Real estate mortgage loans and settlement procedures will change, beginning August 1, 2015. Kiss the HUD-1 goodbye. In fact, kiss all current residential mortgage and real estate settlement forms goodbye. Congress has amended the RESPA (Real Estate Settlement Procedures Act) regulations and has also established stricter guidelines for mortgage loan disclosures and transactions. The new Truth-in-Lending/RESPA Integrated Disclosure regulations ("TRID") are intended to prevent Mortgage Lenders (soon to be called "Creditors") from making changes to the loan terms of Borrowers (soon to be called "Consumers") when the Consumers are most vulnerable.
Truth-in-Lending and related loan disclosure documents are being combined into one form, called a "Loan Estimate." The HUD-1 is being revamped and will be known as the "Closing Disclosure" document. The transaction will no longer be completed at a Closing or Settlement; it will take place at a "Consummation."
With the new regulations and forms, the mortgage lender (sorry, I mean "Creditor"), rather than the title insurance company, will be developing the bulk of the Consummation documents. The new regulations require that the Loan Estimate is to be provided to the parties within three days of the loan application, and at least seven days prior to the Consummation. Moreover, the Closing Disclosure documents will have to be delivered to the parties at least three business days prior to the Consummation. That will make last minute changes--even changes to which the parties agree--almost impossible to implement.
Though the new regulations take effect on August 1, 2015, enforcement of the new regulations will not begin until at least October 1, 2015. This will give lenders, title companies, and real estate professionals time to learn how to generate and deal with the new documents, without fear that a mistake will cause a transaction to be automatically voided, or become the basis for a government sanction.