The Woodlands Real Estate Blog

Known as a "Good Faith Estimate,"" the three-page document, states in plain English loan terms and estimated settlement fees and charges.

On Friday, January 1, the federal government began requiring mortgage lenders and brokers to use a standardized form that breaks down loan costs and allows for simplier comparison.

Assisting consumers in understanding the complex and often convoluted mortgage application process and hold lenders accountable for cost changes made at closing is the target.

For contributing to the mortgage crisis, confusion over loan rates, terms and fees were widely blamed, with mortgages purchased by consumers that they believed were decent deals, only to suffer hidden costs at a later time.

Under the costs and terms listed, lenders must issue loans, except in extraordinary circumstances. Like appraisals and title insurance, the only wiggle room is with settlement services, and in those circumstances, there's a 10% cap on changes that are permitted.

Like potential interest rate changes, monthly payment amounts, balloon payments and prepayment penalties, the forms present a common-sense outline of other loan nuances.

According to Georgia Southern University's director of the center for excellence in financial services, from many lenders, consumers are able to get Good Faith Estimates, put them side by side and simply contrast between them.

The standardized form is welcomed by local lenders, despite the immediate procedural challenges they present. Government officials state the regulations show ""a huge operational change for the industry.""

According to housing market professionals, for consumers, the regulations are not without drawbacks.

In the early going, lenders may be prone to pad those numbers slightly until they get a sense for the rules, since they must stick to their origination charge estimates.