Do you represent buyers who receive more than one good faith estimate (GFE) from a single lender?
- Sometimes. (40%, 21 Votes)
- Never. (36%, 19 Votes)
- Often. (25%, 13 Votes)
Total Voters: 53
Lenders have found another way to cheat the system and leach higher fees from buyers using the good faith estimate (GFE). [See first tuesday Form 204-5]
The GFE, given to buyers within three days of submitting their home loan application, is prohibited from exceeding 10% of the final closing costs, otherwise lenders pay the difference. However, some lenders purposefully over quote their estimates to ensure the final number is within the required 10% range.
A recent survey of 205 closing agents by the American Land Title Association reported nearly 75% of agents have observed lenders over quote their GFEs and pad them with estimates for general services like “document preparation” and “warehouse fees” which don’t make it to the final statement. More than half of the agents surveyed reported being pressured to cut their own fees in order for the lender to make it within the 10% buffer.
Further, 75% of buyers receive more than one GFE from a single lender, thereby (intentionally?) confusing buyers.
Two thirds of agents surveyed claimed lenders do not attach the list of closing service providers required by the Real Estate Settlement Procedures Act (RESPA), which would encourage buyers to shop around for the most competitive rates. Likewise, 75% of agents observed buyers do not shop around for title and escrow services. [See first tuesday Form 204-3]
Buyers aren’t doing everything they can to protect their own interests – more than half do not even use the GFE they received to compare it to the Closing Statement (HUD-1 Settlement Statement). [See first tuesday Form 402]
The Consumer Financial Protection Bureau (CFPB) is scheduled to release a revamped, uniform GFE, which will be available for public comment on the CFPB’s website beginning July 21st.
first tuesday take
The CFPB is the new sheriff in town, struggling to corral lenders to be transparent with homeowners. But sometimes the sheriff needs a posse to back them up – that’s where real estate agents come in handy.
One of the agent’s duties as the gatekeeper to real estate ownership and sales is to protect their clients from deceptive (read: poor) lending practices. The simplest and potentially most effective way to do this is to encourage buyers to please shop around – for everything!
Your buyer didn’t settle on the first house they saw, so why should they settle for the first lender they approach? Counsel (or if you prefer, advise) your buyers to apply and receive GFEs from multiple lenders so they can compare the costs each intends to collect; apples to apples. Many buyers erroneously think submitting multiple applications will negatively affect their credit score. However, as long as applications for home loans are submitted within a 45-day period, multiple applications have no additional detrimental effect on their FICO score. [See first tuesday Form 204-5]
We look forward to the improved GFE, which will hopefully contain an itemized list of proper fees and costs, instead of general, ambiguously titled charges leaving the lender wiggle room to pull the wool over the buyer’s eyes.
Re: Despite rules, many home buyers still overcharged at closing from the Los Angeles Times