The Consumer Finance Protection Bureau has developed new real estate closing forms that will take effect August 2015. These forms will replace the HUD 1 settlement sheet we have become familiar with. While this may seem like nothing more than an inconvenient bureaucratic change, these new forms will help protect consumers.
What’s Wrong With The Old Forms?
The HUD 1 was designed to provide information to consumers that allowed them to understand how much a real estate transaction would really cost. The Good Faith Estimate in particular was meant to make it easier for consumers to compare different loans so they could make smart financial decisions.
Unfortunately that has not been the result. Although the HUD 1 and GFE may have been a step in the right direction, consumers still found them confusing. The average real estate professional could look at them and make sense of the figures but to consumers they were just more baffling government forms peppered with legal terms and columns of numbers. Even the pros could be confused about what number went where HUD software like Easy HUD made it easier for the agents and lawyers but not for the borrowers.
What Is The Advantage Of The New CFPB Forms?
Inspired by the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act, the CFPB started the “Know Before You Owe” program to find a way to not only give consumers the information they needed to make mortgage decisions, but to present that information in a way that didn’t require an accounting or law degree to understand.
The new forms, the Loan Estimate and the Closing Disclosure, have consolidated closing information into a more succinct and easier to read format. The forms use plain language rather than legalese, and the most important sections of the forms have been bolded so consumers can find critical figures easily. The Loan Estimate allows consumers to compare loans before choosing one. The Closing Disclosure not only lets them see the true cost of closing on a property but also is provided early enough for borrowers to have time to understand the costs before signing a contract.
Users of Easy HUD real estate closing software will receive a free update that incorporates the new forms. We helped you stay RESPA compliant, and we will help you remain CFPB compliant.