The GFE is a “waste of time”by Tim Manni
According to a recent survey from ING Direct, the document that has been designed–and redesigned several times–to help homebuyers estimate the costs associated with their mortgage, apparently isn’t accomplishing what it set out to do. Fifty six percent of those surveyed admitted that they didn’t use the document for its original purpose: to compare mortgage offers.
It’s kind of hard to believe that in the wake of what the housing market recently went through and is still going through, homebuyers aren’t taking the time to ensure they’re getting the best deal available and that they fully understand the costs associated with the largest purchase of their lives.
It’s going to take some effort
Granted, despite its numerous redesigns, consumers have expressed time and again that the GFE remains a complicated document:
The Good Faith Estimate itself could be partly to blame for homeowners’ lack of enthusiasm to comparison shop for a mortgage. Even after the federal government’s attempt to streamline the GFE, more than one in three (36 percent) homeowners described the GFE as being “complicated” or a “waste of time.” Although some homeowners described the GFE as being “simple” or “easy to understand,” 68 percent of homeowners surveyed were unable to correctly identify, for example, the purpose of the Title Services charge on the GFE.
However, complicated or not, it seems some homebuyers need to show a little more effort. According to ING, “53 percent of homeowners spent 30 minutes or less reading and reviewing the GFE. One in ten (11 percent) homeowners never reviewed the document.”
The GFE is partially to blame
“It’s worth noting that the present regulation does not require lenders to provide the GFE upfront and BEFORE an application is placed, which would really facilitate comparison shopping,” explains HSH.com’s VP Keith Gumbinger.
“Rather, it isn’t required to be provided UNTIL a borrower HAS ALREADY APPLIED for the mortgage (and then, up to three days after) when there is no longer likely to be any shopping at all. This renders it less-than-valuable as a shopping tool.
“This may be why few bother to read it…they have already made their choice and AREN’T shopping for a loan any longer.”
A new tool that can help
To help correct borrower frustration and confusion, ING developed an interactive tool for homebuyers to help them better navigate and understand the GFE. Clear Orange is a website dedicated to the GFE:
Clear Orange makes the costs associated with the GFE easier to understand by simplifying technical mortgage jargon, highlighting which mortgage costs are unavoidable and distinguishing between fees based on a home’s purchase price. Visitors to the site have the option of printing out an easy to understand Good Faith Estimate explanation that they can use while reviewing their own GFE. This document breaks down the technical terms found in the GFE. Additionally, Clear Orange walks users through a step by step tutorial of closing costs that explains why they are charged and who charges for them.
I just wanted to note that I’m not promoting ING’s new GFE website, rather merely sharing it in hopes it will improve your mortgage shopping experience.
“Even though the ‘new’ version of the GFE is superior to yesterday’s ‘display-any-way,’ freeform disclosure,” says Gumbinger, “it falls short of what is still a lofty goal of making mortgage-comparison shopping simpler. It’s little wonder then that the first item the new Consumer Financial Protection Bureau is expected to tackle is mortgage disclosure reform.”