Say good-bye to the HUD-1 Settlement Statement
GOOD GRIEF!!
"At the risk of sounding astringent, if a homebuyer can’t understand the HUD-1 Settlement Statement in its current form, then perhaps that homebuyer shouldn’t be a homebuyer" says Todd Ewing.
Mr. Ewing has it all wrong.
The purpose of the form is DISCLOSURE. It should not be a test. Disclosure should be informative, not a gauntlet.
I would suggest that the home buyer CONSUMER is paying a considerable fee to a title company to handle the closing. Title company reps or attorneys should be able to describe the information in the Form HUD-1 to a CONSUMER so that it is comprehensable. I've attended hundreds of closings and have found that most do. What most do NOT is expect the CONSUMER to understand forms that most agents don't.
The problem is not that the home buyer can't understand the Form HUD-1. The problem is that the Form HUD-1 was written by bureaucrats who don't understand the CONSUMER and are incapable of writing comprehensible disclosures.
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The Consumer Financial Protection Bureau (CFPB), by mandate under Dodd-Frank, will soon change our world once again.
Just barely two years since the title and mortgage industry was turned upside-down with regulatory changes to the Truth-in-Lending Act (TILA) and the Real Estate Settlement Procedure Act (RESPA), the CFPB will be releasing its proposed forms and regulations next month to replace the HUD-1 Settlement Statement, Good Faith Estimate, and Truth-in-Lending Disclosure.
These new forms will be known as the Loan Estimate and Settlement Disclosure Form.
On its snazzy website, CFPB states that the current 3-page HUD-1 settlement statement is replete with "... Technical and legal jargon ... that may be more confusing than helpful. Complicated and lengthy disclosures can make it hard to answer or even ask the right questions."
So CFPB’s solution is to do away with the current 3-page HUD-1 and replace it with a lengthier and more complicated 5-page document called the Settlement Disclosure Form.
This is hardly an improvement. In our experience at the closing table, homebuyers are less likely to review lengthier disclosure forms compared to short form disclosures.
Among other things, these new CFPB forms will require lenders and settlement service providers to overhaul their existing software production systems, re-tool the lender-to-title company interfacing, and re-train staff members — which meanshomebuyers will end up paying more at settlement.
Currently, homebuyers pay, on average, $750 for total settlement fees in the Washington DC metro area. With little, if any, benefit to the consumer, I expect that figure to increase to approximately $1,000 with the implementation of these new CFPB forms and regulations.
The current disclosures are more than adequate. At the risk of sounding astringent, if a homebuyer can’t understand the HUD-1 Settlement Statement in its current form, then perhaps that homebuyer shouldn’t be a homebuyer.
Todd Ewing
President
Federal Title & Escrow Company
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