.   We are still optimistic that the temporary limits will be extended.  The Administration fully understands that the jumbo mortgage market is not functioning properly and that the GSEs and FHA will play a critical role for the 

There will be an important vote in the Senate this week on the housing tax credit provision.  The “Dodd-Lieberman-Isakson” amendment would extend the tax credit to June 30, 2010.  It would expand the credit to any homebuyer and raise the income limits to $150,000 ($300,000 for joint returns).  The amount of the tax credit would remain at $8,000.   

Prospects:  We still believe the prospects are good for extension of the tax credit.  There is real concern in the Administration about the strength of the economic recovery.  Treasury Secretary Geithner was quoted in the November 2^nd Business Week magazine stating: “we’re not going to make the mistake many countries made in the past of putting the brakes on too early and creating the risk of a weaker recovery with even higher levels of unemployment.”  On the negative side, the stories about fraud in tax credit program (e.g. children and current homeowners receiving the tax credit)  and concerns about the program cost obviously do not help. 

While the industry trade associations are making a major push for the expansion of the tax credit to all homeowners, it appears unlikely that it will be expanded beyond first-time homebuyers).  We will keep you apprised.

Extension of Temporary Mortgage Limits

We also could hear this week or next about whether the temporary mortgage limits will be extended for another year.   We are still optimistic that the temporary limits will be extended.  The Administration fully understands that the jumbo mortgage market is not functioning properly and that the GSEs and FHA will play a critical role for the