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.
It is also 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 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 © 1996 Compliance Action. Originally appeared in Compliance Action, Vol. 1, No. 14, 9/96
First published on 09/01/1996