Hi,

I know this topic has been discussed over and over again, but I was wondering if someone could help clarify...

After reading the regs regarding the 1100's on the HUD-1, we believe that we do fall under the 'lump sum' rule. However, when our attorneys' prepare our final HUD for us, they break down 'inside the columns' in the 1100's, a settlement fee on line 1102, a title insurance fee on 1104, and a title search fee on line 1109. These fees then total in the borrowers column on Line 1101.

We prepare our own documents, and we have never considered any of these fees PPFC, and thus none of them have ever been included in our APR calculations.

I'm just curious as to whether breaking the fees down like this on the inside of the column negates the lump sum rule, and if the settlement fee on the inside column of 1102 needs to be included in our APR calculations.

Thanks!!

Yes...and this exact issue has caused many a reimbursement issue if you are a proactive 'cure by resitution' FI.

Joker are you saying that if the title company lists the settlement fee on the inside of the column 1102, it is a prepaid finance charge and thus would be included in the APR? I had this exact question today for our compliance service that we contract with and they couldn't answer the question. We have recently changed software vendors and our new one will not allow us to select line 1102 unless we select that it is a PPFC. If we don't select PPFC it wants to put closing fees into 1110.

That has been the way I've known it to be for more years than I care to remember...only the line numbers may have changed!

And the following out of the finance charge section of Z is why...if you are requiring that a settlement agent close the loan, even if the borrower can pick one:

(2) Special rule; closing agent charges. Fees charged by a third party that conducts the loan closing (such as a settlement agent, attorney, or escrow or title company) are finance charges only if the creditor:

(i) Requires the particular services for which the consumer is charged;

(ii) Requires the imposition of the charge; or

(iii) Retains a portion of the third-party charge, to the extent of the portion retained.

and the following (from the commentary) is why you can exclude it if it's lumped together with the rest of the title services:

4(a)(2) Special Rule; Closing Agent Charges

1. General. This rule applies to charges by a third party serving as the closing agent for the particular loan. An example of a closing agent charge included in the finance charge is a courier fee where the creditor requires the use of a courier.

2. Required closing agent. If the creditor requires the use of a closing agent, fees charged by the closing agent are included in the finance charge only if the creditor requires the particular service, requires the imposition of the charge, or retains a portion of the charge. Fees charged by a third-party closing agent may be otherwise excluded from the finance charge under §1026.4. For example, a fee that would be paid in a comparable cash transaction may be excluded under §1026.4(a). A charge for conducting or attending a closing is a finance charge and may be excluded only if the charge is included in and is incidental to a lump-sum fee excluded under §1026.4(c)(7).

Thank you very much Joker for clarifying this, it really helps.

I'm just curious as to whether breaking the fees down like this on the inside of the column negates the lump sum rule

It's also a violation of RESPA unless the fees are paid to a third party by the title company or required to be itemized by state law.

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Late to the party, but having a debate with an auditor. If an attorney, not the title agency, is closing the loan and attorney charges a closing fee must it be itemized on line 1102? Funny thing is we are both referencing Question#13 on Page 53 of the FAQs.

Is the the attorney closing the loan for the bank or the tile company?

Bank - the charge belongs in Block 1 and Line 801.

Title Company - line 1102. The attorney would be a 3rd party to the title company assuming the they are not a staff attorney for the tile company.

I am having this discussion with an attorney right now. This particular loan is being closed out of our area so we have not worked closings with any of these providers before. A title company performed all of the title services and all charges are on 1101. However, an attorney (who did not do any of the title work) is preparing the HUD and conducting the closing. The seller is paying her fee. She wants to show her charge on 1102 in the seller's column. I am waiting for the LO to tell me who engaged the attorney. Can anyone help? This is supposed to close this afternoon.

What are YOU requiring. The seller can't (technically) choose the attorney, but can have one to represent their interest... so who is representing the bank/borrower? ( Who is your E&O with/who have you approved to handle it)

I'm waiting for the LO to answer those exact questions.

OK, seller chose the attorney and borrower agreed to the choice. The attorney did not do any of the title work - a title company did. The attorney is just preparing the HUD and conducting the closing.

Her HUD shows the title company charges in 1101 and her (the attorney's) closing fee in the seller side of 1102.

Is this OK? I'm looking at #16 on pg 54 of the FAQs and can read it either way.

Also, how do we separate what the title co. is being paid for from what the attorney is receiving?

Sorry if these are basic questions for most of you. We've never dealt with a closing that had both a title co. and an attorney before. Usually it's all one or the other.

The seller's attorney should not be conducting the closing or preparing any loan documents on behalf of the bank. They (the attorney) represents the seller, not the bank.

We would not allow this.

The horse is out of the barn. I can't stop the closing, so I've just got to figure out how the make the HUD work.

The charge would appear on the seller's side of the line 1102.

Make sure it is well documented this is a seller charge and not a buyer's charge being paid by the seller.

Thanks.

I don't agree because the attorney is preparing the settlement statement for the bank,the bank is requiring use of a settlement agent and the bank is allowing this attorney to, by default, represent them, even tho the seller chose them (not terribly uncommon...using separate atty/title company IS uncommon for the area Becca and I are in).

I say the total goes in 1101, this attorney charge goes on the borrower side with their name listed. If the seller pays it, debit/credit on page 1.

That's the route we ended up going. There was no good way to document that the seller charge was a separate seller charge.

It wasn't. Pure/simple!