By Deborah Higgins, INFOTRAK National Data Services
  
When you are shopping for a loan to refinance or for a new mortgage loan, it is important to be able to compare the offers that you get from different lenders.  

You should not only compare the mortgage interest rate, discount points and APR, but also all of the settlement fees.   These may include but are not limited to:  origination points, processing fees, administrative fees, underwriting fees, title services/insurance, government recording charges, and transfer taxes.

One way to do that is to make sure that you get a Good Faith Estimate (GFE) from the mortgage lenders that you are considering offers from.  Effective January 1, 2010, the Department of Housing and Development (HUD) requires mortgage lenders or mortgage brokers to provide potential borrowers with a standardized GFE form to help you understand the key terms of the loan and all settlement costs (a.k.a. closing costs). 

This form, recently revised by HUD, must be provided to borrowers no more than 3 days after they apply for a loan.  But here’s the catch -- since many of the fees cannot change once a mortgage lender provides them to a potential borrower on a GFE, mortgage lenders will often provide another form, some that look much like a GFE, to borrowers that are shopping for a mortgage loan. 

Initially, mortgage lenders often provide an informal “worksheet” that does not carry the same guarantees and consumer protections that a formal GFE does.  A GFE must be accurate or the lender could face stiff penalties under the new rules that took place effective January 1. 

The use of these “worksheets” is allowed, especially when consumers are just casually shopping for a loan and are only looking for a rough idea of what mortgage rates and settlement fees they can expect to pay.  But when you are seriously shopping for a mortgage loan, only a GFE will actually allow you to make an “apples to apples” comparison of the offers that you receive. 

In order to get a GFE from a mortgage lender, expect to have to give them your Social Security Number (in order to do a credit check), the address of the property that you will be refinancing or purchasing, an estimated value of the property, and any other information that the lender may require to complete an application. 

However, though you are supplying all of the information required for an application, you are not committed to using that lender for your mortgage loan.  The whole idea of this new regulation is to allow potential borrowers to get a binding quote from multiple lenders before making a decision about whom they chose to do business with. 

So do your homework and make sure you have a GFE from all lenders before you make your final decision.  It will help you to make an intelligent choice and could save you a lot of money in the long run.

Visit www.infotrak.com for more mortgage-related articles, tips and advice.

Buying a new home or looking to refinance?  Check the latest rates in your local market @ http://www.infotrak.com/Search-Local-Rates.html.  You can also calculate your monthly payments with our user-friendly calculators.

By Deborah Higgins, INFOTRAK National Data Services 

Freddie Mac, the second largest provider of residential mortgage loans in this country, recently announced it will stop buying and securitizing interest only mortgages on or about September 1, 2010. 

Interest only mortgage loans only require the borrower to pay interest on the loan for a predetermined period of time.  After that, the loan is recalculated so that both principal and interest will be paid off during the remaining loan period.  This often results in a significant increase in the borrower’s monthly payment. 

Interest only mortgage loans were very popular during the real estate boom, allowing many people to buy more expensive homes than they could otherwise qualify for. Assuming that their homes would continue to appreciate in value, many of these borrowers planned to refinance or sell their properties before the higher payments kicked in.  When home values began to decline, these borrowers were not able to qualify for new mortgage loans, often leaving them with higher mortgage payments than they could afford.  Making matters worse, these buyers could not sell their homes because at their reduced value, the home’s proceeds would not allow them to pay off the loan.
 

Almost 18 percent of these mortgage loans are currently at least 90 days late.  Given the poor performance on these loans, it is unlikely that very many banks will be willing to offer them in the future without the security of Freddie Mac purchasing and securitizing the loans. And since these mortgage loans played a major role in the current housing crisis, I am probably not alone in saying “good riddance”.

Visit www.infotrak.com for more mortgage-related articles, tips and advice.

Buying a new home or looking to refinance?  Check the latest rates in your local market @ http://www.infotrak.com/Search-Local-Rates.html.  You can also calculate your monthly payments with our user-friendly calculators.

By Deborah Higgins, INFOTRAK National Data Services

If you are planning to get a mortgage loan anytime soon, you should make sure that you understand new rules imposed this year on mortgage lenders and other settlement service providers that are designed to protect you. 

Effective January 1, 2010, changes were made to the Real Estate Settlement Procedures Act (RESPA) to further assist consumers to compare offers from different mortgage lenders. These changes require mortgage lenders to provide a new standardized three-page Good Faith Estimate (GFE) providing an estimate of settlement charges based on the loan’s term, initial interest rate and monthly amount owed. 

Changes to the RESPA law regulates which charges can and cannot be modified at the time of the loan settlement.  Origination charges cannot deviate from the initial estimate. 

Some services, such as government recording, can increase up to 10% at closing.  Third party services from providers selected by the borrower (such as homeowner’s insurance) are not regulated.

Any violations of the RESPA law should be reported to the HUD Office of RESPA.

Here’s some background on settlement charges.

RESPA was first passed in 1974.  Its purpose is to help consumers to better understand their choices for loan settlement services and fees and to eliminate kickbacks and referral fees that would unnecessarily increase these costs.  In order to achieve these purposes, RESPA requires that a mortgage lender give borrowers certain information at specified times during the borrowing process.  This information includes: 

1)     A Good Faith Estimate of settlement costs.  This document lists the fees that the borrower will likely pay at the closing.  Also, if a lender requires that the borrower use a particular settlement provider, this requirement must be disclosed in the GFE. 

2)     A Mortgage Servicing Disclosure Statement.  This statement discloses whether or not the mortgage lender intends to service the loan or transfer it to another lender.