Lenders often pressure title agents to reduce their fees when other items disclosed on the HUD ‘Good Faith Estimate’ form exceed the allowed tolerances, according to new research conducted by the American Land Title Association.
The Department of Housing and Urban Development expected lenders to absorb the cost when certain fees exceed the original estimate by 10%, ALTA chief executive Michelle Korsmo points out in a letter to the Consumer Financial Protection Bureau.
“In short, tolerance is not working” as intended, ALTA says in the April 12 letter. “Tolerance should not be expanded under the Bureau’s ‘Know Before You Owe’ project, but should instead be replaced with a policy that produces the intended outcome,” CEO Korsmo says.
HUD revised the GFE in 2008, with the intended goal of having mortgage applicants receive more accurate estimates on closing costs. In addition, HUD wanted consumers to use the disclosure to shop for the best mortgage deal.
ALTA's survey of title agents found that 72% of the title companies felt the initial GFE was either accurate or highly accurate. However, homebuyers rarely shopped for settlement services or compared the GFE to the actual settlement costs at the closing table.
Half of title companies reported that consumers never brought their GFE to the closing table.
