WASHINGTON — Requiring lenders to include additional information about the lending process on the good faith estimate form would only serve to further complicate the mortgage process, according to two interested parties.
NAFCU recently told the U.S. Department of Housing and Urban Development that the move would burden credit unions, result in a more complicated form and not help borrowers.
Many aspects of the proposal would "create or worsen consumer confusion" because they are inconsistent with other disclosure requirements, according to a letter sent by B. Dan Berger, the group's senior vice president for government affairs.
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NAFCU contends that material should be included in a separate booklet that HUD provides all homebuyers. NAFCU maintains since this material is educational, rather than specific to the terms of a specific loan, it should be included in The Homebuyer's Guide to Settlement Costs that HUD provides all homebuyers. HUD contends that consumers are less likely to read the material if it is not in the actual paperwork they will be reviewing.
NAFCU also criticized a proposed change that would require lenders to give borrowers GFEs within three days of submitting a GFE application.
Also, NAFCU said requiring lenders to notify applicants that their application has been turned down within a day of the decision was too brief a time period.
NAFCU also took issue with the proposal that the GFE contain a notice saying the lender can receive additional fees by selling the loan after settlement. The association contended that the disclosure should be contained in the application, as mandated in the existing law.
The Certified Mortgage Planning Specialist Institute, an organization representing financial professionals who provide mortgage and real estate equity advice, took issue with an option to allow consumers to lock in a rate while shopping for others.
The idea is "neither realistic nor practical" because prices fluctuate wildly because a broker would incur costs to guarantee a rate without a commitment from a consumer that he or she is serious about closing, CMPSI said.
The institute also opposed the requirement that mortgage brokers break out the yield spread premium–the cash rebate that a mortgage broker is paid based on selling it above the wholesale rate–because it confuses consumers by making mortgage brokers seem more expensive than other service providers not required to make such disclosures.
In March, the peak of the subprime mortgage crisis, HUD issued proposed rules changes to the Real Estate Settlement Procedures Act in response to concerns raised by consumer groups about the quality of consumer disclosures. Comments were due at the end of May and HUD is reviewing those comments before issuing final regulations. The agency is reviewing the comments.
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