Many home buyers have found themselves at the closing table surprised at the difference in closing costs due from what was originally quoted to them.  A Good Faith Estimate(GFE) is just that, an estimate.  Mortgage brokers and lenders provide loan applicants with these figures within three days of making an application for a home loan.   New federal rules were adopted on January 1st regarding the GFE, driven by the Department of Housing and Urban Development.  These new rules mandated the redesign of a simplified Good Faith Estimate form. 

Previously, lenders had no standardized format on how these fees were explained.  "Fees were communicated in multiple ways, which adds to the confusion when comparing costs," says Keith Gumbinger, a vice president at HSH Associates, which tracks the mortgage market. Under the new rules, lenders will all be required to use the same form for their Good Faith Estimates - a three-page document issued by HUD.

There are also new rules capping increases in costs that are disclosed on the Good Faith Estimate and guidelines so that fees listed on the initial GFE reflect the actual cost at settlement. "Those fees on the GFE at the beginning of the process will be the same on HUD-1 form [final settlement statement] at the end of the process," says Mr. Gumbinger.

Here is the summary of information on what changes to expect with the new federal rules regarding good faith estimates:

1. Fees that cannot change from the original GFE to final settlement.

2. Fees that can increase up to 10% at settlement.

3. Fees that can change without limit.

Borrowers may see an increase in the overall costs that lenders charge to originate a loan.  These new rules will cost lenders in the way of new software, new documents and new training. 

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