The United States Department of Housing and Urban Development (HUD) provided updated RESPA Reform compliance guidance on the HUD-1 Settlement Statement three times in the last few weeks. The following frequently asked questions (FAQs) involve only the HUD-1 below and are in addition to the initial FAQs released. We will add the Good Faith Estimate frequently asked questions at a later date. These rules, bearing a miracle, will go into effect on Jan. 10, 2010.
HUD-1 GENERAL
Question:
May separate HUD-1s be given to the seller and borrower with only their own information on each HUD-1?
Answer:
Yes. It is permissible to have two separate HUD-1s in a transaction; one with the buyer’s credits and charges only, and one with the seller’s credits and charges only. The settlement agent must provide the lender with a copy of both HUD-1s when the borrower’s and seller’s copies differ.
Question:
If an addendum is used, can the following text be added to the HUD-1: “See attached addendum for additional information”?
Answer:
It is acceptable to insert such a reference where appropriate on the HUD-1 for the purpose of making it clear to the parties what the completed HUD-1 comprises.
Question:
How should payments by the seller or real estate agent that are for settlement services included on the Good Faith Estimate (GFE) be shown on the HUD-1?
Answer:
If a seller or real estate agent pays for a charge that was included on the GFE, the charges should be listed in the borrower’s column, with an offsetting credit reported in Lines 204-209 of the HUD-1, identifying the party paying the charge. For a seller-paid charge, the charge should also be listed in Lines 506-509. For a charge paid by the real estate agent, the name of the person paying the charge must also be listed.
Question:
The instructions in Appendix A to Part 3500 for completing the HUD-1 indicate how fees that are paid outside of closing should be designated on the HUD-1. Can the convention “P.O.C. (B*) be used instead, with the following footnote at the bottom of the page: *Paid outside of closing by borrower”?
Answer:
Yes, the HUD-1 Instructions require that P.O.C. items be listed on the HUD-1 by the settlement agent with an indication whether P.O.C. items are paid by the borrower, seller, or other party by marking the items paid for by whoever made the payment identified in the parentheses, such as P.O.C. (borrower) or P.O.C. (seller) as long as a footnote is added to the HUD-1 clearly noting the party paying for the items such as *Paid outside of closing by borrower or *Paid outside of closing by seller.
Question:
Where should fees for processing and administrative services be listed on the HUD-1 Settlement Statement?
Answer:
Processing and administrative services are services to perform origination and title service functions. For the loan origination function, charges for such services are included in the total on Line 801. For the title services function, charges for such services must be included in the title underwriter’s or title agent’s charge and are shown in the total on Line 1101. Examples of processing and administrative services include, but are not limited to, the following: document delivery, document preparation, copying, wiring, preparing endorsements, document handling, and notarization.
Question:
Where should the survey fee be disclosed on the HUD-1?
Answer:
The location of the survey fee on the HUD-1 is determined as follows:
(a) if the loan originator required a survey as a condition of the loan and the borrower selected the settlement service provider, the charge for the survey must be listed on a blank line in the 800 series in the borrower’s column;
(b) if the loan originator required a survey as a condition of the loan and the borrower selected the settlement service provider, the charge for the survey must be listed as part of the total in Line 1301 of the HUD-1 and itemized as applicable;
(c) if a survey was required to issue a lender’s or owner’s title insurance policy, the charge for the survey is part of the charge in Line 1101 and must be further itemized if performed by a third party;
(d) if the borrower elected to obtain a survey that was neither required by the loan originator nor required to issue a lender’s or owner’s title insurance policy, then the charge is listed in the borrower’s column on a blank line in the 1300 series.
Question:
May an addendum be added to the HUD-1 to list additional fees and other information?
Answer:
Yes, an additional page may be attached to the HUD-1 to add sequentially numbered lines as needed to accommodate the complete listing of all items required to be shown on the HUD-1, and for the purpose of including customary recitals and information used locally in real estate settlements (for example, breakdown of payoff figures, a breakdown of borrower’s total monthly mortgage payments, check disbursements, a statement indicating receipt of funds, applicable special stipulations between buyer and seller, and the date funds are transferred).
Question:
The General Instructions indicate that if a charge has been shown on the GFE as payable by the borrower but at closing it is paid by another person, including by the loan originator in a loan other than a no-cost loan, the fee should be shown in the borrower’s column on the HUD-1 and be offset by listing a credit to the borrower on lines 204-209 of the HUD-1. If a HUD-1A form is being used, lines 204-209 do not exist. How should the credit be shown on a HUD-1A form?
Answer:
Use of the HUD-1A form is an optional form to be used by the settlement agent in a transaction in which there is not a seller and as otherwise appropriate. If the use of a HUD-1A form is not appropriate, such as if there is a credit given by a loan originator or other party, the settlement agent must use the HUD-1 form.
Question:
In a transaction that is closed in the mortgage broker’s name but is table funded by the lender, must the name and address of the funding lender be shown in Section F (consistent with definition of “lender” under 24 CFR §3500.2(b)) or may the mortgage broker’s name and address be shown?
Answer:
The HUD-1 Instructions for Section F state that the name and address of the lender must be stated in this section. Therefore the name of the lender and not the mortgage broker must be stated in Section F on the HUD-1.
SELLER-PAID ITEMS ON THE HUD-1 SETTLEMENT STATEMENT
Question:
If the seller has agreed to pay charges that were disclosed on the borrower’s GFE, how are these charges listed on the HUD-1?
Answer:
The charges for any service which is disclosed on the borrower’s GFE is listed in the borrower’s column on the HUD-1. The amount charged to the borrower is offset by a credit in that amount in Lines 204-209 and by a charge to the seller in that amount in Lines 506-509 on page 1 of the HUD-1.
LOAN QUESTIONS IN 200 SERIES OF HUD-1
Question:
When the borrower is using a second loan to help finance the purchase of a home, may both loans go on the HUD-1?
Answer:
No, each loan must have a separate GFE and a separate HUD-1. The principal amount of the second loan must be listed outside the borrower’s column with a brief explanation on Line 204-209 of the HUD-1 for the primary loan. If the net proceeds of the second loan are less than the principal amount, the net proceeds may be listed on the same line int eh borrower’s column.
Question:
What types of loans can be shown on Line 202 of the HUD-1?
Answer:
Line 202 of the HUD-1 is used to state the amount of the loan in the mortgage transaction. The loan could be a purchase money loan, refinance, home equity loan, construction loan, or a manufactured home purchase loan.
REAL ESTATE COMMISSION QUESTIONS IN 700 SERIES OF HUD-1
Question:
If a real estate agent is retaining some of the borrower’s earnest money deposit as part of the agent’s commission, is that amount listed in the 700-series on the HUD-1?
Answer:
Yes, if a real estate agent is retaining some of the borrower’s earnest money deposit, the amount of the earnest money deposit applied towards the commission and the party holding the earnest money must be identified on Line 704 of the HUD-1 as Paid Outside of Closing or P.O.C. Only the amount of the commission disbursed at settlement is entered in the columns on Line 703.
LOAN QUESTIONS IN 800 SERIES OF HUD-1
Question:
If a borrower pays some of the origination charge prior to closing, how should it be disclosed on the HUD-1?
Answer:
The full charge for origination, except for any charge for the specific interest rate chosen (points), must be shown on Line 801 of the HUD-1 to the left of the borrower’s column. If the borrower pays some of the origination charge before settlement, an offsetting credit in that amount is shown on the first page of the HUD-1 in Lines 204-209. Lines 801, 802, and 803 of the HUD-1 may not contain any “Paid Outside of Closing” (P.O.C.) items.
Question:
How is a payment from the lender to the mortgage broker that will be “paid outside of closing” (P.O.C.) shown on the GFE and HUD-1?
Answer:
All payments from a lender to a mortgage broker must be shown as a credit to the borrower in Block 2 of the GFE and on Line 802 of the HUD-1. These payments may not be shown as P.O.C.
Question:
What fees are to be recorded in the 800 series of the HUD-1, beginning on Line 804?
Answer:
When the loan originator selects the settlement service provider, fees for third party settlement services that are required by the loan originator are recorded in the 800 series beginning on Line 804. These third party services and fees most often include appraisals, credit reports, flood searches, tax service, and governmental loan program charges, such as VA, FHA, Rural Housing Service, or state bond loan programs. Processing or administrative services are part of “Our origination charge” and may not be separately itemized. The HUD-1 Instructions for the 800 series explain which fees go on which lines.
QUESTIONS IN 900 SERIES OF HUD-1
Question:
On some loans a borrower will make a full regular payment within less than a month and receive an interest credit at closing. May the interest credit, instead of the collection of interim interest, be listed in Line 901 on the HUD-1?
Answer:
Yes, an interest credit may be listed (as a negative number) in Line 901 on the HUD-1.
ESCROW QUESTION IN 1000 SERIES OF HUD-1
Question:
May additional lines be added to the 1000 series on the HUD-1?
Answer:
Yes, additional lines may be added to the 1000 series if needed. If lines are added, Line 1007, Aggregate Adjustment, must be moved down (and renumbered accordingly) so that it remains the last line item in the series.
TITLE QUESTIONS IN 1100 SERIES OF HUD-1
Question:
Where should the Lender’s title insurance premium be disclosed on the HUD-1?
Answer:
The amount of the premium for Lender’s title insurance and related endorsements must be included in the total for title services and lender’s title insurance on Line 1101 of the HUD-1. The charge for the Lender’s title insurance policy and its related endorsements must also be itemized on Line 1104 with the charge to the left of the columns.
Question:
If a borrower selects an attorney to represent the borrower’s personal interests at settlement, where is this attorney’s fee disclosed on the HUD-1?
Answer:
If a borrower selects an attorney to represent the borrower’s personal interests at settlement, and the service provided by that attorney is separate from the functions necessary to conduct the closing, provide title services or issue the lender’s title insurance policy, this attorney’s charge may be separately listed on a blank line in the 1100 series in the borrower’s column along with the name of the attorney and type of service provided. Accordingly, the amount of this attorney’s fee should not be included in the charge listed on Line 1101.
Question:
How is the premium recorded on the HUD-1 if the borrower purchases an enhanced owner’s title insurance policy, rather than a basic policy?
Answer:
Regardless of whether the borrower chooses to purchase a basic or an enhanced owner’s title insurance policy, the premium must be listed in the borrower’s column on Line 1103.
Question:
If the title agent conducts the settlement, should the charge for conducting the settlement be included in Line 1101 of the HUD-1, with the itemized charge listed outside the column on Line 1102?
Answer:
Yes, the charge for conducting the settlement must be included in the total on Line 1101. If the charge is paid to a third party, the charge must be itemized outside of the columns on Line 1102.
Question:
Where do I put the charge for the title commitment on the HUD-1?
Answer:
The term “title services” is defined to include any service involved in the preparation and issuance of the title commitment. See 24 CFR 3500.2. On the HUD-1, the charge to the borrower for title services, including the charge for services related to the title commitment, must be included in the total in the borrower’s column on Line 1101. If a third party prepares and issues the title commitment, the disbursement for this service also must be itemized outside the columns on a blank line in the 1100 series.
Question:
What items are included in the amount disclosed on Line 1101 of the HUD-1?
Answer:
Line 1101 is the total of the charges for “Title services and Lender’s title insurance,” which includes: all charges for conducting a settlement (Line 1102); any premiums paid for lender’s title insurance and its related endorsements (Line 1104); all charges for title searches and examinations; and charges for all other services itemized in the 1100 series if those services are included in the definition of “title service.” The total on Line 1101 should not include the amount of any premium for owner’s title insurance and its related endorsements, which must be listed in the columns on Line 1103.
Question:
How is the charge for conducting the settlement disclosed on the HUD-1?
Answer:
The charge to the borrower for conducting the settlement must be included in the total stated in the borrower’s column on Line 1101 of the HUD-1. In addition, the total in the borrower’s column on Line 1101 must include any amount for conducting the settlement that was paid by another person on behalf of the borrower. In such a case, an offsetting credit must be shown on page 1 of the HUD-1. If the seller paid the amount, a credit to the borrower in that amount must be listed in Lines 204-209, and a charge to the seller must be listed in Lines 506-509. If another person pays the amount an offsetting credit is reported in Lines 204-209, identifying the person paying the charge.
Any separate charge to a seller for conducting the settlement is listed in the seller’s column in Line 1102. The borrower’s charge for conducting the settlement should be itemized outside the borrower’s column in Line 1102.
Question:
If state law requires further itemization of title service or title insurance related fees such as a commitment fee or fees for endorsements to a title insurance policy, how should these fees be listed on the HUD-1?
Answer:
If a state law requires further itemization of title services or title insurance related fees than required under RESPA, those fees may be itemized on blank lines in the 110 series of the HUD-1 with the charge listed outside the borrower’s column. Endorsements to a title insurance policy may also be listed in Lines 1103 and 1104 as applicable, with the charge listed outside the borrower’s column.
GOVERNMENT FEES QUESTIONS IN 1200 SERIES OF HUD-1
Question:
What items are included in the amount listed on Line 1201 of the HUD-1?
Answer:
Line 1201 is the total of the government recording charges. Examples of such charges include but are not limited to state and local fees for recording the deed, mortgage, deed of trust, releases, and any other instrument or document recorded to preserve marketable title or to perfect the lender’s security interests in the property.
Question:
What items are included in the amount listed on Line 1203 of the HUD-1?
Answer:
Line 1203, “Transfer taxes” is the total of state and local government fees imposed for mortgages and home sales.
FEE QUESTIONS IN 1300 SERIES OF HUD-1
Question:
What charges are shown in the 1300 series of the HUD-1 settlement statement?
Answer:
The 1300 series of the HUD-1 settlement statement is used to record the charges for settlement services that are disclosed in Block 6 of the Good Faith Estimate as well as charges that are not disclosed on the GFE. Examples of some of these services may include charges for home inspections, radon inspections, and homeowners warranty.
Question:
What charges are shown on Line 1301 of the HUD-1?
Answer:
Line 1301 is the total of all charges for third party settlement services that the loan originator required but for which the borrower was permitted to select the service provider. The charge on Line 1301 is shown in the borrower’s column. All charges included in the total amount on Line 1301 is shown in the borrower’s column. All charges included in the total amount on Line 1301 must be separately itemized outside of the columns in Lines 1302 and subsequent lines, identifying the type of service, the name of the provider, and the amount of the charge.
Question:
If the loan originator does not allow the borrower to shop for any required services, can the settlement agent begin the itemized list of additional miscellaneous settlement charges in the 1300 series on Line 1302?
Answer:
Yes, if Line 1302 and additional sequentially numbered lines will not be needed to record required services that the borrower can shop for, the settlement agent may list the itemized miscellaneous settlement services on Line 1302.
Question:
If a loan originator permits a borrower to shop for services typically listed in Block 3 on the GFE, such as tax service or flood certificate, where should the services be listed on the HUD-1?
Answer:
If a loan originator permits a borrower to shop for services typically listed in Block 3 on the GFE, such as tax service or flood certificate, the services would instead be listed in Block 6 of the GFE. The total amount charged for these services is listed in the borrower’s column in Line 1301, and the charges are itemized outside the columns in Line 1302 and following lines on the HUD-1.
We expect HUD to release additional FAQs to the public in the very near future to the public so stay tuned to this blog as we will add as RESPA adds to this rule.
For more information please contact the Sterbcow Law Group LLC or visit www.respaattorneys.com