New RESPA guidelines should help understand mortgages

Effective January, 2010, consumers should see some new information from their lender when applying for a mortgage and when they go to closing.

RESPA (Real Estate Settlement Procedures Act) guidelines were revised as a result of the subprime debacle to try and put more (and presumably clearer) information in the hands of consumers when shopping for a mortgage and at the time of closing to ensure they are getting what they expected.

Highlights of the anticipated changes that will impact most consumers include:

• A modified "good faith estimate" that identifies what fees a consumer should expect to pay - and perhaps more importantly - which of them can change at closing and by how much.
  
• A modified "HUD-1" statement provided at closing that shows a clearer comparison of your actual charges against the original estimate and a better representation of seller paid items (if applicable).
  

The good faith estimate sample published by HUD includes a section that encourages a borrower to do some comparison shopping and better evaluate the overall fees a lender will charge. Some aspects of the form also show which items the consumer can shop around for (such as title services).

The new HUD-1 statement has a section that summarizes much of what is in the fine print of mortgage documents. As anyone who's been through a closing will tell you, there is a large volume of paperwork and trying to catch all the details can be rather challenging. The summary data should be able to help you quickly assess whether the numbers look like they are supposed to and avoid any "surprises" down the road.

As with any change of this magnitude, expect a few hiccups along the way. That said, the changes look like they will help consumers get a better understanding of what exactly they are signing up for. For a closer look at the forthcoming revisions, visit the HUD RESPA website.