ENTITLE DIRECT > Title Insurance Knowledge > NY Times reviews new rules for closing costs, title insurance
NY Times reviews new rules for closing costs, title insurance01/25/2010
Before recent changes to the federal regulations surrounding RESPA, borrowers were often given only an estimate of the cost of their title insurance and other related closing expenses that often fell far below the actual costs incurred at the time of closing.
However, the new version of the Good Faith Estimate (GFE) the Department of Housing and Urban Development (HUD) has mandated for use by all lenders effective January 1, 2010, should give consumers a better idea of what they will end up paying.
Recently, the New York Times' Buck Blog gave a rundown of the changes made to the GFE. The posting noted that the new guidelines should make comparison shopping easier for consumers, which could lead to savings on title insurance and closing costs.
The new rules require that lenders supply borrowers with a standardized form. The form must be offered within three business days of the receipt of the loan application and details the terms of the agreement along with all the closing costs that will be involved in completing the transaction.
Prior to the new GFE, borrowers were faced with a situation where different companies may have offered a variety of forms and methods for estimating expenses, making comparisons difficult.
"The new form makes several improvements. The loan's main features are clearly and plainly stated, and include the amount, term, initial interest rate and total monthly payment," the blog from the Times noted. "And it's hard to miss many of the potentially troublesome loan characteristics that tripped up today's distressed borrowers."
The new GFE form also combines a variety of settlement charges rather than presenting an itemized list. It also explains what charges are coming from the lender and what charges are from third parties. The old version of the form may have encouraged lenders to tack on additional fees.
Furthermore, closing costs and title insurance estimates have to be within 10 percent of the actual, final costs the consumer will end up paying. The new rules dictate that anything above 10 percent will be the responsibility of the lender.
That limit doesn't guarantee you wont be overcharged to begin with," the Times said. "So it pays to shop around for items where you can, like title insurance."
And though the new forms should help, they can only do so if consumers receive and use them. Recent reports have noted that some lenders have tried to substitute the new form with their own worksheets. By doing so, they may not be tied to the RESPA requirements.
Consumers should be wary of any worksheets or other forms their lender is providing other than the standard GFE, in order to make the best comparisons from lender to lender and be clear about what costs to expect at closing.