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. 

 If you would like current mortgage information, please click here for more information.

Highest Record of Home Sales Since 2007!

More and more homebuyers are taking advantage of the federal homebuyer tax credit, creating a huge surge of home sales.  November home sales rose nationally by 7.4 percent and are the highest reported level of sales in nearly three years.  51 percent of homebuyers in November used the federal homebuyer tax credit.  The $8,000 tax credit was extended for the first four months of 2010 and expanded to grant a $6,500 credit to qualified current homeowners looking to buy a new home.  

"Things are stabilizing," said Pete Flint, chief executive of real estate Web site Trulia.com. "There is a significant amount of buyer interest out there."  The national association's chief economist, Lawrence Yun, said the tax credit buyers certainly helped inflate numbers in November, but he thinks it might be just the tip of the iceberg.

"This clearly is a rush of first-time buyers not wanting to miss out on the tax credit, but there are many more potential buyers who can enter the market in the months ahead," Yun said.  He said he is hopeful that the market, which has been propped up by the federal government incentives would be self-sustaining by the second half of 2010.

Pending Home Sales Surge to 3-year High

As home buyers scramble to take adavantage of the tax credit that was set to expire at the end of November, the amount of signed contracts to buy previously occupied homes in the U.S. rose for the eighth straight month in September. The National Association of Realtors said that its seasonally adjusted index of sales agreements rose 6.1 percent from August to 110.1. It was the highest reading since December 2006 and more than 21 percent above a year ago. Economists surveyed by Thomson Reuters expected the index would be level at 103.8.

With foreclosures continuing to surge, "an extended and expanded tax credit would help absorb this incoming inventory," Lawrence Yun, the Realtors' chief economist, said in a statement. "We're clearly not out of the woods because an excess of homes remains on the market despite recent improvements," he said. "Although current inventory is getting closer to price equilibrium, foreclosures will continue to enter the pipeline. An extended and expanded tax credit would help absorb this incoming inventory."

Pending sales were up 10 percent in the West and 8 percent in the Midwest. They were up 5 percent in the South and were down 2 percent in the Northeast.

In the South, pending home sales increased 4.9 percent to an index of 109.7 and is 22.8 percent above September 2008. In the West the index jumped 10.2 percent to 143.8 and is 23.7 percent above a year ago.

The Senate has agreed on a compromise to extend and expand the home buyer's tax credit that is set to expire at the end of November. Terms of the deal have been explained by Senators Chris Dodd (D-Conn.), who chairs the Banking, Housing and Urban Affairs Committee, and Johnny Isakson (R. Ga.), a former real estate professional. The compromise expands the tax creidt to non first-time buyers and also adds an increase to the income limits. Additionally the deadline has been extended to April 30, 2010.

Under the new proposal, people who have lived in a primary residence for five consecutive years would be eligible for a $6,500 credit when purchasing a new property.

Incomes limits will be raised to $125,000 for individuals and $225,000 for couples, vs. $75,000 and $150,000 previously.

The maximum house value rises to $800,000.

The Senate has agreed to pass the extension, but Congress still has to vote on it and that could be as early as Tuesday night.

Bank of America has stated that they are relaxing it's policy of payoffs of short sales connected with second liens on homes facing foreclosure.  This is good news for many Realtors and homeowners who have had an incredible amount of trouble completing a short sale transaction due to second lien holders demanding more money for equity loans and second mortgages. 

Bank of America has been one of the least cooperative institutions to deal with.  In the past, they have demanded 10 percent of what the homeowner owed on the equity line.  If they did not receive it, they would not sign off on the short sale.

Bank of America is now asking for five percent of the sale proceeds on the short sale, net of realty commissions, closing and other costs. Bank of America feels that this change will open the door for more short sales to be processed and close.
Raffi Tal, CEO of Los Angeles-based I-Short Sale, Inc., one of the largest players in the field, says Bank of America's new policy "will still jeopardize" many short sales that involve its second liens. 5 percent of an equity line can still jeopardize some deals if the mortgage is really upside down.
You will still need a strong negotiator to work your short sale deals.  Bank of America along with other lenders still have strong rules regarding seller concessions to buyers, some require the buyer to pre-qualify with their institution.
The bottom line, work the numbers and see how this change can move your short sale from paper to the closing table.