HUD Issues New Rules Requiring Good Faith Estimate of Loan Costs
On November 12, 2008, the U.S. Department of Housing and Urban Development issued a long-anticipated Final Rule amending the regulatory framework of the Real Estate Settlement Procedures Act ("RESPA"). This Final Rule, the first change in RESPA settlement procedures in more than 30 years, requires lenders and mortgage brokers to provide borrowers with a Good Faith Estimate that clearly discloses key loan terms and closing costs, including the interest rate, the existence of prepayment penalties or balloon payments, total settlement costs and loan origination fees. With a few notable exceptions, lenders will be bound by these estimates at closing. In conjunction with the Final Rule, HUD also issued a standardized Good Faith Estimate and revised HUD-1 Settlement Statement forms, the use of which will become mandatory on January 1, 2010.