Will Borrowers Now Be Protected Against Unjustified Price Increases?

From The Mortgage Professor.

A new Loan Estimate form, due within 3 days of submission of a loan application, will replace two existing forms that overlapped in ways confusing to borrowers: the GFE developed and administered by HUD, and the Truth in Lending form (TIL) developed and administered by the Federal Reserve.

The Loan Estimate form is much better than the GFE and TIL. It is shorter, inconsistencies have been removed, and the terminology is clearer. In addition a new Settlement Disclosure form, which must be provided at least 3 days before closing, will replace the existing HUD1closing form.

The disclosures have multiple purposes, one of which – perhaps the main one — is to protect borrowers from unjustified changes in the terms of a loan by the lender as the loan process moves toward closing. The GFE and TIL did not do that adequately because consumers receiving revised disclosures were left completely in the dark as to why the revisions were made. I regret to report that the new Loan Estimate that will replace the GFE and TIL does no better.