FHA to Allow Changes to Settlement Certification Due to TRID

August 6, 2015

The Federal Housing Administration (FHA) addressed changes settlement agents can make to the new settlement certification, which replaces the current addendum to the HUD-1, in a new FAQ document to its Single Family Housing Policy Handbook.

Earlier this summer, the FHA released its new certification, which stated:

To the best of my knowledge, the Closing Disclosure which I have prepared(Emphasis added) is a true and accurate account of the funds which were (i) received, or (ii) paid outside closing, and the funds received have been or will be disbursed by the undersigned as part of the settlement of this transaction. I further certify that I have obtained the above certifications which were executed by the borrower(s) and seller(s) as indicated.

Due to the complexities of the workflow, timing and liability for the TILA-RESPA Integrated Disclosures, most lenders have decided to take responsibility for preparing the Closing Disclosure.

“Following the release of the certification, ALTA reached out to the FHA, the Mortgage Bankers Association, and individual lenders to inform them that, if left unchanged, this certification would put settlement agents in the untenable position of falsely signing the certification or holding up transactions for the FHA's low income and first-time homebuyers,” said Michelle Korsmo, ALTA’s chief executive officer.

To address this problem, the FHA announced in FAQ No. 374 that settlement agents could strike the "which I have prepared" language from the certification if they do not prepare the Closing Disclosure.

While the FHA has issued a FAQ, Korsmo said the agency has not revised the certification or the instructions on the certification. This could lead to confusion for loan processors and post-closers when a settlement agents strike out the language. Additionally, settlement agents need to train their closers to know about the FAQ and to work with the processor ahead of closing to get the authorization to strike out the language.

ALTA expects the FHA to continue to issue FAQs up to Sept. 14, when the new Single Family Handbook goes into effect. If you have any questions please contact ALTA's legislative and regulatory counsel, Steve Gottheim, at steve@alta.org or 202-261-2943.

Contact ALTA at 202-296-3671 or communications@alta.org.