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New requirements aimed at helping borrowers shop around for home loans to take effect
The U.S. government is hoping that Americans taking out home loans in the new year will have a better sense of what they’ll ultimately be paying and whether their lender is offering them the best deal in town. Beginning tomorrow, new federal rules will require mortgage lenders and brokers to issue standard three-page Good Faith Estimates that combine all fees they control into one number: an “origination charge.” The newly standardized format is intended to help eliminate the confusion created by varying rates, points, fees and other terms typically scattered throughout loan documents, which can make it difficult for borrowers to compare the total costs between lenders and shop around for the best deal. Regulations mandate that lenders provide consumer with the estimates within three days of receiving a loan application, and they will not be allowed to increase their origination fee afterward. The Department of Housing and Urban Development estimates that the new rules will save consumers $700 on average because they will be better informed.