Dean’s note:I would like to thank Bill Risser, the branch manager of Chicago Title – Gilbert office for contributing the following explanation of the new HUD-1. Bill is also a fellow ASU Sun Devils fan whom I have run into at basketball games. When Bill is not teaching social media or attending ASU sporting events you can find Bill on Twitter at @billrisser.
There has been a lot of talk over the last few months about the new Good Faith Estimate (GFE) for 2010. Lenders are under the gun to comply with the new RESPA guidelines and remain compliant. There have been many posts and articles discussing these changes. In addition to the GFE changes, the HUD-1 Settlement Statement also underwent renovation. Below I’ll highlight the major changes in the 2010 HUD-1 Settlement Statement.
The overall look of the first two pages changed very little. The top of page 1 contains all the relevant names, addresses, file numbers and dates as before. The balance of page 1 summarizes the buyer’s charges and credits as well as the seller’s charges and credits. Prorations are also accounted for on page 1.
Page 2 is where we begin to see the effect of the new RESPA requirements. Lines 801-1001 now contain a section “outside the column” designating where on the new GFE the fees being charged on the HUD-1 can be found. This is part of the government’s effort to make the transaction more transparent. A borrower can now see if the GFE accurately represented the fees being charged on the HUD-1 Settlement Statement. A significant change in the lenders section of the form is line 803. This now contains a lump sum total of all origination fees (origination, doc prep, admin fee, etc) less any credit for the specific interest rate chosen by the borrower. In the past, every fee charged by the lender or mortgage broker has been detailed in the 800 section. This is no longer the case with the new HUD-1. The same is true in the Reserves section (Lines 1001-1009) and the Title Charges section (Lines 1101-1113). These sections also “roll up” the charges to the borrower into one fee. For people familiar with the old version of the HUD-1, these are dramatic changes. One reason the government did this is apparent on page 3.
Page 3 is a new addition to the HUD-1. This page indicates to the borrower whether the lender complied with the new RESPA guidelines. The first portion of page 3 is called Comparison of Good Faith Estimate (GFE) and HUD-1 Charges. It refers to four lines of page 2. They are 801, 802, 803, and 1203. For Arizona, line 1203 is not important as we do not have a transfer tax. The total of this section can not be higher than the GFE by any amount. This is the zero tolerance portion of page 3.
The next section is called Charges Than in Total Cannot Increase More than 10%. This includes title and escrow fees, appraisal fees, credit report fees and tax service fees. As the section name implies, the sum total of all these fees cannot be more than 10% higher than the GFE. The new HUD-1 conveniently displays the GFE figures right along side the HUD-1 figures, including the totals and the percentage difference. One caveat for this section is that if the borrower selects any of the providers in this section, there is no 10% tolerance requirement on that fee.
The last of the comparison sections is called Charges That Can Change. These are charges to the borrower that are out of the control of the lender or title company that can change without affecting compliance of the loan.
A question I’ve been asked many times is what happens if the tolerances are exceeded on the new HUD-1? Will it delay closing and recordation? We have been instructed that as long as the lender funds the loan, we will proceed with recording and close the escrow, even if the HUD-1 is non-compliant.. The lender will then have 30 days to bring the loan into compliance, and refund any overages to the borrower. This will more than likely involve the title company as a revised HUD-1 will need to be issued with any refund.
Finally, the rest of page 3 simply restates language found in the GFE. This lays out for the borrower one final time the particulars of the loan program they are being provided.
Below is a sample of the 2010 HUD-1. There is more information on the new GFE and HUD-1 at the HUD website.
1) First-time Homebuyers Tax Credit extension passes the Senate – So of the dozens of posts on this subject why did I pick this one to highlight, first he got the facts right that it has not passed yet, still needs approval by the House and the President’s signature, but also because he included the text of the actual bill!
3) Loan modifications, 5 things the Government is not doing but should – It is an interesting ready, interesting as in it amazes me that some people still think a lot more government intervention is a good thing. Isn’t it a large part of government’s fault for forcing lenders to loosen the purse strings that we are in this mess? #3 and #4 may have some merit, but 1, 2 and 5? I think it was Mark Twain who said “Thank God I don’t get all the government I pay for.”
4) Real estate iPhone apps gaining traction – When are people going to wake up and realize there are more Blackberry devices out there than iPhones. Give us our apps too.
6) Escrow trenches: Nutty funding conditions – Oh so glad to see someone talking about one of my pet-peeves, the bizarre funding condition coming up at the last minute these days.
8 ) The great unknown in buying foreclosure properties – While it makes some good points, buying a foreclosure is not as risky as it sounds. You still get the home inspection even though it is “as-is” just make sure you get yourself an agent who has worked a lot of foreclosure deals this year to help guide you through the process.
1) How long do mortgage rates quotes last? – It’s a problem I hear with buyers often, they are given a quote then the next day the rate is different. I think lenders need to do a better job explaining to buyers when they do give them quotes.
2) What happens in escrow? – You can read all the details on what is involved in the escrow process or you can jump to the end and have have it explained like he explained it to his 6-year old.
3) I love my dogs but… I also had a bad experience with a cat getting out at a showing a few months ago. Homeowners, agents please make sure you notify people of pets in the house.
7) The net effect of government intrusions in the real estate market is to create a standing wave of foreclosures amid steadily-declining home values – Greg as always writes a thought provoking column and uses his unique style to explain it. And again, as much as I may not want to, I have to agree with him. The staggering part? The National Association of Realtors reports that 59% of all new home loans this year were underwritten by the Federal Housing Authority, the Veterans Administration or the U.S. Department of Agriculture. So basically the federal government owns 59% of the houses purchases this year.
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Dean’s note: I would like to thank Bill Risser, the branch manager of Chicago Title – Gilbert office for contributing the following explanation of the new HUD-1. Bill is also a fellow ASU Sun Devils fan whom I have run into at basketball games. When Bill is not teaching social media or attending ASU sporting events you can find Bill on Twitter at @billrisser.
