Closing Disclosures and Settlement Statements

A lender’s guide to closing disclosures and settlement statements.

By Cheri Hipenbecker, General Counsel

Cheri Hipenbecker, General CounselIt’s the end of November 2015 and the TRID / KB-YO question of the week appears to be “Closing Disclosure form? Seller Closing Disclosure Form? ALTA Settlement Statement? Disbursing Statement? What, oh what, do I use?”

Back in the day, oh yeah, September 2015, we had a single three page HUD-1 Settlement Statement. Today we might use all four of the forms listed above. So if you’re scoring at home, we've gone from a two-page HUD-1 Settlement Statement in 2009 to a five-page Buyer Closing Disclosure form (Buyer CD), with an additional two-page Seller Closing Disclosure form (Seller CD), a three page ALTA Settlement Statement, and/or a page or two Master Disbursing Statement. What's a loan closer to do? How many of these forms must be signed? How many times do buyers and sellers need to be told the monetary figures relating to their purchase or sale of residential real property?

The brief answer is it depends on the parties to the transaction, as the only thing the CFPB requires is that the buyer receives the Buyer CD which showing the buyer and seller’s numbers. AND if the Buyer CD does not include the seller numbers (like the mortgage loan pay off, the real estate commissions, and other seller only charges, which the CFPB says is ok to remove), then in addition to the Buyer CD the buyer must receive the Seller CD showing those removed figures. Note the emphasis on the word receive - the CFPB does not require signatures of buyers and sellers. I'll repeat that again because it's interesting - the CFPB does not require signatures, ever. But of course sellers and buyers like to sign things stating something like “yep I’m the seller, yep I’m the buyer, and yep I’ve reviewed the numbers and they look good! Thumbs up to you settlement agent, please disburse as set forth on this statement.”

Backing up, the current Closing Disclosure regulations are a bit more stringent on form requirements than under the HUD-1 Settlement Statement. Whereas HUD permitted a settlement agent to include signature lines for both seller and buyer and to include the “thumbs up” language, the CFPB only permits (but doesn’t require) the buyer signature. Further if the lender chooses to include a buyer signature line, then under current regulations the lender must include the following statement above the signature line:

  • By signing, you are only confirming that you have received this form. You do not have to accept this loan because you have signed or received this form.” (see 12 CFR 1026.38(s) and 12 CFR 1026.37(n)(1)).

I challenge you - does the above sentence make sense? The buyer is sitting at the closing table, bags are packed, the moving van is in the driveway, and the buyer is asked to sign a document that says “yep here’s a piece of paper.” As a lender does this sentence give you the warm and fuzzy feeling that the borrower/buyer is agreeing to monetary figures related to the home purchase and authorizing the settlement agent to disburse in accordance with the Buyer CD?

If the answer to this question is NO, then in addition to the Buyer CD (and Seller CD if the Buyer CD doesn’t include seller only figures), the lender may want the buyer and seller to sign another document at closing which sets forth all of the monetary figures relating to their purchase/sale (including the loan costs) and which document includes the “thumbs up” language, something like:

  • I have carefully reviewed this document and find it to be a true and accurate statement of all receipts and disbursements made on my account or by me in this transaction. I authorize the funds to be disbursed in accordance with this statement

There’s no magic or required “thumbs up” language here, and there’s no magic or required title needed on the top of the document. Some people have been calling this the “ALTA Settlement Statement” or “Master Settlement Statement” which are both simple and include the “thumbs up” language, but use of that title on the document itself (ALTA or Master Settlement Statement) isn’t mandatory - it’s really a short way of saying “hey I want the seller and buyer to bless the transaction numbers.”

Back to the top – So, what should a loan closer use? A lender MUST provide the Buyer the Buyer CD (and if seller numbers are not included on the Buyer CD, the lender must all provide the Buyer the Seller CD). That’s it - that’s all that’s required.

Rumor has it that some title companies are telling lenders that in addition to the Buyer CD and Seller CD the buyer/seller must sign the ALTA or Master Settlement Statement. That’s wrong. Those are simply tools available for the closing, but are not required by any federal agencies.

Having said that, if the parties (seller, buyer, lender, real estate agent etc.) want something more, something where the buyer and seller approve the numbers and authorize the disbursements, and if Knight Barry is the settlement agent, then all the party has to do is ask us and we’ll prepare the Master Settlement Statement which includes all of the transactional numbers and acts as the big thumbs up.

As if seven pages weren’t enough…