We have a loan where the seller is HUD. The title company that the buyer chose was different from the one we disclose, and they charge several additional fees (including one just because it's a HUD repo). Since we didn't disclose a HUD repo fee on the LE, are we liable for that cost? I think no because he shopped (and the title company never sent us an invoice), but wanted to see what you all thought.

Thanks!

We just had our first HUD deal and weren't aware that HUD wouldn't pay any closing costs, so some of the typical seller fees the buyer had to pay. Our auditor said if we had the contract prior to issuing the LE we should have known. We ended up eating some fees.

I just checked, and the contract says the same thing for us and we had it prior to issuing the LE.

I think for any fee we disclosed as seller paid, we're on the hook for it (just owner's title, in this case).

However, we weren't aware of several of these fees being charged because we never received an invoice from the title company and the "estimated CD" they sent to us didn't have them, either. Are we liable because it was our job to ask?? I can't imagine that being the case. Seems like there shouldn't be an issue on our end, right?

If the borrower had the option to shop for title and they chose someone not on the provider list, there is no tolerance requirement. Therefore, you wouldn't be on the hook for the title fees. As far as the owner's title, I would also think if they chose someone not on your list of providers, that wouldn't need to be a fee the bank eats either.

Transfer taxes and the like would be a different story. If you had the contract and failed to disclose all transfer taxes as borrower paid, the bank would end up eating the difference of what was disclosed versus charged.

But to me, because we had the contract that stated that HUD would not be paying any fees, I think we have to eat the owner's title policy.

Sounds like we're going to take a hit on this one. Thanks for your help, everyone.

OTI is optional and goes in Section H which has no tolerance.

I believe PCBDebbie is correct. The borrower chose a Title company outside of the shopping list so there is not tolerance there. That title insurance company can charge whatever they want and it is up to the customer to ask what the fees are for since the customer chose to take a different company. Does your bank require owner's title insurance because our does not so there is no tolerance issue there especially if they chose a company not on the list.

You will be eating the transfer taxes though IF you had the WHOLE contract before disclosing.

Okay so it turns out we got the contract after we issued our LE (I couldn't tell from the file and assumed). The LO had an email.

So:
1) should we have done a changed circumstance when we found out HUD wouldn't be paying fees?
2) didn't think about that with OTI. I think I got mixed up because of how a seller credit is shown for the OTI fee but then our seller wasn't paying it... Sounds like we're good there.

One other question - what about unpaid real estate taxes? It's not spelled out in the contract, but since it says HUD will pay no fees except the fees to the realtors, are we liable for those since we didn't do a change of circumstance when we got the contract?

Okay,
1) First check to see is the info on what HUD will pay for is readily available online before any change of circumstance. I am not sure what is available and have never dealt with a HUD repo before so I have no clue where to find this info.
2) What is the timeline right now? How long has the LO been sitting on the contract?
3) Was there any specific mention about who would pay unpaid real estate taxes in the contract? To me, even if they do not pay fees, HUD is the owners, they are responsible for taxes.

The seller would be liable for any unpaid real estate taxes while they owned the property. But again real estate taxes do not have any tolerance requirement so even if the buyer would end up paying (which shouldn't be the case) it would not result in any cures.

Totallyconfused (I am too):
1) Will do. This is my first one so I'm not sure, either.
2) Have to issue a CD by Monday. The LO has been sitting on the contract since 7/8ish, long enough that we're past our 3 day CoC requirement.
3) Not that I saw. That was my thought, too, but it says that the net proceeds must be $18,000 ($20,000 sale less $2000 realtor fees).

PCBDebbie - that makes sense, I was just confused because of the net proceeds I talked about in item 3. If HUD pays the taxes, the net proceeds drop below $18,000. I wasn't sure about our tolerance issues since we didn't disclose them whatsoever, but I suppose the alternative would have been to disclose $0 and that makes no sense!