Paulson announces a new Home Disclosure Reform Act. This Act includes additional disclosures on fees made to the borrower. Bush says it will save homeowners $700 on fees.  This new and improved Good Faith Estimate is intended to outline the fees more clearly to the borrower.  It would outline each and every fee and disclose the “Yield Spread Premium” being paid to the mortgage broker from the lender.  Bush claims, by being able to read these new and improved forms, the borrower will be able to make a more educated decision on where to go for their loan so as not be ripped off. Or, to be ripped off less. What, Paulson and Bush do not know, I assume because they do not have mortgages on their homes, is that the Good Faith Estimate are merely an estimate of the fees and the broker fees are already disclosed within.  The current form called the Good Faith Estimate, is exactly that. It is an estimate of the fees to close provided in good faith.  All lenders, bankers, brokers, etc are required by law to send these out within 3 business days of receiving a loan application.  The GFE lists all fees from the lender, title company, escrows for taxes, pre paid interest, points, bank attorney fees and the yield spread premium paid to the broker.   The issue I always had with this, is that the only fees the lender really knows are their own.  Most of the others are unknown until the loan is locked and a few days before the closing.  Fees that are not known are title charges and pre paid taxes and interest.  These are the bulk of the closing costs and are known by the borrower’s attorney.  The yield spread premium is not known until the interest rate is locked in, so that will not be exact either.  

To conclude additional forms and disclosures will only confuse the consumer more.  I believe that making the information simpler and eliminating loan choices are the solution to the problem. Too much information is not good and too many loan choices is even worse.

Dale Siegel