The good-faith estimate is getting better

After years of debate, federal regulators have decided to revise a key disclosure form required by lenders.

The change could help borrowers get a better handle on closing costs while simplifying mortgage shopping.

The modifications are aimed at the so-called good-faith estimate of mortgage costs, which loan officers must present to borrowers during the application process.

The U.S. Department of Housing and Urban Development, which oversees many of the nation's mortgage regulations, recently unveiled the new, simpler format for the good-faith estimates.

Industry critics have long charged that lenders or brokers sometimes inflate the estimated costs of third-party fees and pocket the difference after they receive the borrower's check on settlement day, or that they may bundle costs so consumers have little way of knowing what has been inflated.

Starting in 2010, however, the good faith estimate must offer settlement charges within 10 percent of the amount the borrower ultimately pays, and list all their charges separately.

Because the new rules will increase transparency, borrowers may find it easier to shop around for the best deals.

A HUD analysis suggested that the new estimate could save a typical borrower about $700 on settlement fees.