The following is the first in a series taken from the Federal Register about changes to the HUD-1

Federal Register / Vol. 73, No. 222 / Monday, November 17, 2008 / Rules and Regulations 68205

2008 Proposed Rule

RESPA is a consumer protection statute, and, as further described in this preamble, consumer groups were, in general, very supportive of the basic goals and key components of the March 2008 proposed rule. For example, the National Consumer Law Center, in a joint comment with Consumer Action, the Consumer Federation of America, and the National Association of Consumer Advocates, stated, ‘‘HUD has done an excellent job in moving the ball toward greater protection for consumers in the settlement process.’’ In addition, the Center for Responsible Lending, in its comment concluded: ‘‘[W]e applaud HUD for addressing the challenge of reforming RESPA. We believe HUD’s proposed GFE provides important improvements over existing requirements.’’

HUD received adverse comments about many aspects of the proposed rule, primarily from mortgage industry representatives, including requests that HUD withdraw its proposal entirely or that HUD postpone its current efforts in order to work with the Federal Reserve Board to arrive at a joint regulatory approach. HUD takes these comments very seriously and appreciates the concerns raised by these commenters. HUD’s view continues to be, however, that improvements in disclosures to consumers about critical information relating to the costs of obtaining a home mortgage, often the most significant financial transaction a consumer will enter into, are needed, and that such disclosures are a central purpose of RESPA.(emphasis added) Most commenters—including consumers, industry representatives, and federal and state regulatory agencies—supported the concept of better disclosures in general, and commended both HUD’s efforts and particular provisions in the proposed rule.

Moreover, given the current mortgage crisis, the foreclosure situation many homeowners are now facing because they entered into mortgage transactions that they did not fully understand, and the prospect that future homeowners may find themselves in this same situation, HUD believes that it is very important that the improvements in mortgage disclosures made by this final rule move forward immediately. Nevertheless, as noted in the preamble to the March 2008 proposed rule, HUD will continue to work with the Federal Reserve Board to achieve coordination and consistency between the Board’s current regulatory efforts and HUD’s requirements.

HUD has made many changes to the March 2008 proposed rule in response to public comment and further consideration of certain issues by HUD. Some of the provisions in the March 2008 proposed rule have been revised in this final rule and others have been withdrawn for further consideration. HUD believes that the result is a final rule that will give borrowers additional and more reliable information about their mortgage loans earlier in the application process, and will better assure that the mortgage loans to which they commit at settlement will be the loans of their choice. At the same time, in recognition of the concerns raised by industry commenters about the need for sufficient time for the industry to make systems and operational changes necessary to meet the requirements of the new rule, the final rule provides that the new GFE and HUD–1 will not be required until January 1, 2010. However, certain other provisions of the rule will take effect 60 days from the publication date of the final rule. The following are some of the most significant changes made at this final rule stage, and are discussed in more detail in the discussion of public comment.

• A GFE form that is shorter than had been proposed.

• Allowing originators the option not to fill out the tradeoff table on the GFE form.

• A revised definition of ‘‘application’’ to eliminate the separate GFE application process.

• Adoption of requirements for the GFE that are similar to recently revised Federal Reserve Board Truth-in-Lending regulations which limit fees charged in connection with early disclosures and defining timely provision of the disclosures.

• Clarification of terminology that describes the process applicable to, and the terms of, an applicant’s particular loan.

• Inclusion of a provision to allow lenders a short period of time in which to correct certain violations of the new disclosure requirements.

• A revised HUD–1/1A settlement statement form that includes a summary page of information that provides a comparison of the GFE and HUD–1/1A list of charges and a listing of final loan terms as a substitute for the proposed closing script addition.

• Elimination of the requirement for a closing script to be completed and read by the closing agent.

• A simplified process for utilizing an average charge mechanism.

• No regulatory change in this rulemaking regarding negotiated discounts, including volume based discounts.

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