36 years waiting, it’s got to be good
The year was1974, the first time HUD required a uniform, standard closing statement (HUD1) and a Good Faith Estimate. Not much had changed since then—but expect 2010 to be the year the mortgage industry, as we know it, changes forever.
After waiting almost six months for the new HUD Settlement Cost Booklet, it was finally released on Dec 16, 2009 (HUD’s website) and incorporates the new GFE, HUD 1, MDIA disclosure dates.
The entire mortgage application, closing and servicing (the loan) process is all explained in a 49-page booklet and I venture to say—it’s really GOOD!
This booklet protects you, the loan originator and mortgage company manager! Pretty much everything clients need to know is covered—so clients can not come back to you and say—“you never explained that to me.”
Some “experts” say that the booklet is required to be given ONLY to someone who is purchasing a home. I disagree. In the Mortgage Disclosure Improvement Act, it specifically lists the transactions that require disclosures and we believe that they renamed the booklet “Shopping for Your Home Loan…” for a reason!
HUD released new Settlement Cost Booklet called “Shopping for Your Home Loan.”
- Give to clients on January 1, 2010.
- Give to clients for the following loan transactions:
- Purchase – Primary & 2nd Homes, Condos, Townhomes
- No-cost loans
- Construction/End Loans
- Refinance of primary & 2nd home
- Closed End HELOC’s
- Time Shares
- Manufacture Homes/Mobile Homes on Real Property
- Mortgage Assumptions (if loan terms change from original mortgage)
- Reverse Mortgage
- Not required for:
- Rental Property that will be used for Business Purposes
- Land & Home with 25 acres or more
- Seller-Financed Mortgage or Contract-for-deed
- Loan Modifications
- HELOCS – open end
- Loan application denied – at application
- Or if borrower withdraws within 3 days of loan application
- Can change the Cover ONLY – no alterations to the content;
- OK to change picture, add your company name & contact info to cover page
- Can be translated to languages other than English
- Must be SENT three business days after the signed loan application
- Business Days Defined: Monday thru Saturday (excluding Sunday and Holidays)
- Acceptable Delivery Methods
- Give to client at face-to-face application
- Place in mail no later than three days after loan application
Throw away the old one (Buying Your Home: Settlement Costs & Information). If you meet with your clients face to face, and after completing the 1003, the booklet explains most of the disclosure forms they have to sign anyway!
For example: Page 11-18, “Your GFE Step-By-Step” explains the GFE—which you may want to review and compare when going thru YOUR GFE numbers. Page 30 “Servicing and Escrow Disclosure Statements” –whip out the servicing statement and have them sign it when you get to that page.
I’m not saying that you need to go through the entire 49 pages. However, review the chapters that you would cover (and which they have to sign disclosure forms for anyway) and use the booklet to valid what you are explaining.
I also see this booklet protecting you, the loan originator and mortgage company manager! Pretty much everything clients need to know is covered—so clients can’t come back to you and say—“you’ve never explained that to me.”
In the Mortgage Disclosure Improvement Act, it specifically lists the transactions that require MDIA disclosures (see list above). Also, there was no mention of when the HUD Settlement cost booklet needs to be given in the Nov 19, 2009 HUD RESPA FAQ You can order 100 at a time--FREE from HUD. You must call 800-767-7468. (No online orders at this time.)
I tested it. Ordered five booklets and received a confirmation number. Only the English version is available at this time. (They did not know if the Spanish version would be available.) The clerk claimed that I would receive my booklets within ten days.
While Mortgage Insurance is explained on page 10, what is missing is an explanation of FHA
UFMIP and VA
Funding Fees. Maybe itis not “officially” MI, but it is simply not addressed ANYWHERE in the booklet.
On page 21, VIII. Your Settlement and HUD 1 – clients can request a copy of the HUD 1, one day prior to closing.
You might as well get the elephant out of the room right way. Way back on page 36 is a “Determining What You Can Afford” worksheet. I Suggest that you copy and use this for your pre-quals. I can just see you going through the loan approval process and the client decides to use the worksheet and determines that they can not afford the mortgage payment.
Choose 10 or 12 pages to discuss with your clients. Take a look at page 36-what you can afford worksheet. You may want to use these pages with your pre-qualification forms in home buying seminars or on your website as an interactive qualification tool.
Review the booklet with your real estate agents too. Since pages 4-8 specifically talk about the home buying process, give them a copy because they’ll get questions too.
Karen Deis, was in the mortgage and real estate business for 28 years and in 2000, sold all of her companies to train loan officers and agents full time. She has 7 training websites with the most popular being www.LoanOfficerTraining.com (download free marketing materials) and www.MortgageGirlfriends.com. Email Karen@KarenDeis.com.