New good-faith estimate aims to help borrowers

When we decided to refinance our home last year, we called a good friend who also happens to be a mortgage broker.

I remember our friend Christian sending us documents to review as we started the process. I confess that, to my untrained eye, some of the language in those papers looked like it was written in the Cyrillic alphabet. But I trust Christian, so I didn't worry about getting ripped off. And we ended up getting a great rate.

Not everyone is lucky enough to have such a friend. So when the folks at SecurityNational Mortgage Co. in Murray offered to talk to me about the new "Good-Faith Estimate" (GFE) lenders have been required to provide since Jan. 1, 2010, I was interested to hear what they had to say.

A division of Security National Financial Corp., SecurityNational Mortgage is a full-service mortgage banking company with 31 branch locations and state licensing in 38 states.

Shelly Hill, the company's compliance officer, says lenders have been required to provide good-faith estimates for many years. However, a bill that passed Congress in 2008 called for creation of a new document to promote transparency in the process and cut down on bait-and-switch offers from mortgage companies.

Lynn Beckstead, SecurityNational Mortgage president, said the first significant difference with the new form is that the estimate now must be much more accurate than in the past. That sounds like a great change to me.

"In fact, you can only change your estimate based on certain changes of circumstance," Lynn says. "So the potential borrower can have a much more accurate estimate of what their … charges are going to be."

On the first page, the new GFE states, in plain English, what your initial loan amount will be, along with its term, interest rate and other basic information. And Shelly says that estimate is now good for 10 days.

"So the borrower can take the good-faith estimate and go to (other lenders) and compare offers," she says, adding that the document also shows whether the interest rate is locked.

The second page includes information on origination fees. Shelly says it shows the fees in one block amount, which is designed to keep lenders from throwing in so-called "junk fees" that borrowers won't understand.

The origination charges have "zero tolerance," Shelly says, meaning the lender cannot change them from the GFE to closing unless there is a "change of circumstance." Some other costs listed on the document are allowed to have a 10 percent tolerance, and a few can change more than that.