The Department of Housing and Urban Development recently proposed several new lending rules, including one that will affect HELOC good faith estimates.

Good faith estimates are supposed to be a consumer tool. In the ideal world, a borrower could collect several good faith estimates from home equity lenders, compare their rates, and select the best deal. In the real world, it rarely works like this. Lenders regularly tweak their good faith estimates in order to compete with each other. The actual home equity loan rates a borrower gets can be very different from any of the good faith estimates he receives.

HUD’s proposed rules would make good faith estimates much more reliable. The Washington Post reports:

“The information on the proposed good-faith estimate includes the interest rate, total lender charges and total third-party charges. That’s enough to allow a borrower to shop effectively for fixed-rate mortgages. On adjustable-rate mortgages, HUD plans to require additional information on the factors that affect future rate adjustments and is seeking comments on how best to do this.

The fees and charges laid out in the proposed good-faith estimate would no longer depend entirely on the “good faith” of the loan provider. Changes between the numbers shown on the estimate and those contained in the HUD-1 final closing document will be limited.”

The good faith proposal looks like a significant improvement for prospective home equity line of credit borrowers. We’ll keep you updated on the progress of these new rules.

See Also:
HELOC Lender Obligations Under the Truth in Lending Act

HELOC 3-Day Right of Rescission

Tags | good faith estimates, Heloc, home equity line of credit, HUD, Truth in Lending Act