I found an error on a HUD-1 form where the credit life insurance was paid at closing and was not shown on line 905 as required (loan closed in FEB 2002). Also, the principal loan amount shown was incorrect. Apparently the decision by the borrower to purchase the insurance was last minute and the HUD-1 did not get changed. Is it possible to correct a RESPA violation? We are planning to send a corrected HUD-1 to the borrower.

RESPA does not provide for an "error and ommission" period like Reg. Z, except in certain circumstance for the STD.

However, we do send the borrower a new HUD with a copy of our "we goofed" letter. At least this way if the file is reviewed by an examiner, it shows a good faith effort in providing correct information.

Yes, you can correct a HUD-1. You can do it at closing by writing in the changes, or you can send a corrected copy to the borrower later.

Yes, I agree you can correct the HUD before or at closing, and send a corrected HUD when an error is found. However, sending the corrected HUD, after the fact, does not shield you from any liability that may or could be imposed.

The following is taken from Kirchman’s Q& A on RESPA:

Q-20. If we find errors in our RESPA disclosure to a Customer, can we correct them within a certain time and escape liability the way we can under Truth in Lending and Truth is Saving?

A-20. Only as to the Servicing Transfer Disclosure Statement. It is covered by a specific correction procedure similar to those in TILA and TISA. None of the other RESPA disclosures have such a provision in their portions of the statute of the regulation. We confirmed this situation with HUD. RESPA, section 6 and Regulation X, section 3500.21(f)(2). (It is still good practice, we believe, to give corrected disclosures, though.)

HUD apparently refrained from pointing out that there are no provisions for enforcement -- through public or private actions -- for "violations" of the GFE or the HUD-1. That is why it is perfectly OK and safe to correct the HUD-1 after the fact.

Lucy, you just pointed out something that I was not aware of, if I understand you correctly, are you saying there is no civil, or monetary enforceable penalties for incorrect GFEs and HUD Statements?

In reply to:

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are you saying there is no civil, or monetary enforceable penalties for incorrect GFEs and HUD Statements?

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HUD has no enforcement powers. The bad news is, if you are a regulated depository institution, as I understand it the regulators can use FIRREA to create an enforcement action.

This unlevel playing field of enforcement is what is so aggravating in all of this (as well as HOEPA, etc.) Perhaps that is why most of the mortgage business goes to the "un-regulated" as they are able to produce the product at a much lower cost than we can.

The net effect - Predatory lending is getting worse, not better.

Thanks for your explanation Bonnie.

Yes. The statute has no provisions for enforcement of that part. There are enforcement provisions and penalties for servicing transfers, escrow accounts, and section 8 violations. But HUD is unable to enforce any violations of the GFE or HUD-1. Interesting. As Bonnie says, it makes the playing field pretty uneven.