January 4, 2010

HUD Updates Home Loan Shopping Booklet

The Department of Housing and Urban Development (HUD) has released an updated version of a booklet that's intended to help consumers comparison-shop for a mortgage.

Much of the 49-page publication, "Shopping for Your Home Loan: HUD's Settlement Cost Booklet," is devoted to the new standardized Good Faith Estimate and HUD-1 settlement statement forms that lenders are all using effective Jan. 1.

The forms and other changes to implementation of the Real Estate Settlement Procedures Act (RESPA) are intended to help consumers comparison shop. HUD believes the new RESPA rules, which encourage lenders to package settlement services like title insurance with loans, will save consumers an average of nearly $700 in costs and fees per mortgage.

The new RESPA rules place restrictions on changes to estimated loan origination and settlement service charges as disclosed on the GFE. The RESPA rule changes also require that mortgage brokers disclose "yield spread premiums" — rebates paid by lenders when borrowers take out loans at higher interest rates than they could qualify for — and credit them against a borrower's closing costs.

Download a copy of "Shopping for Your Home Loan: HUD's Settlement Cost Booklet" here.

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