Mortgage 'Reform' Is Just a Small Step Forward

By Michelle Singletary
Sunday, November 16, 2008

Department of Housing and Urban Development Secretary Steve Preston recently announced what he said was a "mammoth leap forward for the consumer."

So what does this mammoth leap entail?

It's an overhaul of the good-faith estimate used during the mortgage lending process.

This good-faith statement, which is given to mortgage applicants, is already required under the Real Estate Settlement Procedures Act, or RESPA. It's supposed to give people an estimate of their settlement charges and loan terms. Often it doesn't.

Preston also announced that a page will be added to a new standardized HUD-1 settlement statement. This change is intended to allow consumers to compare their final loan terms and closing costs with what was listed on the good-faith estimate.

"Consumers need and deserve to know what they're getting themselves into before they sign on the dotted line," Preston said during a teleconference.

To this so-called big announcement, I say big whoop-de-do.

So now we get "reform," after people have bought homes they couldn't afford with exotic loans that should never have been sold to them.

Now we have so-called major reform, when lending standards are so high and credit is so tight it's hard to close on a loan anyway.

Okay, so I guess now is better than never. Borrowers could save up to $700 by using the forms to comparison-shop for the best-priced loans, according to HUD.

But lenders and mortgage brokers won't be required to provide consumers with the new three-page standardized good-faith estimate until Jan. 1, 2010.

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