HUD-1 Settlement Statement Has Gone Away

08/12/2015 12:00am
Author: Edward O'Donnell

For more than 30 years, lenders gave the Good Faith Estimate and the Truth-in-Lending disclosure to consumers when they applied for a mortgage. At closing, the title agent gave the the HUD-1 Settlement Statement and the Truth-in-Lending disclosure. The information on the forms was overlapping, inconsistent, and confusing. Now, four separate forms have been condensed into two.

The Consumer Financial Protection Bureau made significant changes to the Truth-In-Lending disclosures, and to the settlement disclosures. The Changes are effective for loan applications made on or after October 3, 2015. This has really changed the way real estate professionals. prepare for closings.

The Loan Estimate

The Good Faith Estimate and the Truth in Lending disclosure have been replaced by the Loan Estimate. It’s really not an “estimate” any longer, because lenders will be held accountable to the exact charges listed on this form, and the loan charges listed must come within 10 percent of the actual costs. The estimate must be given within three days after six items of information are collected: the consumer’s name, income, social security number, property address, estimated property value, and the loan amount.

The Closing Disclosure

The HUD-1 Settlement Statement and a separate Truth-in-Lending disclosure have gone away, replaced by the Closing Disclosure. In the past, the parties to the transaction often did not see the settlement statement until the closing date. The new regulations require that the parties receive the closing disclosure at least three business days before closing. The law says that if the forms are mailed, they must be mailed at least seven days before closing. No more last minute changes just before closing! Those sellers who want to close by December 31 for tax purposes had better have everything ready at least a week earlier. 

To get a look at the new forms, go to http://www.consumerfinance.gov/knowbeforeyouowe/compare/