POC Costs & Property Taxes Listed on HUD-1A form
by Dan Persfull, BOL Guru Guru Bios
Question: We have been cited during a recent FDIC compliance exam for not including POC costs for hazard insurance and property taxes on the form HUD-1A, when the customer obtains a second-lien home equity type loan. We have never been written up for this before and the fees don't seem to fit in the categories provided on the HUD-1A. Are they really required to be listed?
Answer: Yes. This has been a RESPA "hot spot" for the past few years. Here's a couple of excerpts from the FDIC SCANS bulletin # CHIRO-04-2001:
Numerous violations concern the lack of disclosure of hazard insurance premiums on GFEs and HUD-1s in a second lien and/or refinance transaction where adequate hazard insurance is already in place and the lender does not require additional insurance. In these situations, if the financial institution requires hazard insurance to be in place, then hazard insurance must be disclosed on both the GFE and HUD-1 as paid outside of closing (P.O.C.).
Part 3500.7(c) of RESPA requires that the GFE list an estimate of each charge “that the borrower will normally pay or incur at or before settlement.” Items paid for in advance of closing, such as hazard insurance in the case of a refinance or a second lien transaction, must therefore be listed on the GFE and identified as paid outside of closing (P.O.C.).
Another violation often identified regarding the HUD-1 is the identification of the third party provider to whom fees are paid and the amount of fees paid to that provider. Keep in mind that the third party provider ultimately receiving the fee, as well as only the amount actually being paid to that person should be disclosed. If a lender performs actual settlement services in addition to those provided by the third-party vendors, RESPA rules and regulations permit the lender to charge the borrower for those services plus those provided by the third-party vendor. However, such portion of fees retained by the bank must be allocated and disclosed separately from the fees paid to third-party providers on the HUD-1.
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