David A. Megay, Esq., is an attorney with OWM Law concentrating his practice in the Real Estate/ Title Insurance, Business Planning and Estate Administration Areas.
Dave resides with his family in the Pottstown area. This is his 23rd year in the practice of law, the last 19 years of which have been with OWM Law. Dave is a proud member of the Phoenixville Rotary and serves on many community and charity boards of directors.
The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.
HUD-1, HUD-2, HUD-3…Are Real Estate Settlement Sheets Easier or Harder to Understand
The United States Department of Housing and Urban Development recently changed the law in an effort to make settlement sheets more understandable to buyers and sellers and to help protect consumers. The settlement statements (commonly referred to as “HUD-1 sheets”) were generally two (2) pages long prior to the change. The new law now result s in HUD-1 sheets that can be five (5) pages long. How did expanding the settlement sheet from two (2) pages to five (5) pages
make it more understandable? Do I need an attorney to come with me to a real estate settlement to explain the settlement sheet?
For the most part, the first two (2) pages of the settlement sheet are set up in the same fashion – a column each for the buyer and the seller. The first page summarizes all of the settlement charges for both parties and the second page shows more detailed charges, etc. Where the changes come in is in the third page of the settlement sheet and the attachments thereto. The third page, in an effort to protect the consumer against unsavory lending practices, now provides a
summary of the loan terms (i.e., principal amount borrowed, term in years, interest rate, monthly payment of principal and interest, notification of whether the interest rate adjusts, whether there is a prepayment penalty, additional amount that you are putting into the monthly escrow for taxes and insurance, etc.). The buyer/borrower can also see a comparison of all the lender’s actual charges to what the lender estimated. The attachment to the settlement
sheet also provides a more detailed breakdown of the lender’s charges, amounts escrowed for taxes and insurance, and the title insurance company’s title insurance premium and related charges. The additional pages, while adding to the length of the settlement sheet do a great job of educating the buyer/borrower and requiring that the lender and title company explain/justify their fees.
Contact your attorney to have him/her attend settlement with you to explain the above or, at the very least, review the settlement sheet with you beforehand. As knowledgeable real estate attorneys, and licensed title insurance agents, we welcome your call to help you understand the new settlement sheet.
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David A. Megay, Esq., and James C. Kovaleski, Esq., speaking at SCORE business planning seminars on 4/25/11, 9/12/11, and 11/7/11 (contact SCORE at 610-327-2673).