The new reforms were issued by HUD officials, who want to make sure homebuyers completely understand what are known as “good faith estimates”. Those documents will now be simplified and shortened, with terms and fees associated with the loans easy to find. Latha Ramchand is an associate professor at the University of Houston’s Bauer College of Business.
“At the end of the day, the problem was people that could not afford a home were given mortgages that they could not afford and part of the reason was they did not know what they were getting into. So the idea is to make that process more transparent so if I am signing-up for a mortgage, I’m am fully cognizant of all the terms that are attached to the mortgage before I get into the mortgage.”
A new page to the settlement statement will also be added the allow consumers to compare actual costs with a good faith estimate. The new rules take effect in January of 2010.