Real Estate Update: 2015 Changes to the Settlement Service Process

November 2nd, 2015 by JBWK

Submitted by Matthew D. Meadows

Effective October 3, 2015, the Consumer Financial Protection Bureau has instituted several changes to the terminology and forms employed in real estate settlements, which are regulated by the Real Estate Settlement Procedures Act (RESPA). Specifically, the revised regulations merge the Truth in Lending Act disclosure form with RESPA’s HUD-1 Settlement Statement, creating new combined disclosures rules which govern most closed end residential mortgages that are made for personal or family use.

Changes to terminology are designed to make the language used at settlement more consistent with terms used in other mortgage financing regulations. For instance, closing/settlement is now referred to as “Consummation,” and the HUD-1 has become a “Closing Disclosure.”
The new regulations require creditors to provide a loan estimate within three (3) days of their receipt of a written loan application, whether or not additional required materials such as supporting information have also been received. Once the lender provides a loan estimate, unless there is a valid change in circumstances, the loan estimate binds both the consumer and the creditor, eliminating the need for signing a revised Good Faith Estimate at settlement.

Additionally, the new rules clarify other major aspects of the settlement process, such as the distinct roles of creditors and settlement agents, and the mandatory time period between closing disclosure and consummation.
These are merely a few highlights of the new combined disclosure rules that became effective in October. The changes to the old residential settlement practices are detailed and complex, so it is important for buyers and sellers alike to seek out a settlement agent who is knowledgeable in the application of these very new procedures.

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