Tuesday, December 22, 2009

What the new GFE "isn't" -- Where's my PITI and Cash to Close?

(This is Day 3 of 12 in a series called "The 12 Days of RESPA Reform" which will run until December 31st. For a full list of RESPA topics, check here.)

The new GFE doesn't tell us WHAT?

Succinctly asked by one of our readers via Twitter DM, "Why the [expletive deleted] doesn't the new GFE have a PITI # on it?"

We can't really address the "why," but we'll clarify the "what" and offer what we think will be a workaround by lenders.

Traditionally, lenders have used the GFE for multiple purposes. The spirit of the first still survives: Provide borrowers with an estimate of costs inherent in getting the loan. But many lenders amended their own form to include an estimated "Funds Needed to Close" figure, as well as the total Principal, Interest, Taxes and Insurance (or, "PITI") monthly payment line itemization. For a borrower, these are *crucial* figures - maybe the two most important numbers in the entire transaction. Yet, they don't appear on the GFE.

At least three lenders we work with will be providing their own "Closing Cost Worksheet" or something similar. It will include the GFE figures for closing costs, but will also spell out precisely how much money the borrower will need to bring to closing, and what their total monthly payments will be (including the all important interest and taxes).

As an agent, what does this mean to you?

When working with buyers, make sure they are asking their lenders about this. Don't expect that the GFE will contain this info. Know exactly what information the GFE conveys (look here), and what it doesn't convey, and make sure your client gets the answers in some other format!

(Revised 12/22/09 at 5:19PM)

Tomorrow we will discuss the HUD-1 as a "tie-in" to the GFE.