It was mortgage lender against mortgage lender last week in an unusual Washington brouhaha -- with new FHA Commissioner David Stevens as the referee.

The fight was over whether the new, consumer-friendly Good Faith Estimates (or GFEs) and HUD-1 closing disclosures given to all home real estate and mortgage participants will take effect as scheduled less than six weeks from now.

The rules are important because they provide much-needed clarity on mortgage-related fees and closing costs, and impose strict new prohibitions against the surprise, eleventh hour charges that enraged consumers in recent years. They also make it easier for applicants to shop for competing rates and terms.

But a coalition of big banks and mortgage trade associations wants to derail the January first start date for mandatory use of the new GFE and HUD-1 disclosures. The six include the American Bankers Association and the Mortgage Bankers Association and four other, smaller Washington lobbies.

In a 32-page letter to FHA Commissioner Stevens, they spelled out a series of issues they have in gearing up their systems by January 1. If HUD does not relax its nationwide startup date, the groups predicted that there would be a "crippling" of the home loan marketplace, and a tidal wave of lawsuits by consumers against lenders.

For example, due to potential confusion about the role of mortgage brokers in providing borrowers with upfront Good Faith Estimates of mortgage loan costs - and their binding effect on mortgage lenders not to exceed those estimates - the groups warned that many lenders would stop accepting loans from brokers.

The groups cited a lengthy series of other problems in their letter to Stevens as well.

What they didn't count on, however, was that the biggest mortgage lender by dollar volume - Wells Fargo - would pull the rug out from under them, writing separately to Stevens urging that HUD stick with its January first start date for the revised GFEs and HUD-1's.

Wells Fargo co-presidents Michael Heid and Cara Heiden basically said: Forget all the whining about the difficulty of gearing up systems and complying by January first. Over the past eleven months, they said, Wells has built the forthcoming rules into its national computer system and is ready to go.

Not surprisingly, Stevens sided with Wells Fargo and told the six groups: Sorry folks, you've had a year to get ready. Get with the program.

Bottom line for consumers, Realtors, builders and lenders: Absent action by Congress -- which is unlikely -- look for the new Good Faith Estimates and HUD-1s as scheduled, starting New Years.

Published: October 26, 2009

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.