The new good-faith estimate (GFE), which the U.S. Department of Housing and Urban Development will require beginning Jan. 1, offers brokers a great opportunity to be explicit about how they are paid. You can do this by comparing the new form to the old form, which does a better job with cash-to-close estimates and line-item fees. Such a comparison can take place as part of the borrower-education process.

Showing both GFEs to customers demonstrates compensation transparency and reinforces the inverse relationship between rate and closing costs. Done correctly, the hustling process associated with locking prospects into a rate and gaining final commitment will become nonexistent.

One nice thing about the new GFE is that the offered terms and lock policy are plainly displayed on Page 1. The form also allows originators to place a deadline on the offer and reinforces that time is of the essence. A deadline often encourages borrower compliance.

Meanwhile, the latest amendments to Regulation Z, which implements the Truth in Lending Act (TILA), give brokers an opportunity to explain how the law protects borrowers from any surprise adjustments to loan terms. Commitment often is easier to secure when borrowers understand how noncompliance could result in a delayed transaction.

These amendments, which took effect this past July 30, also help define the financial-commitment aspect of the lending process. Brokers should advise borrowers about mandatory waiting periods and their influence on the transaction timeline. Explain to borrowers how these time frames work to their advantage. Helping borrowers understand built-in procedures can foster trust and work as a sales tool.

HVCC and pre-closing

The Home Valuation Code of Conduct (HVCC), which prohibits brokers from ordering appraisals for loans sold to Fannie Mae and Freddie Mac (editor's note: At press time, a bill proposing an HVCC moratorium had yet to pass the U.S. House.), has received much criticism since its implementation this past May. A similar rule prohibiting brokers from ordering appraisals for Federal Housing Administration loans takes effect Jan. 1.

Rather than waste energy fighting the HVCC, brokers should embrace the code as another opportunity to establish trust. You can do this by explaining how relationships between lenders and appraisers could have fueled the inflationary cycle in the housing market.

This explanation usually invites questions from borrowers about valuation. At that point, brokers can describe their limited ability to contact appraisers and the listing real estate agents' responsibilities. Borrowers tend to see this added regulation as another affirmation that the price they're paying has been vetted by someone with no financial interest in the transaction.

Also consider scheduling pre-closing conference calls to review TILA documents, along with conditional-approval and estimated-settlement statements, for 10 days before the closing date. By the time you schedule this call, you should know if any underwriting items affect the final terms. If so and if the final annual percentage rate is affected, you may need to provide new disclosures.

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