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Question & Answer
Question: We use several different attorneys to close mortgages. In our compliance audit, we discovered that they are not following the same procedures in filling out HUD-1s. One attorney lists the appraisal and credit report separately. Another lists the application fee but does not list the appraisal or credit report separately. Which one is correct?
Answer: The attorney who is breaking apart the application fee and listing settlement services such as the appraisal and credit report separately is filling out the HUD-1s correctly. Regulation X requires that each settlement service be specifically identified on the HUD-1. This includes identifying the service, including the name of service provider, and itemizing the cost of the service. The HUD-1 should be filled out this way even if the fees are paid at another time, for example, as a part of the application fee.
There is also current advice from HUD that the attorneys should be breaking apart their own fees if the fee covers several different settlement services such as title work, document preparation, and conducting the settlement.
It is important to be sure that all settlement service fees are included on the HUD-1 without regard to when and to whom they were paid by the borrower. The HUD-1 itemizes settlement fees, not "closing" fees. RESPA and Regulation X define settlement as a process, not a time-specific event.
We frequently find that settlement agents - including attorneys - fail to include items that were paid by the customer prior to closing. It's a good idea to check for these in your audits. Make sure that they are included on the HUD-1 and identified as "paid outside of closing" or "poc."
Copyright © 2000 Compliance Action. Originally appeared in Compliance Action, Vol. 5, No. 6, 6/00
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