Who is responsible for the accuracy of the HUD-1? Attorneys close mortgage loans and prepare the HUD-1. Our lending officer says we (the bank) do not want to correct any errors the attorney may have made on the HUD-1 because then the bank assumes liability for the accuracy. Opinions?

I've always thought the bank was ultimatley responsible for the accuracy of HUD forms even when attorney completes. It's been my experience that we have MORE error when attorney completes that when done in the bank!

Too true, but sometimes it's because our form letters do not provide the information for them to do it right. That's what I discovered when statements from the title companies were incorrect. If our letters do not give them the names of the appraisers etc, how can we expect them to know how to complete the line item?

When errors are noted with the attorney completed settlement statements and right to cancel form we have the
attorney sign an indemnification agreement that the bank will not be liable. We also send out an attorney letter, which is highlighted showing the attorney the areas that had errors and how our closing instructions explain how to complete the HUD1 forms.

I've asked the same question at seminars and been given different answers. It appears that the bank is responsible if we are funding the loan. We were told that we have the right to see a copy of the Hud1 24 hours prior to closing and should inspect it for any errors at that time. We also send an explicit letter and still had errors, but after having the HUD1 faxed to us prior to closing have found the title company/attorney are being more careful.

We asked the same question of our internal auditors because we kept getting them back with errors from closing companies we used. He showed me in the FDIC exam manual (and probably the OCC has a similar view?) the following: "the financial institution does not have the statutory requirement to ensure that the HUD-1 settlement statement is propertly completed unless it is the closing or settlement agent. Therefore, violations of incompleteness of the HUD-1 should not be cited if the financial institution is not the settlement agent or does not have direct control over the settlement agent. However, HUD-1s should still be checked for accuracy even if the financial institution is not the settlement agent and any inaccuracies should be brought to management's attention." Hope this helps.

I have seen that quote here before. But a second part of the question is, it may depend on who audits you. I don't believe the OCC has the same allowance. I didn't find it anywhere but in the FDIC's manual when doing a keyword search. It could be there in different wording.

Will an investor have the same opinion, FHA or the VA? Having seen some of those audits recently, they don't give a lot of lattitude.

Personally, I think it needs to be done correctly and I believe the lender has an obligation to check it. If you find that as a practice they are done incorrectly, how do you justify using that same agent!

The only problem I have faced in that is that we, the bank (at least in Southern California) have no say-so in who the settlement agent (usually an escrow company) is.

Applicant waltzes in with their application and already executed Escrow Instructions and, of course, wants the loan funded in less than a week. Little time to do research whether or not that particular escrow company has a "problem" in getting the HUD-1 right. And here's a hint, most Escrow companies that I have seen do NOT get it right. And they don't really care what I may think about it.

We are regulated by the OTS and their opinion is that the bank is ultimately responsible for the HUD-1 being completed properly. They told us if the title company can't get it right then we should not do business with them anymore. However, that is not practical as some of the small communites where we have a branch, there is only one title company. So when we receive a copy of the final HUD-1 and it is incorrect we make the title company fix. We also, obtain a preview however, the title companies still figure out a way to not complete correctly. It's a battle at times.

Pat Field

If the other guy can't get it right and you have no choice, I'd put on my friendly training hat and offer to teach them how it is done correctly and provide them the instructions from RESPA.

If they don't want to learn, I'm not sure what you could do except try to work it out with them or do the HUD-1 yourself.

We were told by an FDIC examiner at a seminar in October that they were no longer going to write us up for incorrect HUDs done by closing agents. This came from the Boston region of FDIC. Our local examiner wasn't really in favor of it, but he said the district office made the decision after much discussion.

When I was a FDIC examiner in the early 90's we were told by DC to tell bankers that if an outside company completed the HUD-1 we would not cite them for errors IF they tried to get a corrected disclosure. In 1992, this philosophy changed and we were told that since the bank funded the loan, they were responsible to ensure its accuracy. As a consultant, I see all agencies (OCC, FDIC, FRB, OTS) cite banks for HUD-1 errors. I think that kcarter has the right answer - ask for the HUD-1 a day early to review and amend as necessary. At closing, alter the form as necessary (and have the borrower initial the changes) to make it right.

maureenc: where is that at in the FDIC manual? In the Compliance Examination manual?

I have not heard from anyone at the FDIC stating that they won't be citing HUD-1 accuracy as reported by Anonymous. As a consultant, I can tell you first hand that many FDIC banks have been cited for this since October.

Hi David. I was curious by your question to maureenc, so I checked. It does say that in the FDIC Compliance Exam Manual under the Exam Procedures for Approved Closed End Loans: Part III: B3-13. Interesting since I know banks have been sited on this.

Thanks for the reference. I couldn't find it. Interesting, because as you say, I have seem most (if not all) cited for this.

As an OCC bank we have been cited for inaccuracies on the HUD forms in the past. (And when you have directors who are closing agents.... well that's another story!). Recently, I have heard, however, that the examiners have backed off somewhat on the minor errors (wrong line numbers, etc.) but since we don't have a compliance exam until next year, we are proceeding as if they will still be looking. We review the statements pre closing, loans post closing, etc. and try to communicate proactively with our agents.

Opinions are mine and not that of my employer.