Question:

Is the good faith estimate of settlement charges reliable?

Answer:

Not really. The Truth in Lending disclosure statement and the GFE (Good Faith Estimate) of settlement charges has to disclose any information to assist the borrower in effectively shopping for loans. Unfortunately, the TIL and the Good Faith Estimate rarely accomplish this. The TIL statement shows the loan APR, the GFE shows the rate, but unless these terms are locked you can't rely on the numbers. The interest rates change every day.

The Good Faith Estimate settlement charges received by a lender take precedence over those received by a broker. Also, the more time has passed from obtaining Good Faith Estimate settlement costs to the actual HUD-1 statement containing final loan settlement charges, the greater the difference.

Also, the GFE settlement costs are not always provided in good faith. Borrowers report costs significantly lower on the Good Faith Estimate compared to the final HUD-1 statement, or even missing on the GFE and added to the HUD-1. Given that there is no liability if errors exist on the GFE, borrowers can't rely on disclosed settlement charges.

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