Now this will really help with all of the mortgage fraud that went on out there. The new HUD rules require a three-page “good-faith estimate” for borrowers explaining rates, fees, any prepayment penalties and the possibility of later increases in monthly payments. HUD said it “shrank” that form from four pages to three in response to industry complaints.

The rules also limit the maximum amount to 10% that certain fees can increase from the initial estimate. A new HUD-1 form, which is provided to consumers before they sign loan documents, is designed to help consumers more easily compare what they were promised with what they are actually being charged. One problem is that consumers may see that HUD-1 form only shortly before the closing when they are pressed for time and may feel it is too late to resume their mortgage shopping.

HUD said the rules will help consumers understand how much a broker is being paid in fees, often called “yield spread premiums.” But Rebecca Borne, a lawyer at the Center for Responsible Lending, a nonprofit group pushing for changes in mortgage regulation, said the new HUD forms fail to make those fees clear and won’t prevent abuses of them.

Lenders and brokers will have until Jan. 1, 2010, to start using the forms. HUD dropped a provision that would have required a lengthy “script” to be read to borrowers at the closing table, setting out the terms of the loan.

If you were ripped off by a mortgage broker, please call Bill Miller at 602.319.6899 to see if the Law Firm of William A. Miller, PLLC, in Scottsdale and Phoenix, Arizona, can help.