Glossary: Good Faith Estimate – GSE
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- Good Faith Estimate – a document that tells borrowers the approximate cost they will pay at or before settlement, based on common practice in the locality. Under requirements of the Real Estate Settlement Procedures Act (RESPA), the mortgage banker or the mortgage broker must deliver the GFE to the applicant.
- Government Sponsored Enterprise (GSE) – a financing entity created by Congress to fund loans to homeowners, farmers and students. Examples include Fannie Mae (FNMA), Freddie Mac (FHLMC) Ginnie Mae (GNMA) and the Federal Home Loan Banks (FHLB). The guiding principle of the organizations is the desire to enhance the availability and reduce the cost of credit for those that would not otherwise be able to access it.
- GSEs have also created a secondary market through the securitization of loans, which means they can be traded by investors. The pre-crisis demand for debt securities meant the GSE could charge a higher price for them and pass the savings onto the public in the form of lower interest rates.
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