Tim Bradford   
Lending Specialist   
216-324-8113   
LO.007173.000   

Welcome to www.GFEforDummies.com

This page is devoted to Page 2 of the Good Faith Estimate that is scheduled to take effect January 1, 2010.  Page 1 is described here and provides basic information about how to ensure you are comparing identical loan options.   A separate page is devoted to the "Your Adjusted Origination Charges" area of this page.  Go here to view information regarding the numbers presented here.  

As part of the numbers presented on this page, you will find this on the third page and it provides the guidelines for what can fees change and what fees must be guaranteed by your lender or loan broker.   

It is important to note that the items described in Box 1 "CANNOT INCREASE" at settlement.   Items in Box 2 "CAN INCREASE UP TO 10%" at settlement, If the provider is selected by your lender.  As Box 3 indicates "CAN CHANGE' at settlement, these items are where GOOD FAITH on the part of your lender is so important.   Because these items are NOT lender Controled  nor Guaranteed and your Lender knows they can change, any variance in these numbers could be used as a means of making a Good Faith Estimate more attractive than another.  This may provide a loophole for lenders that then new GFE was intended to protect consumers against.  Information about each area on page 2 is presented with some explanation of the fee category.  

"3. Required services that we select"  -  form details and summarizes the Services or Costs that your lender control.  As part of the New GFE, the lender must guarantee these number not to vary by more than 10% of the total quoted. 

"4. Title Services and Lender's Title Insurance" - Of all the areas on this page this category of fees, this one may have the greater variance in dollar total of the fees.    Another reason this amount might differ from one lender to another is the fact that the rules require the lender to estimate,  HUD in their Lender Question & Answers says that Lenders should quote what is typical and normal, without providing a definition of typical and normal.   In Northern Ohio, the distribution of some closing costs differ based upon who is selling the property.  Bank Owned Sellers, HUD Properties and Builders split closing costs differently than the normal real estate companies contracts in Northern Ohio.  There can also be individual difference between one companies contract than another.   Without a definition of Typical and Normal one lender may quote one amount and another quote something else.  

HUD also says that buyers have the right to shop these services, In Northern Ohio most of the Real Estate Contracts specify the Title, Closing or Escrow companies to be used.  Because you will normally receive the GFE after you have signed the offer to purchase, how changes in the Offer to Purchase will be handled if you wish to use a company or provider different than what was written in the contract will need to be addressed as the New GFE rules take effect. It should also be noted that in Northern Ohio a number of Real Estate Companies, Brokerages and individual Realtors have established Affiliated Business Arrangements (AfBA) with Title Companies, Closing Agents, Escrow Companies and Lenders.  The rules in relation to AfBA Disclosures has not changed, and you may see a range of fees quoted instead of a specific number.  One one AfBA disclosure I way an escrow fee estimated as being between $200 and $400.  A lender quoting on the low end of a range might be under estimating, while the lender using the upper end my be over estimating your charges.   Because this fee and the others on this page are mostly estimates, but totaled as "B-  Your Charges for All Other Settlement Services", a lender wishing to make there GFE look better might under estimate fees, which is something that the New GFE was intended to prevent.     

"5. Owner's Title Insurance" -  In Ohio, this number should be the same on every quote because in Ohio Title Insurance is regulated by The Ohio Division of Insurance.  Your lender should know how the cost of Title Insurance is determined in the City, State or County where you are purchasing the home.  If you find a difference in this number between lender you need to determine the reason for the difference.

"6. Required Services that you can shop for" - Unless you know someone that will provide these services, the cost of these services are generally the same in any geographic area.  Included in the list of items that you can SHOP FOR should be a Home Inspection. 

"7.  Government recording Charges" - This number should be the same on every quote.  In Northern Ohio, you might see a minor difference because recording fees are based upon the number of pages filed, however this number should be basically the same on every quote. 

"8. Transfer Taxes" -  This number should be identical on every quote.  Transfer Taxes are generally a form of Sales Tax that are imposed by Governmental agencies.  In Ohio, the transfer tax varies by County and ranges from 1% - 4% depending on the County where the property is located.   In Northern Ohio, on most Real Estate Contract the Transfer Tax is something paid by the Seller.  Buyers will need to consult their Purchase Contract to determine the effect of this number on their Cash to Close. 

"9. Initial Deposit for your escrow account" - This number should be identical on every quote, if Taxes and Insurance are are being included in your payment.  The amount shown here allows your City, State or County Real Estate Taxes to be paid when due.  It also allows for the annual payment of your Home Owners Insurance when it is time to renew each year.   In Northern Ohio, borrowers will see this amount as one to six times the monthly taxes on the property.  Because most contracts call for the Pro Ration of taxes at closing taxes and because taxes are collect in arrears and paid every six months, this amount does not truly represent cash that will be needed by a borrower at closing.  Regardless of this This number should be identical on every quote, 

"10. Daily Interest Charges" -  This number should be identical on every quote.   In this example one day of Interest to close is presented.   Another lender might include 30 days of interest.  Some lenders may opt to quote only one day, because the $39.59 looks much better than $1,187.70(30 days of interest).  The added $1,148.11 is not an added cost, it is just the way the lender has chosen to create the GFE.  As said "This number should be identical on every quote." as long as you are comparing the same rate of interest on your loan request. 

"11. Homeowner's Insurance" -  This number should be identical on every quote.  You will be shopping for your Home Owners Insurance from an agent of your choice.  A number of Realtors and Lenders have established "Affiliated Business Arrangements" with providers of Home Owners Insurance.   If presented with this option, Shop and Compare because the convenience of the insurance does not always mean the best priced option.  Please understand that your Lender in not a Insurance Agent and the reason for any difference could be intentional or from lack of experience or knowledge.  Remember, This number should be Identical on every quote.

Click here for information about the "Your Adjusted Origination Charges" box that is found on Page 2 of the GFE