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As of January 1, 2010, mortgage originators have to issue a new format for the Good Faith Estimate to prospective clients. The intention of the US Department of Housing and Urban Development was to make it clearer to prospective mortgage owners what was involved in getting a loan and to help them compare loans among mortgage providers. 

When good intentions go bad

Fourteen years ago, when I got into the business of doing mortgages, there was a one page Good Faith Estimate that had to be signed in one place. Today, it is 10 pages, requiring four signatures.  I’m seeing mortgage originators add their own cover letters to that 10 pages to help the client understand all the paper—a table of contents of sorts.  Mind you, this is in addition to the other 20-30 pages of mortgage disclosures and application requirements. It’s enough to make my head spin, and I’m in the industry.

Now, I would agree that an informed consumer is a better consumer but most of the information provided is repeated. Assuming that borrowers see and understand that, the information is good. But for most consumers, it’s only going to be more confusing and add to the mound of paper they’re already trying to sort through. At the end of the day, I’m not sure it solves the problem of educating consumers. It encourages them to shop for many loans, but the average consumer doesn’t know a good loan from a bad one, high fees from low ones.  How does the consumer know he or she is not talking to four different lenders, all with high fees?  How does the consumer know that he or she has chosen the appropriate loan for his or her financial circumstances?

Back to basics again: Important to do your homework and feel good about your decisions. Important to make sure you get your questions answered, that you feel like you are making decisions with confidence and clarity. Get referrals. Hire those you trust.

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