Help me out here. Does a GFE (good faith estimate) lock a lender into their quote and if so, for what length of time?

I’m currently trying to work with two lenders; Home Finance of America (HFA) and Prospect Mortgage (PM) and hoping to retrieve enough information to be able to make a rational decision with respect to obtaining financing of a home loan.

PM gave me a GFE (but PM's name didn’t appear anywhere on the pages) and HFA gave me only a pre-GFE and when I pressed them I was told that a GFE would be done along with the escrow. I thought that when I asked for a GFE that the financing organization was bound to do so, am I wrong?

My reason for asking about the GFE has to do with the stories I’d read on the internet regarding complaints. Both companies seem to have numerous complaints but the problems are pre January 1,2010 and the changes in the law regarding being locked in have to have some positive effect as to what rate of interest is being offered and the charges associated with the loan. So it might be that under the current law that the lender cannot add on extra charges or change details of the transaction.

I can be wrong in my assumptions and I’m seeking some direction here as the loan closes next month.

Note that HFA quoted me 4.875% interest plus costs of $1210. PM quoted me 5.0% with costs of $2052.

RESPA says that a GFE must be issued 3 days after a loan originator receives an application.  An application includes borrowers name, monthly income, social security number, property address, estimate of value of the property, loan amount and any other information deemed necessary by the loan originator. 

Without all of the above information most lenders will not issue an actual GFE but they might issue some sort of a worksheet to illustrate the costs.

steve bazdmeg:

Does a GFE (good faith estimate) lock a lender into their quote and if so, for what length of time?

Your question is straightforward but the answer isn't.  There are currently 57 pages of instruction from HUD on how to fill out the new GFE and HUD 1 closing statement.  On a purchase, depending on the state that you live in, there could be wide variations in the fees quoted.  For example in the two states that I am licensed the seller always pays the Owners Title Policy but RESPA mandates that it be shown as a buyers cost.  Some lenders are requiring that state excise tax in Washington State be shown as a buyers cost even though state law says that it is a sellers obligation.  At closing Owners Title and Excise Tax will be reflected as a credit to the buyer and a charge to the seller.  But HUD believes that it is much clearer to the consumer to show these charges as a buyers cost even though they are never paid by the buyer, you be the judge if this is helpful to you in making a decision on the lender to use.  If you accept one of the GFE's within 10 days of the actual issue date then they are locked into their origination fee, within 10% of required services that the lender selects (appraisal, title insurance, etc) or if you choose title services then those can change and the lender isn't locked in on the daily interest adjustment, taxes or homeowners insurance. 

They are only locked into interest rates and discount rates for the period of time that is stated on the first page of the GFE.  If you don't lock in within that period of time then it is floating.  Most will be floating unless you lock in at the actual time that the rates are quoted.

Hope that helps!

The new GFE - RESPA rules were created by the government - and it was supposed to allow a borrower the abilty to shop for a loan based on the actual cost of the loan rate  - and to eliminate a version of bait and switch - and the GFE is binding - it's a new rule and regulation for Everyone - and as usual, there are about 15 ways to work around the rule so it is not as binding as the regulation was ment to be - thus the confustion to all of us.

Bryan gave you a good in depth reasoning behind your situation.

With the confines of the new law, most lenders including myself are very reluctant until we have all six items that constitute an application.  That said, the new GFE is extremely flawed and confusing, so many lenders are issuing a Detailed Fees Sheet prior to the new good faith.

Unless your loan is locked up front, the closing costs quoted must remain valid for 10 days excuding Sundays and Holidays.

Good Luck

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