A pair of changes to the real estate transaction process will be noticeable to both consumers and industry pros alike – new “Truth In Lending” (TIL) procedures by mortgage lenders and a new “HUD-1″ Settlement sheet following new RESPA guidelines (that stands for Real Estate Settlement Procedures Act). Both are designed to bring fuller disclosure of loan and settlement costs to consumers.

In this post I’ll deal with the new HUD-1 form, and in a future post the Truth In Lending process. The new HUD closing sheet relies heavily on the Good Faith Estimate, which is given by the lender to the consumer at the time the consumer applies for a loan. Under the new TIL regulations lenders must furnish the (now) borrower with another Good Faith Estimate should the terms change (including the rate, purchase price, etc). Your real estate agents needs to be on top of this…

At closing the title company (who you hire to conduct your settlement/closing) will fill out the new HUD1 and deliver it to you for review. Here’s what the new form looks like this: http://www.hud.gov/content/releases/hud-1.pdf. There are:

1. no major changes to page 1
2. major changes to page 2
3. a whole new page 3

I happen to think that the changes are overall good for my clients, and they are clearly geared toward simplifying the reporting of fees (by grouping them together as “lender fees, government fees” etc) so laypeople can compare costs. Go figure that we need a longer form to make things simpler… Also, the new HUD1 form for 2010 emphasizes that the cost estimates given to the borrower early on in the loan process match the final figures at the closing table. This is tricky, but also good in my opinion. If you’re a client of mine you’ll get the whole story when we’re going over settlement papers. Your government at work!

If you have any questions about the HUD-1, what it means etc. you can contact either myself or Guardian Transfer (our preferred closing partner)