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Changes to HUD-1 Settlement Statement & Good Faith Estimate

If you’re thinking about buying or selling real estate in Charlotte this year, the U.S. Department of Housing and Urban Development has made some key changes to two of the forms used in the process of a real estate transaction. HUD implemented these changes, effective January 1, 2010, to the HUD-1 settlement statement and the GFE or Good Faith Estimate. The Good Faith Estimate was the biggest change. It is now a standard form that all lenders will use. The new HUD-1 Settlement Statement will pull certain line items directly from the GFE.

The idea behind the changes to these forms was to help buyers better understand the terms of mortgages from multiple lenders by essential allowing them to compare loans “apples to apples”. The form is simpler than previous GFE’s, and the form spells out key terms of the loan in the very first section of the form.

Lenders will have to be committed to the numbers they provide in the GFE as the new rules require the numbers on the GFE to match the numbers on the HUD-1 at closing or in some cases be within a certain percentage of the original values.

The new forms should make the home buying process clearer for buyers, and it will require the lender to be accountable for the initial numbers it provided to the borrower during the loan application process. The lender, closing attorney and real estate agent will need to be very diligent during the closing process to ensure a smooth and timely closing.