In block 1 part of the orgination charge is an UW fee and the bank is giving this back to the borrower. So in block 2 the 3rd box is checked and the UW fee is deducted from the amount listed there. Question: Can the UW fee be deducted from the amount listed in the 3rd box? I am saying it should not be deducted and shown as a credit in the 200 series on the HUD-1.
Am I right?

You can do it either way, however I would be consistent in how you process it.

FWIW since you apparently have other charges shown in the 3rd check box of Block 2 my advice would be to give the credit on the HUD SS instead of "netting" Block 2.

Thanks Dan.