Thursday, December 24, 2009

The New HUD-1's "Bundled Pricing"

(This is Day 5 of 12 in a series called "The 12 Days of RESPA Reform" which will run until December 31st. For a full list of RESPA topics, check here.)

The New HUD-1' Settlement Statements "Bundled-Cost" Structure

As we discussed yesterday, the new HUD-1 Settlement Statement is going to tie into the Good Faith Estimate (GFE) rather explicitly by referencing on what line of the GFE the cost will appear. Another very important (and related) feature of the new HUD-1 is a bundling or aggregating of closing costs.

Here is a comparison of how the 1100 fees are laid out today, and how they will be after 1/1/10, for an approximately $1M purchase in Northern Virginia:


Old HUD:

Settlement Fee: $230
Abstract: $125
Title Binder: $95
Title Insurance $5,080
Hand-recording: $50
Courier: $60

(Total: $5,640)


New HUD:

Title Services and lender's title insurance: $2,760
Owner's title insurance: $2,880

(Total: $5,640)


The theory behind the change is that for borrowers to really compare apples to apples in shopping for services, they need the big picture and not be distracted by the breakdown of fees involved. This new scheme also segregates what is required for the loan (title fees and lender's title insurance) and what is optional (owner's title insurance).

Tomorrow's post will discuss the 3 "types" of charges: Those that cannot change once on the GFE, ones that can increase by no more than 10%, and those that can change.