As you enter the final days of Escrow, your settlement agent will provide you with disclosures to review before closing. This is the time when all the numbers finally come together for both the buyers and the sellers. Here we will Learn the Alta Settlement Statement vs HUD Differences, and why neither is required.
Over the years there have been lots of different names for the closing statements provided. The HUD was the primary disclosure provided until 2015 when the TILA-RESPA Integrated Disclosure came about. However, the TILA-RESPA form has personal information on it that can’t be provided to some parties in the transaction. Instead, an ALTA statement will be generated. The ALTA has the same numbers as the TILA-RESPA (which replaced the HUD), but without some of the personal info.
In reality, neither the ALTA statement nor the HUD is the final disclosure for a buyer or seller. But title agents may still use those terms.
Grab a coffee and hunker down – I hope you are ready for a lot of Government acronyms and terms – it can get confusing!
TImeline of Terms
Over the years the names of final disclosure provided at the closing table have changed.
At a real estate closing an escrow officer, real estate attorney, or other closer provides both parties (the buyers and the sellers) with a list of all the charges and fees associated with the transaction.
This started with the Truth in Lending Act, and the most recent is the TILA-RESPA Integrated Closure Form (also called the TRID)
All of these changes have come from acts of government designed to make the process more transparent and to protect the consumer (you).
Here is a short timeline of the major events that dictate when each form was used.
- 1968 – TILA (Truth in Lending Act)
- 1974 – RESPA (Real Estate Settlement Procedures Act)
- 1986 – HUD-1 form (Housing and Urban Development Settlement Statement)
- 2010 – Dodd / Frank (The Dodd / Frank Wall Street Reform and Consumer Protection Act)
- 2015 – TRID (TILA-RESPA Integrated Closure Form – also called the TRID)
For an example of the most current closing form visit this site: Consumer Financial Protection Bureau. The TRID is the form from the CFPB which is the agency in charge of generating this form and subsequent rules, and they have a great explanation of all the sections on their website.
The basic TRID Rules dictate what information mortgage lenders must give to borrowers and when they must provide it
The disclosure rule states that “Consumers must receive the Closing Disclosure (TRID) no later than three business days before consummation of their loan.” Many lenders will make you acknowledge receiving this form in writing or electronically. I’ve seen it delivered at the end of the business day just before the 3-day deadline and make you acknowledge it quickly, but good lenders will have it to you sooner, so you have time to review it.
You will get a TRID first, at least 3 days before closing, and will need to acknowledge it, if you are getting a mortgage.
What Numbers Appear on the Final Closing Disclosure?
At the closing for your home purchase, you will receive at least one, and maybe more than one closing statement. It is different for each side of the transaction. It is also different based on financing. I’ll go over each.
Disclosures Provided to the Sellers at a Closing
On the seller’s side, according to TIL-RESPA, both parties must receive a closing disclosure form. However, since the TRID has a lot of personal information about the buyers on it, your closing agent might provide an ALTA Statement.
As a seller, there aren’t nearly as many documents to sign. The process generally takes about 15 minutes. Mostly you are signing a release of interest in the property, and a few other title transfer forms.
Most sellers will want to look at the final statement however because it does show the lump sum of the proceeds from the house you will receive.
Disclosures Provided to the Buyers at a Closing
On the closing date, when you go to sign all the paperwork, the closing process usually takes about an hour, and you will sign many different things. Since it is different for literally every transaction – this is why the government got involved, to make sure you (the consumer) know exactly what you are getting, and how much it costs).
Here are some of the different things you may see on the TRID or ALTA. This itemized list is not complete and is only a sample of what to look for. Your
- What is the final sale price? This should be the same as the final negotiated contract price.
- Is this a financed or cash transaction?
- What are the loan terms?
- How much is the loan amount?
- What is the Annual Percentage Rate (APR)
- What is the interest rate? fixed or variable?
- Any loan origination fee.
- What is the amount of cash you need to bring to closing (down payment, etc).
- Are you receiving a title insurance policy?
- The name and contact information for the mortgage lender and other parties in the transaction
- How much are the Property Taxes? (This may be an aggregate number or could be an itemized list with the different school taxes, etc)
- What are the county taxes and recording fees?
- How much are the title charges?
The closing agent determines the needed forms for your specific transaction. They also ensure you sign all the appropriate paperwork.
Remember at the beginning of the process, right after you got under contract, and as you were applying for a loan, you got a good faith estimate (GFE) from your mortgage broker. This is a loan estimate. It should match closely the numbers provided to you on the TRID.
What does ALTA mean?
ALTA stands for the American Land Title Association. They are an organization that strives to “improve the skills and knowledge of providers in the real property transaction, effectively advocate member concerns, and standardize products for industry use”. Real Estate Agents
Real Estate agents don’t have much interaction with them, they are more involved with the title company and escrow services.
I have heard the ALTA described as the most confusing accounting spreadsheet ever. It has a debit AND a credit column for both the buyers and sellers. After you look at it for a while it starts to make sense, but many of the fees disclosed might seem unusual.
ALTA Settlement Statement Example
Here is an example of an ALTA combined statement. Some versions are separate for each of the sellers and the buyers to keep more info private. I like to see the combined statement so I know everything is accounted for and as we negotiated.
Frequently Asked Questions
Is the Alta the same as the HUD?
No, The ALTA is not the same as the HUD (or HUD-1 statement) The HUD-1 settlement statement is no longer used (since October 3, 2015) EXCEPT in the case of a Reverse Mortgage.
What is the difference between a HUD and a settlement statement?
The HUD is an older, outdated statement that is no longer required, except in one unique situation (Reverse Mortgages)
Is an ALTA provided for cash transactions?
Yes, an ALTA statement may be provided for cash transactions as it is a complete accounting of the different numbers in the transaction. However, it is not required.
I’m getting a Reverse Mortgage, will I receive a closing statement?
Yes – You will get a closing statement, as well as a lot of other disclosures. A Reverse Mortgage is the only situation where a HUD-1 is required.
Who Provides the ALTA Statement?
The disclosures rule doesn’t say anything about an ALTA statement. Your closer might provide one as an easy way to look at all the final numbers.
Now you should understand the difference between the Alta Settlement Statement vs HUD Differences, and why the TRID is the required documentation.
There have been a lot of changes over the years for different settlement sheets. It comes down to understanding what you are paying, and to whom in the real estate transfer process. Since so many people are involved in the process, the government has required these different disclosures to make sure you understand where your money is going.
Of course, if you have any questions you should talk to your trusted real estate professionals who can guide you through the process and answer all your questions.