New regulations from the Department of Housing and Urban Development will require that closing costs be spelled out on a revised and consumer-friendly version of the good-faith estimate form that borrowers are supposed to receive within three days of applying for a mortgage. These rules will take effect Jan. 1, 2010.

Fees are divided into three categories:

• Fees that cannot increase from upfront estimates to closing, including lender or broker's mortgage origination, processing, and underwriting charges, as well as lender or broker’s points based on the interest rate quoted and local transfer taxes.
• Fees that can increase as much as 10 percent from upfront estimates, including services such as appraisals, title insurance, and recording fees from local governments.
• Fees that can increase without limit because the amount is difficult to predict in advance, including home owners insurance, daily interest charges on the loan, and initial deposits by the borrower into an escrow account.

The new HUD-1 form will allow the borrower to easily compare what they were told the settlement fees will be with what they actually are at closing.

Source: The Washington Post Writers Group, Kenneth R. Harney