Earlier this summer, the FHA released a new settlement certification, which replaces the current addendum to the HUD-1. The new certification states:
To the best of my knowledge, the Closing Disclosure which I have prepared 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. (Emphasis added).
However, most lenders have decided to take the responsibility for preparing the Closing Disclosures themselves. ALTA noticed this language and pointed out to the FHA 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.
Addressing the problem, the FHA announced in FAQ 374 to its Single Family Housing Policy Handbook, that settlement agents should remove or strike through the “which I have prepared” language from the certification if they did not prepare the Closing Disclosure. The FHA has not revised the certification or clarified the instructions on the certification. The FHA only provides guidance via the FAQ. This could lead to confusion for loan processors and post-closers when settlement agents strike out the language. Settlement agents will 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.
The Single Family Housing Policy Handbook goes into effect on September 14, 2015. ALTA is continuing to monitor this situation in hopes of getting the certification language changed.