If you’ve ever bought or sold a house, you’ve likely seen the HUD-1 Statement. This form is used by all parties, their lawyers, lenders, real estate agents and title company to itemize all charges imposed upon a borrower and a seller in a real estate transaction. It gives each party a complete list of the incoming and outgoing funds.
The Real Estate Settlement Procedures Act (RESPA) requires that the form be used in all transactions which involve federally-regulated mortgage loans. In New Jersey, we use the HUD-1 for every real estate transaction and for years fondly referred to it as the RESPA.
However, after ALL OF THESE YEARS, the HUD-1 is about to change. As a result of the national housing crisis of the past few years, with partial blame on mortgage lenders and banks providing mortgages to those who could not afford the loan or did not understand all of the facts and figures of the loan, Congress has passed the Dodd-Frank Act. This Act mandates that the Consumer Financial Protection Bureau (CFPB) create a new federal disclosure form that will do a better job ensuring that consumers are able to make fully informed decisions when shopping for a home mortgage.
The CFPB has decided on a new Closing Disclosure Form that will replace the HUD-1 to be used commencing August 1, 2015. The key difference is that the new form will be formatted so that it is clearer for buyers to discern the amount of loan principal and interest rate that will be due, and most importantly, they will be able to see upfront exactly how much money they will owe each month.
Additionally, the CFPB has promulgated a new requirement that this Disclosure Form be provided to consumers at least 3 business days before the date of the closing, in the hope that this will allow consumers extra time to fully understand the future monthly costs of their mortgage and to avoid the pressure of seeing and digesting the terms at the closing table.
If you are in the market for selling your house or buying a new one, you should consult an experienced attorney with knowledge of these matters to help explain the new form and guide you through all the other details of the closing process.
Winograd and Schwartz Attorneys at Law, PC