What Is a Good Faith Estimate (GFE)?
A Good Faith Estimate (GFE) is a standardized disclosure that lists the estimated costs and key terms of a reverse mortgage offer so borrowers can comparison‑shop and understand what they’re being charged. Under the Real Estate Settlement Procedures Act (RESPA) the GFE used to apply to most mortgage types, but since October 2015 the GFE is used only for reverse mortgages; other mortgage types now use the Loan Estimate form. (See CFPB; Investopedia.)
Key takeaways
– A GFE gives an itemized, estimated breakdown of fees, charges, and loan terms for a reverse mortgage. (CFPB; Investopedia)
– Lenders must provide a GFE to a reverse mortgage applicant within three business days of receiving the application. (CFPB)
– The GFE contains estimates only; final closing costs may differ for legitimate reasons (e.g., third‑party fees). Borrowers should review and compare GFEs from multiple lenders. (CFPB; Investopedia)
– Borrowers may be charged a credit‑report fee prior to receiving a GFE, but lenders may not charge additional fees for providing the GFE. (CFPB)
How a Good Faith Estimate (GFE) works
– When you apply for a reverse mortgage, the lender prepares a GFE that shows estimated settlement charges and major loan terms: interest, funding fees, closing costs, title and recording charges, taxes, and administrative fees.
– The lender must deliver the GFE within three business days of receiving your application.
– The purpose is to let you compare offers across lenders: you can request multiple GFEs, compare line‑by‑line, and choose the lender and terms that best fit your needs.
– Because many costs (for example, title or third‑party closing services) come from outside the lender, the GFE shows estimates — the final amounts may change at closing.
Important consumer protections and rules
– Timing: GFE must be delivered within three business days of application for reverse mortgages. (CFPB)
– Fee limitation: Lenders can charge only a credit report fee before issuing the GFE; other fees to obtain the GFE are not allowed. (CFPB)
– Plain language: The standardized form is designed to make terms and costs easy to understand and compare. (Investopedia)
Limitations of a Good Faith Estimate (GFE)
– Estimates, not guarantees: The GFE shows projected costs. Actual closing costs can be higher or lower based on third‑party fees, changes you request, or additional services required for your transaction.
– Third‑party variability: Some costs—title, recording, escrow, or survey fees—are set by outside providers and may differ from the GFE.
– Fraud risk: Unscrupulous lenders may add or inflate administrative fees (wire transfers, processing). Always compare and ask for explanations.
– Applicability: Since October 2015 GFEs apply only to reverse mortgages. Other consumer mortgage applicants receive a Loan Estimate instead. (CFPB; Investopedia)
Good Faith Estimates (GFE) vs. Loan Estimate forms
– GFE: Now used only for reverse mortgages. Must be provided within three business days and lists estimated costs and terms. (CFPB)
– Loan Estimate: Introduced under the TILA‑RESPA Integrated Disclosure (TRID) rules in October 2015; used for most other mortgage types. It serves a similar purpose (three‑day delivery, standardized cost/term breakdown) but follows the newer TRID format.
– Not all credit transactions get either form: HELOCs, some manufactured housing loans not secured by real estate, and certain homebuyer assistance programs receive other disclosures (e.g., truth‑in‑lending statements) instead. (CFPB)
Special considerations for reverse mortgage borrowers
– Counseling: Many reverse mortgage programs—most notably FHA’s Home Equity Conversion Mortgage (HECM) program—require counseling by an approved counselor before closing. Ask whether counseling is required for the product you’re considering.
– Repayment rules: Reverse mortgages have distinct repayment triggers (e.g., sale of the home, borrower move, failure to pay property charges). Make sure these appear clearly on the GFE and final disclosures.
– Impact on heirs and estate: Reverse mortgages can affect home equity available to heirs. Use the GFE along with counseling and legal advice to understand consequences.
– Shop multiple lenders: Because the cost components can vary widely (origination fee, servicing fees, third‑party charges), getting multiple GFEs helps identify outliers and hidden fees.
Practical steps for borrowers — a checklist
Before you apply
1. Educate yourself: Learn the basics of reverse mortgages and whether a federally insured HECM or a proprietary product fits your needs. Ask if counseling is required.
2. Gather documents: Proof of age and identity, property information, mortgage payoff statements (if any), income/asset details as requested.
When you apply
3. Ask explicitly for a GFE: The lender must provide it within three business days for reverse mortgage applications.
4. Confirm who pays for what: Ask which charges are lender fees and which are third‑party (title, recording, appraisal) so you know what you may be able to shop for.
When you receive the GFE
5. Review key line items:
– Total estimated settlement charges
– Origination/administrative fees
– Third‑party fees (appraisal, title, recording)
– Upfront mortgage insurance or FHA/VA funding fees (if applicable)
– How interest is calculated and whether payment amount or interest rate can change
– Repayment triggers and terms
6. Compare multiple GFEs: Line‑by‑line comparisons reveal differences—focus on the total cost, recurring charges, and items that can’t be shopped.
7. Verify timing and fees: Make sure the three‑day timeline was met and that you were charged only a permitted pre‑GFE fee (credit report), if any.
If numbers don’t add up
8. Ask questions: Request clarification and itemized explanations for any unexpected charges. Get responses in writing.
9. Negotiate: Ask the lender to reduce or waive discretionary fees if they are excessive or if another lender offers a better deal.
10. Check for required counseling: Confirm you completed any required reverse‑mortgage counseling and that the counselor’s recommendations were acknowledged.
At closing and afterward
11. Compare final closing documents: Compare the final closing statement with the GFE. Expect some differences, but ask about any large unexplained increases.
12. Keep records: Save the GFE, correspondence, closing documents and counseling certificates.
13. Seek help if needed: For suspected fraud or unexplained excessive fees, contact state regulators, the Consumer Financial Protection Bureau, or an attorney.
Red flags and how to avoid scams
– High unexplained “administrative” fees or repeated small fees that add up (ask for itemized descriptions).
– Pressure to sign before you receive the GFE or to pay non‑credit‑report fees to receive the GFE. (Only a credit report fee may be charged before the GFE.)
– Requests to wire funds for fees to unfamiliar accounts.
– Lenders refusing to put key terms in writing.
Where to get help and verify information
– Consumer Financial Protection Bureau (CFPB): guidance on GFEs and mortgage disclosures. (cfpb.gov)
– State mortgage regulators: verify the lender’s license and complaint history.
– HUD (for HECM reverse mortgages): counseling agency lists and program rules.
– Independent housing counselors or elder law attorneys for complex situations.
Sources and further reading
– Consumer Financial Protection Bureau, “What Is a Good Faith Estimate (GFE)?” and 12 CFR §1024.7 (Good Faith Estimate). (cfpb.gov)
– Investopedia, “Good Faith Estimate (GFE).” (investopedia.com)
Bottom line
For reverse mortgage applicants the GFE is a critical, legally required estimate issued within three business days that helps you compare offers and understand likely costs. Treat the GFE as a shopping and negotiating tool: get multiple estimates, ask detailed questions about any fees you don’t understand, confirm counseling and program rules, and compare the final closing costs to the GFE to ensure there are no unexplained surprises.