Bankin’ Bits

New rules clarifying the costs of a home loan will take effect on January1, 2010.  The new rules, enacted by the Department of Housing and Urban Development pursuant to the Real Estate Settlement Procedures Act, place new requirements on lenders and brokers to provide house shoppers with better estimates of the fees and charges they will incur at closing and during the life of a home loan.  Under the new rules, mortgage loan brokers and lenders:

• Must provide prospective borrowers with estimate forms within three days of receiving a mortgage loan application;
• Cannot increase the origination fee provided in the estimate;
• Can only increase non-origination charges by up to 10% (e.g. title research); and
• Use the forms that inform prospective purchasers of their right to shop around for title insurance.

Settlement firms will be required to use a new HUD-1 form, which will show the difference between initial estimates and the final charges consumers actually pay.