Market Share Report April – 2015

May 15, 2015

The HUD-1 settlement statement serves two important purposes. One purpose is disclosing the actual?settlement costs to the buyer and seller. The other is functioning as a disbursement record for the?settlement agent. The disbursements on the HUD-1 must balance to the disbursements from the?settlements agent?s trust account. One of the less obvious differences between the HUD-1 and the new?Closing Disclosure (CD) we?ll all be using after August 1, 2015 is that the CD is not suitable for use as a?disbursement record.

The pre-closing CD will contain the final numbers for loan and some closing costs, essentially the same?fees now disclosed on the final TIL. But, the CD may also contain estimates for other non-loan related?charges ? tax pro-rations, association dues to name a couple. And it will not reflect last minute buyer?and seller credits for inspections, repairs or possession. Those items will be finalized in the three day?waiting period and changes do not require a new disclosure period.

The CD also includes a convoluted calculation of the buyer?s title insurance costs. In our market the?amount disclosed for title insurance will significantly overstate the actual cost to the buyer in almost?every purchase transaction. As a result settlement agents will also be preparing a disbursement?statement for the parties to sign which will indicate all of the credits and charges required ? the same?information contained in a HUD-1 today. The settlement agent?s form will balance to the disbursements?made from the trust account.

The American Land Title Association has created a model settlement statement which most of its?members will use to record and balance disbursements. I?ve include a copy of the form with this?month?s report. I find it ironic that this disbursement statement is remarkably similar to the one I used?early in my career before the enactment of RESPA in 1976. Try not to laugh.

All of this serves to remind us that the new rules are designed to strengthen the consumer?s position?with regard to the lender?s disclosure of loan terms, fees and closing costs, not necessarily in regards to?the other parts of the transaction outside of the lender?s control.

~John Bethell