25 Feb HUD ALERT: The Good, The Bad and The Ugly of the new HUD1
HOW THE NEW HUD REGULATION CHANGES YOUR CLOSING STATEMENT
Terminology:
HUD – Housing and Urban Development
GFE – Good Faith Estimate (issued by lenders and mortgage brokers)
HUD1 – Escrow Closing Statement (issued by closing company)
The new HUD regulation that came into effect Nationwide on January 1, 2010 has changed your closing statement. As an Agent, Buyer or Seller, it is important to be aware of these changes and HUD’s purpose behind them.
HUD’S INTENTION:
- Although most find the new regs confusing, the goal is to provide Buyer a summation of the cost of services that can be used easily for comparison shopping.
- Regardless of geographical area: all lenders and mortgage brokers must follow the same rules when completing the GFE; and all closing companies must follow the same rules when completing the HUD1.
THE GOOD:
- To protect Buyer, there are now “tolerance” limits to avoid increases in fees between the time the GFE is issued and the time the HUD1 is issued.
- Loan Origination Charge and Transfer Tax have zero tolerance for increase;
- Title and Escrow Closing Costs have 10% tolerance for increase.
- All increases in excess of tolerance levels must be cured by lender/mortgage broker unless re-disclosed on a new GFE within timelines before closing.
THE BAD:
- Regardless of standard practice and stipulations of the Purchase Agreement, BE AWARE: the cost of the Owner’s Title Insurance Policy must be charged to Buyer. If the Purchase Agreement calls for Seller to pay the Owner’s Title Insurance Policy, as is customary in our area, you should find a credit from Seller to Buyer on the first page of the HUD1 as reimbursement.
THE UGLY:
- All Escrow and Title Charges are now lumped together on one line, except for owner’s title insurance. The Buyer’s debit column will no longer list the miscellaneous closing costs for title and escrow separately as before. You may ask for a “Closing Statement” in addition to the required HUD1 to show you the breakdown.
See link below, or contact your escrow officer for additional explanations.
http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm
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