Written by Todd Ewing | 17 November 2011

Well . . . . . . . here we go again!  Our federal regulators will try again for the third time in less than two years to make the HUD-1 Settlement Statement more transparent and comprehensible to the average consumer – and call it something entirely different.

The newly formed agency known as the Consumer Financial Protection Bureau (CFPB) has just published proposed drafts of a "reformed" HUD-1 Settlement Statement, to be called a Settlement Disclosure Form.  
One of the proposed drafts, “Ironwood,” consists of six pages and the other draft, “Hornbeam,” consists of five pages.  

So we’ve gone from a two-page HUD-1 to, potentially, a six-page Settlement Disclosure Form all in the span of two years.

The proposed forms combine the Truth-in-Lending Disclosure, which currently consists of two pages, and the HUD-1 Settlement Statement.  The drafts also appear to do away with the 2010 HUD reforms that currently require lender origination charges and title charges to be rolled up into a single line item charge; thus, all charges would be itemized as separate line items.  

For adjustable rate mortgages, the proposed forms clearly spell out the interest rate change date, frequency of interest rate change, along with the specified index and margins used to re-calculate the interest rate.  Other disclosure features of the newly proposed forms include detailed escrow account information, lender cost of funds, originator fees summary, and total interest percentage.

How will this be better for the consumer?  

I do believe that these newly proposed disclosures now combined with the HUD-1 will slightly improve the consumer’s experience.  However, the question is: At what cost?  

Given that the mortgage and title industry will expend a lot of additional resources in upgrading systems and software and ongoing compliance, there is no question the consumer will pay more at the closing table as a result of these proposed regulations.

Hornbeam - Settlement Disclosure Form (draft)

Ironwood - Settlement Disclosure Form (draft)