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| HUD Mortgage Rules 
HUD USER News: The U.S. Department of Housing and Urban Development has issued long-anticipated mortgage reforms that will help consumers shop for the lowest cost mortgage and avoid costly and potentially harmful loan offers. HUD will require that lenders and mortgage brokers provide consumers with a standard Good Faith Estimate (GFE) that clearly discloses key loan terms and closing costs. HUD estimates its new regulation will save consumers nearly $700 at the closing table.
The easy-to-read standard Good Faith Estimate (GFE) will clearly answer the key questions consumers have when applying for a mortgage, including:
> What's the term of the loan?
> Is the interest rate fixed or can it change?
> Is there a pre-payment penalty should the borrower choose to refinance at a later date?
> Is there a balloon payment?
> What are total closing costs?
The GFE will consolidate closing costs into major categories to prevent junk fees, and display total estimated settlement charges prominently on the first page so the consumer can easily compare loan offers. HUD will specify the closing costs that can and cannot change at settlement, and if a fee changes, HUD will limit the amount it can change.
The Department performed rigorous consumer testing and found that the new Good Faith Estimate helped consumers select the lowest cost loan 9 out of 10 times, regardless of whether the loan was originated by a lender or a broker. HUD will require the new standardized GFE and HUD-1 beginning January 1, 2010.
PD&R's Office of Economic Affairs was instrumental in the development of the RESPA rule by providing policy guidance in developing the rule, conducting research to define the problems in the mortgage settlement process, overseeing the development of the new forms required by the rule, and writing the Regulatory Impact Analysis and Final Regulatory Flexibility Analysis.
For additional benefits and details about these reforms to the regulatory requirements of the Real Estate Settlement Procedures Act (RESPA), click on the following links:
News release and fact sheet
HUD's Standard Good Faith Estimate
HUD-1 Settlement Statement
> RESOURCE: HUD USER, P.O. Box 23268, Washington, DC 20026-3268
1-800-245-2691 / 1-800-927-7589 (TDD) / 202-708-9981 (fax)
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