Good Faith Estimate (GFE) versus Initial Fees Worksheet

As of the first of the year HUD issued new rules regarding Good Faith Estimates (also know as GFE’s).  These newly adopted rules called for stricter guidelines for the preparation of GFE’s by lenders, mortgage bankers and mortgage brokers.  Obviously the look of the GFE and layout has changed; however, the real change in the rules is how accurate the preparer must be in estimating closing costs and loan origination fees.  In the past there were not many guidelines regarding the accuracy of these items.  Although, I feel that there are many great mortgage brokers and lenders working in our market; I must also admit that I had many instances where the final HUD at he closing table had significant differences from the original GFE, and trust me, it was never in the favor of the buyer.  Although, there is no way to prove it; it would appear that preparers of GFE would under estimate closing costs, prepaid items and origination fees in order to get the buyer / borrower to commit to them, only to later at the closing table, at the 11th hour change-up the numbers.  “Well, now what here we are a the closing table, with a ton of deposit money in escrow at risk if we don’t close.”  Naturally, this would anger any buyer and anger any agent or broker representing the buyer.

I for one am glad that the new rules are in place. The rules basically state that there is only a small margin of acceptable variance from the GFE to the final HUD for the previously mentioned fees.  Also, if these fees do vary by more than the acceptable margin then the lender must absorb the difference.  I feel that this will help in more honest and responsible lending.

Lenders are naturally concerned about this rule as they see it as potential losses.  Therefore, many lenders have responded by creating “initial fees worksheet”. This worksheet will give an estimate of fees and prepaid items, etc. However, this particular worksheet will be provided prior to application, that is prior to the borrower having their credit pulled, or even providing the property address.  The main thing for a buyer / borrower to remember is that this is not a GFE and should not be taken as such. The “initial  fees worksheet” offers no guarantees whatsoever.

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South Florida Brokers & Associates, Inc.

Pending Homes Sales Index is down

Today I got several report from reliable sources (NAR, FAR and Realtor.org) that the pending home sales index was significantly down from October 2009 to November 2009.

Pending home sales are Down

As most of us know the pending home sales index is an excellent indicator often used to forecast future real estate activity in a market or even nationally.  The idea is that the higher this index the lower the inventory will be in the next 30 to 60 days and we all know that the lower the inventory the more likely prices are to increase.  Well the same can be said for the reverse; that is to say the lower this index the less homes can be expected to close and if sellers continue to place properties on the market then inventory should increase and prices drop.  With that said the November 2009 pending home sale index dropped by 16% from October 2009; however, this may be very misleading.  The reality is that there was one big factor that was more than likely artificially increasing the index in November 2009.  That factor was the tax credit expiration.

I believe that buyers were rushing to the market in order to make their purchase in time and benefit from the economic relief program consisting of the tax credit.  However, the extension of the tax credit may have simply alleviated the pressure of  the rush and therefore deflated the pending home sales index.

When we look at additional data we find that the pending home sales index actaully went up significantly form November 2008 to November 2009, this is more like comparing apples to apples.  In this case the index rose 15%, according to data gathered and received from realty times.com. This is a clear indication that the marker was certainly headed in a better direction in 2009 over 2008 and I believe that 2010 will be better than 2009.

In addition, prices have been creeping up in most major metropolitan areas.

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