Say good-bye to the HUD-1 Settlement Statement

By
Title Insurance with Federal Title & Escrow Company
http://actvra.in/DdJ

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.

Update (07/02/2012):

For those who like the new Settlement Disclosure Form, I'd like to know if you think it's worth an increase of about 30% in settlement fees to your homebuyers.  

Secondly, do you think the last round of changes 2 years ago to the GFE, TIL, and GFE improved your homebuyers' experience?

Lastly, all of these regulatory requirements and changes create higher barriers to entry for competition (i.e., increase in start-up costs).  Over time, established title companies will increase charges to the consumer when faced with less competition.  

 

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Re-Bloggged 5 times:

Re-Blogged By Re-Blogged At
  1. Herman Herrera 06/30/2012 06:57 AM
  2. Nick T Pappas 06/30/2012 11:05 AM
  3. Allen Lomax 07/01/2012 11:35 AM
  4. Gabe Sanders 07/02/2012 03:24 AM
  5. Lenn Harley 07/02/2012 03:36 AM
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Topic:
Real Estate Best Practices
Location:
District of Columbia District of Columbia
Tags:
title insurance
closing costs
cfpb
respa
tila
hud1

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Ambassador
1,807,203
Cindy Jones
Pentagon, Fort Belvoir & Quantico Real Estate News
Integrity Real Estate Group

Looked at the new "HUD-1" and thought geez here we go again.  Something new to learn on top of the changes Virginia just made to our buyer brokerages and representation agreements.  Can't stop learning in this business EVER!

June 30, 2012 05:38 PM
Ambassador
1,501,092
Ed Silva
Central CT Real Estate Broker Serving all equally
RE/MAX Professionals, CT 203-206-0754

I can just see some short sale bank kicking back the new forms because they don't like them

June 30, 2012 06:21 PM
Rainmaker
540,110
Eric Michael
Metro Detroit Real Estate Professional 734.564.1519
Remerica Integrity, Realtors®, Northville, MI

Todd, will there ever be an end to this? Each time they make new forms, they end up not being good enough. Government, eh?

June 30, 2012 07:12 PM
Rainer
56,556
Cyndi Carver
Issaquah & Bellevue Specialist
John L Scott, Inc.

Thank you so much for the update! It gets more complicated all the time. I remember when the TIL was first required, we had to read the explanation to the consumer and they still didn't understand the whole thing.

June 30, 2012 07:14 PM
Rainmaker
53,527
Cheryl Dukes, Realtor
South Fulton Georgia Homes For Sale
Solid Source Realty, Inc.

Wow - only $750 in total settlement fees? - Sounds like a bargain for the D.C. area. I have to disagree that if a buyer doesn't understand the form, then the buyer shouldn't be buying a house. (what does understanding the hud 1 have to do with being a deserving homeowner?) Half the time, I don't understand the form my own self. I don't think it's easy to understand at all. Instead of making it longer and more complicated, it should come with a detailed explanation of each line item. Perhaps buyers would be more likely to review it, if it was more user-friendly.

June 30, 2012 07:28 PM
Rainer
275,302
Kimo Jarrett
Kimo's Lifestyle Solutions
WikiWiki Realty

It shouldn't deter us from doing our business since we are continually evolving and increasing our costs of doing business as we attempt to create more efficacy with our business partners, city, county, state and federal governments. 

June 30, 2012 07:40 PM
Rainmaker
267,176
Paddy Deighan JD PhD
Paddy Deighan J.D. Ph.D
Aston McLaren Inc

what else can we expect?? The current HUD-1 only makes sense when you read page two before page 1!!

June 30, 2012 08:02 PM
Rainmaker
1,237,398
Gene Riemenschneider
Turning Houses into Homes
Home Point Real Estate

The HUD 1 can be very confusing.  Making it longer is not going to help.  The more paper the less people actually understand.  

June 30, 2012 08:29 PM
Rainmaker
199,376
Woody Edwards
A Realtor® Who Answers His Phone!
First Choice Realty, Inc

Many of you are exactly right.....the longer the form, the less likely it will be read, let alone understood.  Typical government, trying to "HELP" the consumer.......and screwing it up!

June 30, 2012 10:00 PM
Rainmaker
629,292
Stephanie/Bob The Ruiz/Miller Team
The Ocala Dream Team
Keller Williams Cornerstone Realty

Hi Todd, thanks for the post and the heads up.  We did not know there was another JUD coming.

July 01, 2012 06:01 AM
Anonymous #98
Anonymous
Zia Montesi BIC & Realtor
As BIC and with 12 years experience I still think it's my responsibility to explain to my Buyer or Seller what they are being asked to sign. I reread each time which allows me the review & be prepared to answer questions. Clarification is a must; I agree with Paddy, go over Pg 2 first in your "education" of your vital client, you're a partner in this transaction. Educate and protect. Zz / zouterbanks@gmail.com /OUTER BANKS BEACHES / NE NC
July 01, 2012 07:45 AM
Rainmaker
157,943
Jonathan Osman
Charlotte House Hunter Group
Keller Williams Realty

So they've taken a relatively easy document to explain and made it about as complicated as possible.  I bet this document cost about a billion dollars to create as well.  If the government can do such great work with this HUD-1, I can't wait to see what they come up with for health care (tougue firmly in cheek).

July 01, 2012 08:48 AM
Rainmaker
808,064
Lyn Sims
Schaumburg Homes
RE/MAX Suburban - Schaumburg IL Real Estate - Northwest Suburbs of Chicago

Kind of cranky don't you think towards the home buyer? I say the consumer does not need any more interference & over- complication from these people. All their actions have cost buyers $$.

July 01, 2012 09:07 AM
Ambassador
1,160,817
Tammie White
TW Realty Group, Franklin TN, South of Nashville
Benchmark Realty, LLC (615) 495-0752 or www.TWRealtyGroup.net

Why fix something that's not broken? I think it's in the best interest of the consumer to leave well-enough alone.

July 02, 2012 10:15 AM
Rainmaker
647,735
Evelyn Kennedy
Alameda, Real Estate, Alameda, CA
Gallagher & Lindsey, Alameda, California

Todd:

Got to set some time aside to thoroughly review the new form.  I thought the HUD-1 was good.  My only hope is that the new form will be easily understood by a buyer.  From you blog it sounds like that is not the case.

July 02, 2012 12:51 PM
Rainmaker
133,055
Donna Quinlan
Realtor CRS,GRI, Newburyport, Boston's North Shore
Keller Williams Realty

That's too bad. My clients usually understand the Hud quite well. I'm not looking forward to this change. Thanks for the information. I had not heard about the change.

July 03, 2012 04:10 PM
Rainmaker
612,140
Thom Abbott
Midtown Atlanta Condos For Sale
MyMidtownMojo.com Thomas Ramon Realty

I have two words....."heavy sigh!"

Let's see...I looked a tthe Hemlock one and it just seems like a heck of a lot of paper to say the same thing.

I love how we (the government) like to see just how difficult we can make something.

 

July 04, 2012 02:04 PM
Rainmaker
126,486
Jeremy Joslin
Professional Real Estate Marketing and Sales
Coldwell Banker Residential Brokerage

Very interesting Todd.  Sometimes I wonder what the thought process is.  

July 05, 2012 07:29 PM
Rainmaker
698,676
Sharon Parisi
Dallas Homes
Keller Williams Dallas Premier Realty

The original statements worked for me!

August 15, 2012 12:50 AM
Rainmaker
132,587
Liane Thomas - Corona & Riverside Real Estate
Bringing you Home!
The Jet Team, Keller Williams Realty, Corona Real Estate

I don't see anything in a new 5 page form that benefits my buyers. Settlement costs going up by 1/3? Not a benefit...more wasted paper?...not a benefit...

November 02, 2012 01:18 PM
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Rainmaker
17,845

Todd Ewing

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