Cary/Raleigh Real Estate Blog

HUD’s new mortgage reforms aim to benefit borrowers

Posted by Bhavesh

In November last year, the department of Housing and Urban Development of the U.S, Government, popularly known as the HUD brought out mortgage reforms, overdue for the last 30 years.

The HUD had earlier worked on plans to give a boost to housing in various ways. A plan for a real estate school in Richmond was considered ‘exemplary.’ To emphasize the concept of ‘affordable housing’, few years back the division of Affordable Housing Research and Technology of HUD got together with the National Building Museum to promote the idea of affordable housing as an essential architectural and economic asset.

The consumers will highly benefit from these reforms. They will now be able to get the lowest cost mortgage and prevent any kind of expensive loan offers. The department would want the lending institutions and mortgage brokers to offer the consumers with a standard Good Faith Estimate (GFE), which would underline the important terms, conditions and closing costs of the loan. The HUD foresees this new policy will help consumers save about $700.

The Secretary of HUD, Steve Preston commented that “It has been a long road but today we can finally announce a better way to buy homes in America. He further said “Consumers need and deserve to know what they’re getting themselves into before they sign on the dotted line. After carefully considering the concerns of consumers and the different businesses in the housing sector, we have developed an approach that empowers the average family to shop for the most appropriate loan to meet their needs.”

HUD drew up plans for new reforms during March, last year to meet the regulatory requirements of the Real Estate Settlement Procedures Act (RESPA) by encouraging a process of underscoring the loan terms and the final costs clearly. The proposed reform was stretched until June for more speculation over the GFE.

The Assistant Secretary of Housing, Federal Housing Commissioner,
Brian Montgomery declared that “We have carefully considered the concerns expressed from every corner of the mortgage market in developing this rule. I am convinced that we successfully balanced the needs of consumers with those in the business of homeownership. None of us can lose sight of the fact that millions of Americans simply don’t understand all the fine print of their mortgages and this, in many respects, is at the heart of today’s mortgage crisis.”

Many industry commentators felt that the proposed GFE plan by HUD was lengthy. The GFE form was cut short to three pages to make it more convenient for borrowers understanding. The loan applicants will be in a position to draw a comparison between the approximate and the final cost. Shaun Donovan, president Obama’s nominee for the secretary of HUD, is looked upon as a ‘housing expert’, is expected to bring about more changes in the department.