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No More HUD-1? It’s Time to Review Your Relocation Policies

This week, we want to take some time to alert our readers of an upcoming document change that will be affecting transferees who sell (and buy) a home as part of the relocation process. Effective August 1, 2015, all lenders will be required to use the Closing Disclosure Form.  This form replaces the HUD-1 that has been used for home sale and home purchase lending transactions.  If any of your relocation policies reference the HUD-1, the wording should be changed to the Closing Disclosure Form.

As you know, normally the “HUD-1” would appear in the following sections of your policy:No More HUD-1 - Time to Review Your Relocation Policies

1. Definitions – This is the section of your relocation policy where you should describe the terms used in the policy.

2. Home Sale Benefits – If you offer a direct reimbursement of home sale expenses, the HUD-1 is probably listed as the required supporting documentation for reimbursement.

3. New Home Closing Costs – If the transferee is not using a direct bill lender, or if you are citing specific costs or limiting benefits, your policy may reference the HUD-1 for supporting documentation or to reference certain line items that may or may not be reimbursed or may be capped.

While you are reviewing your policies you may also want to consider the following:

1. Discount point reimbursement: If you are currently reimbursing for discount points, you may want to reconsider.  With rates so low, there is no need for this benefit. If your company wishes to offer assistance with the mortgage rate, this assistance should be given only when it is truly needed.  You can offer this benefit on a sliding scale basis – i.e. up to 1 discount point should the rate go over 5% and up to 2 discount points if the rate goes over 8%.

2. Origination charges: Changing regulations mean that now all discount points, application fees, underwriting fees, etc. are considered origination charges. Instead of saying up to 1% origination charge or discount point in your relocation policy, re-word it to read: “origination charges, excluding discount points unless the rate goes above 5%, then up to 1 discount point will be paid.  Should the rate go above 8% up to 2 discounts points will be paid.”

3. Owner’s title insurance: Since the transferee is required to protect the lender against issues pertaining to title, this is becoming increasingly “strongly recommended” by lenders prior to closing a loan.  It makes sense that the purchaser should have this same type of protection.  When purchasing lender AND owner title insurance together, the cost to purchase them is cheaper than if purchased separately.  Therefore, if only lender’s insurance were purchased, the cost for the lender’s insurance would be higher than if both lender and owner insurance were purchased.  The difference to include the coverage for the owner may only be several hundred dollars.

We will keep you up to date on the changes as we get closer to the August 1st. In the meantime,  if you have any questions on how to update your policy, please leave a comment below.

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MIKE CANNING
VP, Client Services

RICK CALANNI
VP of Business Development Northeast Region

 

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