Goodbye HUD-1 Form. New Home Closing Rules Take Effect Aug. 1

Filed in Homeownership, Housing Finance by on April 22, 2015 14 Comments

houseandcalculatorThe Consumer Financial Protection Bureau will institute new rules Aug. 1 regarding disclosures under the Truth in Lending Act and Real Estate Settlement Procedures Act that will affect all home builders, particularly those with a real estate lending arm.

Under the new procedures as a result of the Dodd Frank Act, four documents will be merged into two. The Good Faith Estimate and Truth in Lending disclosures will be eliminated and combined into a new single Loan Estimate form, or “LE.”

In addition, the final Truth in Lending Disclosure and HUD-1 Settlement Statement are being replaced by the Closing Disclosure, or “CD.”

What does this mean?

First, the Loan Estimate must be delivered to the prospective buyer no later than three business days after receiving the application.

Currently, the HUD-1 Settlement Statement can be presented to the buyer on the day of closing and any changes to the statement can take place during the loan closing.

Under the new rule, the biggest change is that the Closing Disclosure must be provided to the consumer a full three days prior to the closing, and if there are changes during that 72-hour period, the closing could be delayed.

Be Ready a Week Before Closing

To prevent any unwanted closing delays, a good rule of thumb is to have all the paperwork in order a week before the scheduled closing date. So if you want to close Aug. 10, make sure everything is ready Aug. 3.

These new rules are intended to streamline the loan application process and make it easier for consumers to understand by clearly spelling out the most relevant details all on one page – the interest rate of the mortgage loan, the amount of the monthly payments and a listing of all the closing costs.

For those applying for adjustable rate mortgages, the documents will explain how their interest rate and future monthly payments could change based on certain factors.

NAHB was actively involved during the rulemaking process, submitting comment letters both individually and with coalition partners urging the CFPB to ensure that any changes that would make it easier for consumers to understand and comply with the settlement process would not place any undue burdens on builders, lenders and other housing professionals.

NAHB will conduct a webinar June 24 to educate and prepare our members for the impending changes and to show how builders can work proactively with lenders and settlement stakeholders to avoid unnecessary delays to closings. The webinar will also outline strategies to minimize potential issues by communicating with customers and business partners.

See more details on the upcoming new lending rules. For more information, contact NAHB’s Steve Linville at 800-368-5242 x8597.

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  1. I find it a shame that a person with good credit can get a loan for a brand new motor home that can cost $200,000 and drive it off the lot the same day with proof of insurance, yet the average home price in America is $188,900 and it can take 4-6 weeks to get a mortgage on it! Maybe we should have Fleetwood do mortgages instead of …

    • Jim,

      Good Observation and comment. Plus that ” rolling collateral ” can be much harder to track.
      I’d rather lend to a stick built homeowner myself.

    • Jim. This will happen immediately the next day after Sellers &/or Brokers sign their repurchase agreements with their lenders. Guaranteed quick closings! For a short time until the buybacks soak up all your cash.

    • Carol Shute says:

      I said the exact same thing to a lender once. We have immaculate credit and were trying to buy a little house in the country on 10 acres for $45,000. They put us thru all sorts of headache. At one point, I told the banker that I could walk on any car lot in the city and drive off in a brand new dually within an hour. It was ridiculous! And do you know that they finally denied us on the basis of not being able to prove my mailing address – the very address where they sent the letter to deny us!!

    • Jim Hix says:

      The government screws up closings and fixes nothing. Why aren’t lenders, Realtors and title companies flooding there Congressman with complaints. Anything the government does is a disaster and this is a disaster. It helps no one and burdens everyone!!!

  2. Doug Hershman says:

    I fear for the domino effect in regards to the 3 day disclosure of the Closing Statement. Almost always, a buyer is also a seller and is reliant on their buyer getting to settlement to produce the funds necessary for their own purchase. If their buyer has a disclosure problem that pushes the settlement back, that will necessarily delay the settlement on their purchase as well. What about the movers, how will they be impacted? Will buyers have the ability to reschedule them in a timely fashion without extra cost? Will we need to start having pre-settlement occupancy agreements in place because the buyers have nowhere else to go? While disclosure is a good thing, there are certain possible unintended consequences that could cause even greater problems.

    • LaMarr Clemons says:

      I have to wonder if this is like Obamacare; we were promised Nirvana. We were told it was to provide insurance for the uninsured, and would lower costs for everyone else, when a dollar from everyone in America could have paid for the premiums of such people. Instead, we got a never-ending set of complications far from what was promised. Will this become another governmentally mandated boondoggle which some lenders will not enter, thus harming would be borrowers for lack of competition? We’ll see.

      • Jim Hix says:

        It’s Obamacare for Realtors buyers, sellers, lenders, movers, insurance agents, title companies. Where is the outrage? Tell me please!

  3. wes says:

    What till you find out what they are going to make the title companies do.

  4. Jim Podell says:

    Most everything that is required for a home mortgage is not necessary for the borrower to obtain a home mortgage. Remember that the extra paper work and many steps that are required for a borrower to get a home mortgage create jobs, when the jobs are created, more houses can be sold. Create more jobs, sell more houses. OR less jobs, sell less houses. As an attorney summed it up for a borrower/buyer in one of my first closings in the year 1963. “IF YOU PAY, YOU STAY. IF YOU DON’T, YOU WON’T.” How much paperwork does it take to get this point across?

    • Steve Harkness says:

      As a 23-yr licensed mortgage professional I understand the consumers’ despair. To tell you the truth, this last blast of nonsense coming from the CFPB was almost enough to get me to retire. These individuals that create all these forms….I don’t know what to say.
      You need two documents for a mortgage and that is a NOTE secured by a Deed of Trust. All the rest are what are called ‘cover someone’s backsid’e forms to keep from getting sued by lawyers. The CFPB or Consumer Finance Protection Bureau as they call themselves are about as much about protecting the consumer as the Federal Reserve is a federal government agency. The CFPB are all about protecting the Federal Reserve which is about protecting the to big to fail mega banks.
      The whole thing is just appalling and make me feel so sorry for the consumer. At one time we had this form called a Good Faith Estimate or GFE for short. It was a one-page document that had each charge broken out line item by line item. The loan officer and consumer signed the thing and it was pretty straightforward. Then about five or six years ago HUD decided that the GFE did not give the consumer enough information to make an educated decision and was way too complicated. So they took this simple form and in the government’s way of making things better turned it into a three-page form that had all fees lumped together so the consumer was not really sure what they were paying for. Congress even wrote HUD a letter asking them to reconsider inflicting this disaster on to the consumer but those at HUD pushed forward anyway.
      When we find out that the CFPB was going to redo this form and make it easier for the consumer to understand, we in the mortgage industry held our collective breath hoping for an actual improvement. The CFPB’s idea to make it easier for the consumer to understand was to turn a three-page nightmare into an eight-page disaster full of terms no one has heard of before.
      The name of this monstrosity is called a TRID and to make matters worse it has provisions that will prevent loans from closing as scheduled if there ANY change in the dollar amount of this TRID that has to be given to the consumer three days before closing. The unintended consequences of this are going to be chaos with people not being able to move into their homes because of the need to re-disclose. It will be a domino effect of misery inflicted on the consumer but I am certain it will create a plethora of opportunity for all these lawyers that haven’t been able to find work because law schools don’t seem to have any restrictions on how many they produce.

  5. VBD says:

    Unintended consequences. This is a mess. I suspect this is messing up many settlements. I am both a seller and a buyer. We are in a hotel for a week because lender needs my HUD-1 on the sale before they can get a clear to close on my new home. That takes AT LEAST a day and then there is AT LEAST another 3 days we have to wait before I can settle. Where are we…in a f&#@&n hotel. More money and all of our stuff in storage….MORE MONEY.

  6. Leslie says:

    They may have thought it would protect someone, but as usual, it has done nothing but further complicate an already complicated process. The buyer should still have the right to waive that 3 day wait period. It’s ridiculous.

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