After a long, controversial rulemaking process, the Department of Housing and Urban Development (HUD) unveiled revised rules under the Real Estate Settlement Procedures Act (RESPA). “It has been a long road but today we can finally announce a better way to buy homes in America,” HUD Secretary Steve Preston said. HUD received 12,000 comments on its March proposal. In response, the Department made several significant changes in the final rule.

HUD originally proposed that settlement agents read a closing script at the closing table and that a copy be provided to borrowers. Ultimately, the agency discarded the script in favor of a new page on the HUD-1 Settlement Statement that allows consumers to compare their final loan terms and closing costs with those listed on their Good Faith Estimate (GFE).

HUD agreed with commenters who suggested the new GFE allow consumers to compare their estimated closing costs with the actual costs included on their HUD-1 Settlement Statement. To facilitate comparison between the HUD-1 and the GFE, each designated line on the final HUD-1 will now include a reference to the relevant line from the GFE.

In response to industry commenters HUD shortened the GFE from four pages to three, including an instructional page to help borrowers understand their loan offer.

HUD also highlighted the following changes:

• The revised rule will require lender payments to mortgage brokers (often called yield spread premiums) to be disclosed in a more meaningful way.
• Loan originators will be required to provide borrowers their GFE three days after the loan originator’s receipt of all necessary information.
• Lenders and settlement service providers will have 30 days from the date of closing to correct errors or violations and repay consumers any overcharges.

Brian Montgomery, HUD’s Assistant Secretary of Housing, Federal Housing Commissioner, said, “I am convinced that we successfully balanced the needs of consumers with those in the business of homeownership. None of us can lose sight of the fact that millions of Americans simply don’t understand all the fine print of their mortgages and this, in many respects, is at the heart of today’s mortgage crisis.”