Depending on how loan officers provide quotes up front — on an informal “worksheet” that carries no federal consumer protections or on a new, three-page “good-faith estimate” that comes with rock-hard guarantees — there could be a world of difference.

A loan officer might quote you fees that are low-balled by hundreds of dollars on an informal worksheet to get your business. But if the quotes are made on a GFE, they’ve got to be accurate because, under new federal rules that took effect Jan. 1, any significant excesses must come out of the lender’s wallet at settlement.

Last week, the Department of Housing and Urban Development brought together representatives of the highest-volume mortgage lenders in the country — which originate more than 80 percent of all new home loans — to review the agency’s reformed GFE and closing documents.

Among the issues discussed were the widespread use of informal worksheet estimates to quote mortgage rates and settlement fees. HUD does not object to lenders using worksheets to give casual shoppers a rough idea of what they’ll pay. But the agency says it wants lenders and loan officers to make clear to customers that worksheets are not GFEs and are not guaranteed.

At the meeting with major lenders, HUD Deputy Assistant Secretary Vicki Bott warned that under no circumstances can worksheet quotes be issued to a mortgage applicant “in lieu of a GFE.” Once a customer supplies the essential application information — Social Security number, property address and estimated value, among others — lenders must issue a binding-cost GFE rather than a worksheet, Bott said.

Also, loan officers cannot refuse to provide a GFE to an applicant who requests one, nor can they tell applicants that they can receive a GFE only if they commit to using that company to obtain the mortgage.

Loan shoppers “do not have to move forward with a lender to get a GFE,” Bott said in an interview after the lender meeting. “By no means can they say you are bound to me as your lender” after the issuance of a cost-guaranteed GFE. Why? Because the whole concept of the revised GFE is to enable home buyers and refinancers to shop intelligently, with confidence in lenders’ estimates. You can now get cost-guaranteed quotes on a GFE from one lender, then compare them with GFE quotes from competitors. The new form contains itemized boxes allowing comparison of up to four lenders’ quotes — from interest rates to loan fees to prepayment penalties and total settlement expenses.

The GFE also ties upfront estimates to later charges at closing and encourages borrowers to check line by line for any discrepancies. The form explains which fees come with zero tolerance for changes between upfront estimate and closing — generally, the loan fees and local transfer taxes — and which fees allow a 10 percent tolerance for higher charges than the estimate, such as certain title and closing-related services.

How can you be a smart mortgage shopper using the new federal rules to your advantage? If you are seriously looking for the best deal and are prepared to supply basic application information, ask for a GFE by name. If you’re merely shopping for generic rate quotes, worksheets are fine as long as you understand their limitations.

Beware of lookalike ploys and substitutes. Bott told lenders to make sure their worksheets do not “look like a GFE” and that they “be clear [to consumers] that they are not GFEs.”

Some worksheets that have been used by lenders since Jan. 1 resemble GFEs but have titles such as “estimated settlement costs” at the top of the page. Others indicate on the bottom of the form that the worksheet “is not a GFE,” but the typeface is so small that it’s barely legible.

Finally, be aware that federal law requires issuance of a GFE within three days of any application. If you don’t receive one and you signed up for a loan on the basis of a lender’s worksheet, you are truly flying blind.
Complements: Kenneth R. Harney