Doron F. Eghbali Residential Real Estate Law Blog on Lawyers.com

Home buyers at the closing might take a look at the closing costs and tell themselves, we thought our costs were much lower, what are these costs? Well. Effective January 1, 2010, the Department of Housing and Urban Development (the "HUD") took some measures to bring some order and peace of mind to already stressed home buyers. However, there still might be some surprises.

The new rules implemented by the Department of Housing and Development relate to a document called Good Faith Estimate ("GFE"). Lenders are required by the Federal Real Estate Settlement Procedures Act to provide you this document within three days of applying for a loan. The requirement is satisfied if the document is mailed within three days after you applied for the loan.

Before the new rules put into effect by the HUD, there was no uniform way of communicating with home buyers of the fees they should expect at the closing. Before the implementation, for instance, you would see on your GFE your costs to be $4,000 at closing. But, at closing you saw your actual costs to be $4,700.

Unfortunately, even with the new rules still some surprises are likely.

NEW RULES 

1. HUD GFE Form: Lenders are required-as of January 1, 2010 - to use the same three-page Good Faith Estimate form issued by the HUD.

2. Some Costs Cannot Change: Some fees and costs cannot change from the original GFE to the final settlement. These costs include:

• The Lender's origination and underwriting charges; and
• The credit or "points" based on the specific interest rate chosen.

• Services required and recommended by the lender. If the borrower selects a third-party from that list for title services, title insurance and recording charges, the fees cannot increase by more than 10%. But, they could still increase.

• Service providers not approved by the lender and selected by the borrower. These include service providers of title insurance, home insurance, pest and flood insurance, if necessary.

4. Still the Form Is Not Easy To Comprehend for Borrowers: Unfortunately, the new GFE form is still rather complicated.

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DORON EGHBALI is a Partner at the Beverly Hills Offices of Law Advocate Group, LLP. Primarily Practices Business, Real Estate and Entertainment Law. He Could Be Reached at 310-651-3065 or doroneghbali@LawAdvocateGroup.com. For More Information Visit: www.LawAdvocateGroup.com.