The federal government recently passed some major reforms to the settlement, or "closing" rules for home purchases which will make it much easier for consumers to compare costs between the Good Faith Estimate that a buyer receives from their lender at loan application and the Hud-1, Settlement Statement that itemizes their expenses at closing. Aimed at making the yield spread premiums that are paid to a mortgage broker and the actual closing costs more transparent, there is now less likelihood that there will be large discrepencies between what was provided in the Good Faith Estimate and what is actually being charged on the Settlement Statement at closing.
By January 1, 2010, a new three page Good Faith Estimate will replace the current two pager and requires lenders to calculate and disclose yield-spread premiums, extra money that the lender can pocket if the interest rate changes, as part of their origination fee. Known as "playing the market" these premiums benefitted lenders when the rate dropped and the mortgage broker pocketed the difference, sometimes thousands of dollars. While not all lenders compensated themselves with this undisclosed bonus, many did requiring a change in the guidelines to protect the consumer. A lender with the buyer's best interest at heart should pass the "savings" along to the buyer.
While the current changes in the law are important and will help consumers, choosing an honest lender is fundamental. If you have wisely employed a buyer's representative, a real estate broker that represents you in the purchase of a home, he or she has a fiduciary duty to help you, the client, select a lender that will treat you with honesty and integrity and provide financing that is in your best interest rather than that of the lender. The loan program that the lender recommends should be determined by your best interest and not by how much the lender is going to make off of your loan. Ask your broker to provide you the name of an honest and reputable lender that puts your interests first not theirs when you are making a home purchase. The lender we recommend to our clients at West Austin Properties has a proven track record with our clients and has been saving our clients thousands of dollars for years because he puts their needs first.
On January 16, 2009, the RESPA reform law also required builders to quit steering buyers to loan companies and title companies that the builder owned in exchange for " builder concessions" or rebates. This is good news also for the consumer who can now get the same builder benefits and choose the service providers, lender and title company that provides the best rates and services rather than being locked in to one that had an affiliated business relationship with the builder.
This article by Laura Duggan,
West Austin Properties, January 25, 2009.
Happy Birthday to daughter, Kerry, who is celebrating her 25th birthday today!
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