The federal Real Estate Settlement Procedures Act ("RESPA") concerns the disclosures and settlement procedures to consumers when applying for and closing on a mortgage loan and real estate. For the first time in more than 30 years the United States Department of Housing and Urban Development ("HUD") has implemented new RESPA rules ("Final Rule").
The Final Rule and forms were published by HUD on November 17, 2008. Most of these changes will be required to take effect on January 1, 2010 however much of the Final Rule became officially enacted on January 17, 2009 and it's provisions can now be used, including the new HUD1 Uniform Settlement Statement ("HUD1") and new Lender's Good Faith Estimate ("GFE").
It should be noted that there are currently a few lawsuits and further discussion regarding a small number of the proposed changes, including the "required use" provision, so these items might be further modified [Update: HUD has withdrawn the "required use" provisions]. Indeed several rules were dropped from the Final Rule, including the use of a "closing script" that would have been required to be read aloud at the settlement table and which potentially could have added an hour of time spent at each real estate closing. Instead HUD has created a third page on the new HUD1. However, even though the "closing script" was abandoned and a few modifications might still be made, as of January 17, 2009 nearly all of the Final Rule provisions were enacted.One of most revamped RESPA rules involves the new Lender's Good Faith Estimate. The existing GFE has been used by Lenders since 1992 and it currently estimates mostly settlement costs rather than mortgage fees. The new GFE expands fee disclosures of both the mortgage and settlement costs and then ties these fees directly to a new HUD1 Settlement Statement. The new HUD1 references the GFE estimates in multiple areas and the Final Rule establishes additional consequences for the differences in fees between the two... within certain tolerances (in some cases 10%).
Attorneys, Lenders & others should be aware of the use of the new forms, the consequences and procedures for tolerance overages at the closing and prepared for their overall explanation and execution. Note: there are no signature lines on the new HUD1 Settlement Statement, if a signature execution is desired or requested, signature lines can be added.
If tomorrow a Lender provides to the borrower the new Good Faith Estimate for either a purchase or refinance, the new HUD1 or HUD1-A Settlement Statement must be used at the closing.
Lafayette Title has posted the new Good Faith Estimate, HUD1 and HUD1-A Settlement Statement forms on our website, feel free to view or download them here.