New HUD/ Combined Disclosures Coming in 2015

R.I.P. HUD-1 Settlement Statement: The Birth of Combined Disclosures

Here lies the HUD-1 Settlement Statement

1974 (makeover in 2010 adding Truth In Lending and GFE) – August (or October) 1, 2015

Birth Certificate:

Name: Combined Disclosures (Loan Estimate and Closing Disclosure)

Date: August 1, 2015 (Possibly October 1, 2015)

In 2015 the HUD-1 Settlement Statement, Truth In Lending and Good Faith Estimate used in the purchase of a mortgage or refinance will be replaced with forms referred to as the Combined Disclosures.

Is this good for the purchaser/borrower?

Only time will tell, but what we do know is that the CFPB's (Consumer Financial Protection Bureau) new regulations were made with the protection of the consumer as the primary objective. The new documentation will be prepared for the consumer, by the lending institution (e.g. bank or mortgage company). As attorneys, it is our responsibility to make sure our clients (and other real estate service providers) understand the effect these new forms will have on purchase, refinance or the purchase other financial products subject to the new disclosure forms. The roll out for the new forms was originally set for all closings scheduled for after August 1, 2015. With some push back from leaders in the industry, a bill is currently being strongly considered to extend this date to October 1, 2015.

The two documents which make up the new Combined Disclosures, are:

(1) LOAN ESTIMATE – designed to replace the Good Faith Estimate and Truth In Lending Form. The Loan Estimate is a preliminary estimate of a consumer’s closing costs, a summary of the terms of the loan and projected loan payments. The goal of this form is to allow the consumer to shop around and get estimates from multiple lenders, looking for the most suitable offer.

(2) CLOSING DISCLOSURE – designed to replace the HUD-1 Settlement Statement and Final Truth In Lending Form. The Closing Disclosure is an effort to create a more comprehensive closing statement for the consumer. The objective is to help the consumer to understand the details of the transaction, the loan costs versus other costs of the transaction, what costs were and were not chosen by the consumer, and the amount and time payments are due. This form will have many similarities to and is meant to be easily compared with the figures found on the Loan Estimate.

What are some transactions that will be subject to the new Combined Disclosures documents?

  1. Purchase Money Financing Secured by real property
  2. Refinance
  3. Purchase of Land 25 acres or less
  4. Purchase of Vacant Land
  5. Construction Loans
  6. Timeshares
  7. Assumptions

What are some transactions that are exempt from the new regulations?

  1. Reverse Mortgages;
  2. Home Equity Line of Credit;
  3. Mobile Home Loans;
  4. Creditors who originate 5 loans per year or less;

Oh, by the way....the Truth In Lending, Good Faith Estimate and HUD-1 will still be required for some loans and must be used by Settlement Agents.

It is important to contact a real estate attorney early in the process of purchaseing a home or binding yourself to any serious finaicial obligation.

Categories: Real Estate