With 11 days and counting until all lenders and closing attorneys must be in compliance with the new RESPA requirements and the new Good Faith Estimate (GFE) and HUD-1 Settlement Statement, HUD has released two helpful documents:
- Shopping For Your Home Loan: HUD’s Settlement Cost Booklet. Loan originators are required to provide consumers with a copy of the booklet within three days of a loan application.
- HUD RESPA Powerpoint Presentation.
The booklet encourages retaining a competent real estate attorney in the transaction:
Before you sign a sales agreement, you might consider asking an attorney to review it and tell you if it protects your interests. If you have already signed your sales agreement, you might still consider having an attorney review it. (Ed. You definitely want an attorney to review and mark up the purchase and sale agreement, or else you’ll wind up signing the standard form and getting burnt).
If choosing an attorney, you should shop around and ask what services will be performed and whether the attorney is experienced in representing homebuyers. You may also wish to ask the attorney whether the attorney will represent anyone other than you in the transaction. (Ed.: You definitely want to choose an attorney who specializes in real estate, as opposed to an attorney who dabbles in it. Residential real estate practice, once considered fairly basic, has rapidly changed into a complex maze of regulations, disclosures and standards. You need someone who does this every day.)
In some areas, an attorney will act as a settlement agent to handle your settlement. (Ed.: In Massachusetts, it is fairly common that the same attorney will represent a buyer and close the loan for the lender. This is called a dual representation and often saves the home buyer money on closing costs. The buyer’s and lender’s interests are aligned as both parties must have clear and marketable (and insurable) title to the property).
The booklet also provides very helpful encouragement for buyer’s to purchase title insurance, which I always recommend:
Title Services and Settlement Agent
When you purchase your home, you receive “title” to the home. Certain title services will be required by your lender to protect against liens or claims on the property. Title services include the title search, examination of the title, preparation of a commitment to insure, conducting the settlement, and all administration and processing services that are involved within these services. Many lenders require a lender‟s title insurance policy to protect against loss resulting from claims by others against your new home. A lender‟s title insurance policy does not protect you.
If a title claim occurs, it can be financially devastating to an owner who is uninsured. If you want to protect yourself from claims by others against your new home, you will need an owner’s policy.
Kudos to HUD for finally advocating the benefits of title insurance!