curing tolerance violations on the HUD

If there is a tolerance violation on a HUD-1A how should the cure be reflected? Just to make it simple for discussion purposes ..if a title examination fee is actually $350 but $250 was listed on the GFE, the bank will pay $100 to cure the tolerance violation. What should be listed in the HUD-1A column on page 3? Should it be the total charge for the service ($350) or should it be what the customer is responsible for paying ($250)? Either way the $100 will be shown on page 1 as POC to meet tolerance.

You show the actual cost ($350) or you won't have a violation to cure.

Thank you for your response! That was my thoughts; however, someone in my bank pointed out the following from the RESPA FAQ's from HUD (section 4 & 5 #9)

Q: How is a potential tolerance violation that is corrected by the lender shown on the HUD-1?
A: The settlement agent must prepare a revised HUD-1 that states the actual charges paid by the borrower and seller. If the lender pays for a portion of a charge to cure a potential tolerance violation, the amounts for the charge shown on page 2 of the HUD-1 must be corrected to show the actual amount charged to the borrower. The settlement agent should include on a blank line in the applicable series a notation that the lender has made a P.O.C. payment of a specified amount to correct a potential tolerance violation. After the revised HUD-1 has been prepared by the settlement agent, the settlement agent must provide the revised HUD-1 to the borrower, the lender, and the seller as appropriate.

The Q&A being referenced gives an alternative on how you show the cure on Page 2 of the HUD. The Comparison Chart on Page 3 would show the actual figures. HUD Column $350 GFE Column $250.

So on the 3rd page of the HUD your tolerance percentage will still show out even though you have corrected it in line 204 of the HUD?

Yes. The credit entry shows the required cure on page 3 has been processed.

At our bank we insert the credit on the HUD side of the comparison chart

Then you are not following the required guidance in the FAQs.

What FAQ would that be?

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/res/respa_hm

I am famiiar with the FAQ's but don't see a specific rule that would prohibit inserting the credit to bring the comparison chart back to 10% after the cure is given to the borrower

You need to review pages 41 through 43, in particular the Q&As and illustrations for disclosing the cure.

Dan's right. HUD issued a FAQ on 4/12/10 that clarified the cure is no longer to be listed in the "tolerance buckets". The FAQs originally indicated a credit was listed there and they they removed this wording and indicated it should only be in the 200s.

The $ amount to cure is listed in the 200 section but in addition, a credit amount is shown in the HUD column of the comparison chart labeled as "amount to cure tolerance violation" and this brings the "Increase between GFE & HUD-1 charges" section back to the allowable 10%. It may not be necessary but is it prohibited?

I cured our violation in the 200 section but was unable to find anywhere in our loan processing software to "credit an amount to the comparison charges back to a 10% tolerance" therefore in my case the tolerance still showed the 12.0060 on the 3rd page but on the first page there is a $29.13 10% tolerance cure in line 204. Is this correct?

Yes, anon directly above, that is the correct way to show the cure. p3 should not be changed to no longer show the need for a cure. If you did, how would anyone know why you gave the credit and if it's correct?

Someone would know why the credit was given because it is labeled "amount to cure tolerance violation" and someone would know it is the correct amount because the tolerance is now at 10%. I think my question has been answered, thanks everyone

What if your Title Company is making the change and showing the cure on HUD-1 page 3 as a negative figure? Can we insist it is wrong and refuse the HUD-1 until they correct it?

We won't send them a TIL until we have our HUD-1, which was put into place to force the title company to send us a HUD before closing or to insure we have it 24 hours in advance. So I think we would have leverage to force the issue. Thing is we were just audited and examined in the past 6 months and no one brought it up as an issue. Not to say they won't at some point in the future.

FAQ on 4/12/10? Can you please site exactly?

The FAQs can be found at

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/rmra/res/respa_hm

You have to 'show your work' just like you did on your math homework in school.
The HUD must show both the error and the cure.
If you remove it from p3 there is nothing to cure and no calculations can be done.
So you enter the figures from the last GFE in the GFE column on p3 and the actual costs in the HUD column. If the line that reads Increase between GFE and HUD-1 charges ends up more than 10%, you cure on p 1.

Yes, I understand where to find the FAQs. But he notes 4/12/10 not 4/2/2010. Last known FAQs I'm aware of are from 4/2/2010. In order to be on the same page, I was hoping to have either a direct link or confirmation he meant FAQs from 4/2/10 and if so what page and question number does he see "tolerance buckets" noted?

It's a typo. The last FAQ was 4/2/10. As Dan said back a few posts ago, read pages 41-43 regarding showing the cure properly.

If you don't show the credit on the comparison chart to bring the tolerance to within the 10% allowable how will an auditor know you gave the correct dollar amount on page 1? Putting the credit on page 1 is only showing half of "your work". I am meeting the RESPA requirement of refunding the dollar amount over the 10 % allowed but is it really a violation to show the credit on page 3?

I guess that is a question you will have to refer to your examining body then on how they will view your approach.

Besides HUD directing you to cure in this fashion, you also have three other RESPA experts opining the same, and I will tack on with them... the cure for the 10% violation should be shown on page one of the HUD in the 200 series.

If you wish to disclose differently than directed by the appendix and FAQs, just be ready and armed to defend your reasoning. Personally, at this point and with all of the other battles to fight out there, this isn't one I'd be willing to lock horns with my examiners over. JMO.

"how will an auditor know you gave the correct dollar amount on page 1?"

Most auditors probably know how to use a calculator.

Yes it was a typo. 4/2/10 was the last FAQs issued by HUD.

Maybe I'm reading this whole string wrong, but I'm going to vent: We try to help - free of charge. I make a typo, which I believe a reasonable person would have determined (Dan did with his link and Truffle commented as such) and some act like I'm making things up. We offer more guidance to back up our statements and we get told "prove it". Look up the FAQs yourself. It's there. Dan gives a link and we still get challenged. HUD has made this clear. We tell you what HUD says and we still get challenged. No thanks, just challenged.

Keep this in mind: all of the advise provided here at BOL is free of charge. All of us have things we could be doing besides helping you. I'm not asking anyone to believe me, just because I say it, but it would be nice to see some effort (research it yourself - especially when we hand you the source) and some appreciation.

Again, maybe I'm reading this wrong, but this string set me off. (Coming off the soapbox now)

::jumps up and down claping wildly::

Go to www.hud.gov/respa. On the right side of the page you will see a link that says "Watch the Webcast". It is a webcast that HUD did in March 2010. In it, they specifically state that they are correcting the FAQ mentioned above and that the comparison chart should show the violation.

Different Anonymous....
The way the HUD is currently programmed on our system certain lines on the HUD have to be "mapped" or written some where else. The HUD lines where the cure is shown happens to be some of the lines that have to be "mapped". The tolerance cure is currently "mapped" to the third page of the HUD.

Re-programming the form will be costly for the bank because the vender considers this "customization". It will also take time to have it corrected.

Should my bank stop using the HUD on our system and produce HUDs by hand for any HUDs with tolerance violations until we can resolve this?

Re-programming the form will be costly for the bank because the vender considers this "customization". It will also take time to have it corrected.

If the program is wrong, they are most likely in violation of their contract with you. Someone higher up at your bank need to escalate the issue to someone higher up at your vendor.

To limit your risk, yes. If you decide the bank can live with the risk and potential violations/fines, then leave it alone. Generally for a defective control (your system) on a serious issue, a manual workaround is needed until the systemic fix is put in place.

Can the HUD Tolerance cure be paid as a credit by the TPO if we have them sign an agreement to do so?

TPO??

Third Party originator. ( Broker).

When we receive a GFE from our broker channel we are normally tied to the fees they disclose if we accept the loan in our system. If we were to add an agreement with the Broker to pay any of the fees that are above the tolerance, would that be a violation?

Broker

Commentary 1026.36(d)(1)

7. Permitted decreases in loan originator compensation. Notwithstanding comment 36(d)(1)-5, § 1026.36(d)(1) does not prohibit a loan originator from decreasing its compensation to defray the cost, in whole or part, of an unforeseen increase in an actual settlement cost over an estimated settlement cost disclosed to the consumer pursuant to section 5(c) of RESPA or an unforeseen actual settlement cost not disclosed to the consumer pursuant to section 5(c) of RESPA. For purposes of comment 36(d)(1)-7, an increase in an actual settlement cost over an estimated settlement cost or a cost not disclosed is unforeseen if the increase occurs even though the estimate provided to the consumer is consistent with the best information reasonably available to the disclosing person at the time of the estimate. For example:

ii. Assume that when applying the tolerance requirements under the regulations implementing RESPA sections 4 and 5(c), there is a tolerance violation of $70 that must be cured. Provided the violation was unforeseen, the rule is not violated if the individual loan originator's compensation decreases to pay for all or part of the amount required to cure the tolerance violation.

Thank you!