Learn the significance of the Good Faith Estimate in mortgage lending, its role in promoting transparency, and its evolution into the Loan Estimate.
A "Good Faith Estimate" (GFE) was a standard form that outlined the costs associated with obtaining a mortgage loan provided to borrowers by lenders or mortgage brokers. The GFE aimed to give borrowers a clear understanding of the loan terms and the total costs of the mortgage process, including interest rates, loan fees, and other charges. It was designed to facilitate comparison shopping among borrowers, allowing them to compare loan offers and fees from different lenders.
The Good Faith Estimate was replaced by the "Loan Estimate" form as part of the TILA-RESPA Integrated Disclosure (TRID) rules implemented on October 3, 2015, by the Consumer Financial Protection Bureau (CFPB). The Loan Estimate provides similar information but is designed to be even more consumer-friendly, with clearer explanations of loan terms and costs.
Although the Good Faith Estimate is no longer in use, its purpose—to inform and protect consumers in the mortgage process—continues through the Loan Estimate and other TRID regulations. Borrowers receiving a Loan Estimate can expect the same level of detail and transparency that the GFE provided, ensuring clarity and fairness in mortgage lending.
The Loan Estimate integrates and replaces the Good Faith Estimate and the initial Truth in Lending disclosure, providing borrowers with clearer, more concise information about loan terms, costs, and risks.
No, the Good Faith Estimate has been replaced by the Loan Estimate for mortgage applications received on or after October 3, 2015. Lenders are now required to provide a Loan Estimate instead.
The TRID rules include provisions that limit how much certain fees can increase from the Loan Estimate to the Closing Disclosure. If discrepancies exceed these limits, you should inquire with your lender. Borrowers may also have recourse through regulatory agencies if they believe their rights have been violated.
Subscribe to our monthly newsletter for up-to-date real estate industry trends, news, and insights.