New HUD mortgage forms -- will they help?

Past attempts to disclose mortgage information to homebuyers have resulted in thick stacks of documents dropped like bricks on the table as the sale is completed.

All too often, consumer advocates say, borrowers simply grab the pen and start signing with little regard to what's in the documents, especially in states such as California where lawyers aren't required at closing. That, the advocates say, has contributed to the fraud that seemed especially prevalent in the market for subprime and complex nontraditional mortgages.

Attempts continue to make mortgages terms clearer, the latest coming today from the U.S. Department of Housing and Urban Development, which is requiring lenders and mortgage brokers to provide a standardized three-page good faith estimate to borrowers. Key aspects of the loan, including settlement costs, are on lines replicated on the final settlement document known as HUD-1, to make any changes apparent.

The new regulations, in the works since March, take effect on Jan. 1. HUD estimated they would save consumers nearly $700 on average.

HUD Assistant Secretary Brian Montgomery said in a statement that the agency considered opinions "from every corner of the mortgage market" while developing the new rule. "None of us can lose sight of the fact that millions of Americans simply don't understand the fine print of their mortgages and this, in many respects, is at the heart of today's mortgage crisis," Montgomery said.

HUD Secretary Steve Preston also issued remarks saying changes in the housing markets and the epidemic of foreclosures demanded action.

Your thoughts? Can these new rules really provide home buyers with the information they need to make informed decisions or are there pitfalls, as so often seems to be the case?

-- Scott Reckard

Comments

[John]

Good news, as they are confusing. Simply it. They should enfore this as part of the various aid programs from Citi group and others. In addition to Citi, the federal gov't FHA, JPMorgan Chase, Wachovia, and Bank of America/Countrywide have committed to helping over 2 million homeowners between them keep their homes. Why not make them use the new forms. I found more info on the programs here.
http://www.needhelppayingbills.com

[sheila]

good faith estimates are GARBAGE because they are always wrong and are totally non-binding on the lender. they are the CAUSE of much of the confusion, not the solution. any decent lawyer can distill a short, simple, binding term sheet from a RE contract - they don't want people to know, that is the problem.

[Miss M]

The "Good Faith" part is a misnomer, too many lenders and brokers act in bad faith when they give it to you. When I bought my house the difference between the actual closing costs and the good faith estimate was 100%! The closing costs were twice what I had been told and I was left scrambling to come up with the cash for closing. It would have been 150% if I hadn't fought them on some of the bogus charges. I'd welcome the changes but it seems there is no teeth behind it, until there are penalties for dishonesty what's the point.