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6500 - Consumer Protection
{{12-31-08 p.7024}}
Appendix A to Part 3500--Instructions for Completing HUD--1 and
HUD--1a Settlement Statements; Sample HUD--1 and HUD--1a Statements
The following are instructions for completing the HUD--1 settlement
statement, required under section 4 of RESPA and 24 CFR part 3500
(Regulation X) of the Department of Housing and Urban Development
regulations. This form is to be used as a statement of actual charges
and adjustments paid by the borrower and the seller, to be given to the
parties in connection with the settlement. The instructions for
completion of the HUD--1 are primarily for the benefit of the
settlement agents who prepare the statements and need not be
transmitted to the parties as an integral part of the HUD--1. There is
no objection to the use of the HUD--1 in transactions in which its use
is not legally required. Refer to the definitions section of HUD's
regulations (24 CFR 3500.2) for specific definitions of many of the
terms that are used in these instructions.
General Instructions
Information and amounts may be filled in by typewriter, hand
printing, computer printing, or any other method producing clear and
legible results. Refer to HUD's regulations (Regulation X) regarding
rules applicable to reproduction of the HUD--1 for the purpose of
including customary recitals and information used locally in
settlements; for example, a breakdown of payoff figures, a breakdown of
the Borrower's total monthly mortgage payments, check disbursements, a
statement indicating receipt of funds, applicable special stipulations
between Borrower and Seller, and the date funds are transferred.
The settlement agent shall complete the HUD--1 to itemize all
charges imposed upon the Borrower and the Seller by the loan originator
and all sales commissions, whether to be paid at settlement or outside
of settlement, and any other charges which either the Borrower or the
Seller will pay at settlement. Charges for loan origination and title
services should not be itemized except as provided in these
instructions. For each separately identified settlement service in
connection with the transaction, the name of the person ultimately
receiving the payment must be shown together with the total amount paid
to such person. Items paid to and retained by a loan originator are
disclosed as required in the instructions for lines in the 800-series
of the HUD--1 (and for per diem interest, in the 900-series of the
HUD--1).
As a general rule, charges that are paid for by the seller must be
shown in the seller's column on page 2 of the HUD--1 (unless paid
outside closing), and charges that are paid for by the borrower must be
shown in the borrower's column (unless paid outside closing). However,
in order to promote comparability between the charges on the GFE and
the charges on the HUD--1, if a seller pays for a charge that was
included on the GFE, the charge should be listed in the borrower's
column on page 2 of the HUD--1. That charge should also be offset by
listing a credit in that amount to the borrower on lines 204--209 on
page 1 of the HUD--1, and by a charge to the seller in lines 506--509
on page 1 of the HUD--1. If a loan originator (other than for no-cost
loans), real estate agent, other settlement service provider, or other
person pays for a charge that was included on the GFE, the charge
should be listed in the borrower's column on page 2 of the HUD--1,
with an offsetting credit reported on page 1 of the HUD--1, identifying
the party paying the charge.
Charges paid outside of settlement by the borrower, seller, loan
originator, real estate agent, or any other person, must be included on
the HUD--1 but marked "P.O.C." for "Paid Outside of
Closing" (settlement) and must not be included in computing totals.
However, indirect payments from a lender to a mortgage broker may not
be disclosed as P.O.C., and must be included as a credit on Line 802.
P.O.C. items must not be placed in the Borrower or Seller columns, but
rather on the appropriate line outside the columns. The settlement
agent must indicate whether P.O.C. items are paid for by the Borrower,
Seller, or some other party by marking the items paid for by whoever
made the payment as "P.O.C." with the party making the payment
identified in parentheses, such as "P.O.C. (borrower)" or
"P.O.C. (seller)".
In the case of "no cost" loans where "no cost"
encompasses third party fees as well as the upfront payment to the loan
originator, the third party services covered by the
"no
{{12-31-08 p.7025}}cost" provisions must
be itemized and listed in the borrower's column on the HUD--1/1A with
the charge for the third party service. These itemized charges must be
offset with a negative adjusted origination charge on Line 803 and
recorded in the columns.
Blank lines are provided in section L for any additional settlement
charges. Blank lines are also provided for additional insertions in
sections J and K. The names of the recipients of the settlement charges
in section L and the names of the recipients of adjustments described
in section J or K should be included on the blank lines.
Lines and columns in section J which relate to the Borrower's
transaction may be left blank on the copy of the HUD--1 which will be
furnished to the Seller. Lines and columns in section K which relate to
the Seller's transaction may be left blank on the copy of the HUD--1
which will be furnished to the Borrower.
Line Item Instructions
Instructions for completing the individual items on the HUD--1
follow.
Section A. This section requires no entry of information.
Section B. Check appropriate loan type and complete the
remaining items as applicable.
Section C. This section provides a notice regarding
settlement costs and requires no additional entry of information.
Section D and E. Fill in the names and current mailing
addresses and zip codes of the Borrower and the Seller. Where there is
more than one Borrower or Seller, the name and address of each one is
required. Use a supplementary page if needed to list multiple Borrowers
or Sellers.
Section F. Fill in the name, current mailing address and
zip code of the Lender.
Section G. The street address of the property being sold
should be listed. If there is no street address, a brief legal
description or other location of the property should be inserted. In
all cases give the zip code of the property.
Section H. Fill in name, address, zip code and telephone
number of settlement agent, and address and zip code of "place of
settlement."
Section I. Fill in date of settlement.
Section J. Summary of Borrower's Transaction. Line 101
is for the contract sales price of the property being sold, excluding
the price of any items of tangible personal property if Borrower and
Seller have agreed to a separate price for such items.
Line 102 is for the sale price of any items of tangible personal
property excluded from Line 101. Personal property could include such
items as carpets, drapes, stoves, refrigerators, etc. What constitutes
personal property varies from state to state. Manufactured homes are
not considered personal property for this purpose.
Line 103 is used to record the total charges to Borrower detailed in
Section L and totaled on Line 1400.
Lines 104 and 105 are for additional amounts owed by the Borrower,
such as charges that were not listed on the GFE or items paid by the
Seller prior to settlement but reimbursed by the Borrower at
settlement. For example, the balance in the Seller's reserve account
held in connection with an existing loan, if assigned to the Borrower
in a loan assumption case, will be entered here. These lines will also
be used when a tenant in the property being sold has not yet paid the
rent, which the Borrower will collect, for a period of time prior to
the settlement. The lines will also be used to indicate the treatment
for any tenant security deposit. The Seller will be credited on Lines
404--405.
Lines 106 through 112 are for items which the Seller had paid in
advance, and for which the Borrower must therefore reimburse the
Seller. Examples of items for which adjustments will be made may
include taxes and assessments paid in advance for an entire year or
other period, when settlement occurs prior to the expiration of the
year or other period for which they were paid. Additional examples
include flood and hazard insurance premiums, if the Borrower is being
substituted as an insured under the same policy; mortgage insurance in
loan assumption cases; planned unit development or condominium
association assessments paid in advance; fuel or other supplies on
hand, purchased by the Seller, which the Borrower will use when
Borrower takes possession of the property; and ground rent paid in
advance.
{{12-31-08 p.7026}}
Line 120 is for the total of Lines 101 through 112.
Line 201 is for any amount paid against the sales price prior to
settlement.
Line 202 is for the amount of the new loan made by the Lender when a
loan to finance construction of a new structure constructed for sale is
used as or converted to a loan to finance purchase. Line 202 should
also be used for the amount of the first user loan, when a loan to
purchase a manufactured home for resale is converted to a loan to
finance purchase by the first user. For other loans covered by 24 CFR
part 3500 (Regulation X) which finance construction of a new structure
or purchase of a manufactured home, list the sales price of the land on
Line 104, the construction cost or purchase price of manufactured home
on Line 105 (Line 101 would be left blank in this instance) and amount
of the loan on Line 202. The remainder of the form should be completed
taking into account adjustments and charges related to the temporary
financing and permanent financing and which are known at the date of
settlement.
Line 203 is used for cases in which the Borrower is assuming or
taking title subject to an existing loan or lien on the property.
Lines 204--209 are used for other items paid by or on behalf of the
Borrower. Lines 204--209 should be used to indicate any financing
arrangements or other new loan not listed in Line 202. For example, if
the Borrower is using a second mortgage or note to finance part of the
purchase price, whether from the same lender, another lender or the
Seller, insert the principal amount of the loan with a brief
explanation on Lines 204--209. Lines 204--209 should also be used where
the Borrower receives a credit from the Seller for closing costs,
including seller-paid GFE charges. They may also be used in cases in
which a Seller (typically a builder) is making an "allowance" to
the Borrower for items that the Borrower is to purchase separately.
Lines 210 through 219 are for items which have not yet been paid,
and which the Borrower is expected to pay, but which are attributable
in part to a period of time prior to the settlement. In jurisdictions
in which taxes are paid late in the tax year, most cases will show the
proration of taxes in these lines. Other examples include utilities
used but not paid for by the Seller, rent collected in advance by the
Seller from a tenant for a period extending beyond the settlement date,
and interest on loan assumptions.
Line 220 is for the total of Lines 201 through 219.
Lines 301 and 302 are summary lines for the Borrower. Enter total in
Line 120 on Line 301. Enter total in Line 220 on Line 302.
Line 303 must indicate either the cash required from the Borrower at
settlement (the usual case in a purchase transaction), or cash payable
to the Borrower at settlement (if, for example, the Borrower's earnest
money exceeds the Borrower's cash obligations in the transaction or
there is a cash-out refinance). Subtract Line 302 from Line 301 and
enter the amount of cash due to or from the Borrower at settlement on
Line 303. The appropriate box should be checked. If the Borrower's
earnest money is applied toward the charge for a settlement service,
the amount so applied should not be included on Line 303 but instead
should be shown on the appropriate line for the settlement service,
marked "P.O.C. (Borrower)", and must not be included in computing
totals.
Section K, Summary of Seller's Transaction. Instructions
for the use of Lines 101 and 102 and 104--112 above, apply also to
Lines 401--412. Line 420 is for the total of Lines 401 through 412.
Line 501 is used if the Seller's real estate broker or other party
who is not the settlement agent has received and holds a deposit
against the sales price (earnest money) which exceeds the fee or
commission owed to that party. If that party will render the excess
deposit directly to the Seller, rather than through the settlement
agent, the amount of excess deposit should be entered on Line 501 and
the amount of the total deposit (including commissions) should be
entered on Line 201.
Line 502 is used to record the total charges to the Seller detailed
in section L, and totaled on Line 1400.
Line 503 is used if the Borrower is assuming or taking title subject
to existing liens which are to be deducted from sales
price.
{{12-31-08 p.7027}}
Lines 504 and 505 are used for the amounts (including any accrued
interest) of any first and/or second loans which will be paid as part
of the settlement.
Line 506 is used for deposits paid by the Borrower to the Seller or
other party who is not the settlement agent. Enter the amount of the
deposit in Line 201 on Line 506 unless Line 501 is used or the party
who is not the settlement agent transfers all or part of the deposit to
the settlement agent, in which case the settlement agent will note in
parentheses on Line 507 the amount of the deposit that is being
disbursed as proceeds and enter in the column for Line 506 the amount
retained by the above-described party for settlement services. If the
settlement agent holds the deposit, insert a note in Line 507 which
indicates that the deposit is being disbursed as proceeds.
Lines 506 through 509 may be used to list additional liens which
must be paid off through the settlement to clear title to the property.
Other Seller obligations should be shown on Lines 506--509, including
charges that were disclosed on the GFE but that are actually being paid
for by the Seller. These Lines may also be used to indicate funds to be
held by the settlement agent for the payment of either repairs, or
water, fuel, or other utility bills that cannot be prorated between the
parties at settlement because the amounts used by the Seller prior to
settlement are not yet known. Subsequent disclosure of the actual
amount of these post-settlement items to be paid from settlement funds
is optional. Any amounts entered on Line 204--209 including Seller
financing arrangements should also be entered on Lines 506--509.
Instructions for the use of Lines 510 through 519 are the same as
those for Lines 210 to 219 above.
Line 520 is for the total of Lines 501 through 519.
Lines 601 and 602 are summary lines for the Seller. Enter the total
in Line 420 on Line 610. Enter the total in Line 520 on Line 602.
Line 603 must indicate either the cash required to be paid to the
Seller at settlement (the usual case in a purchase transaction), or the
cash payable by the Seller at settlement. Subtract Line 602 from Line
601 and enter the amount of cash due to or from the Seller at
settlement on Line 603. The appropriate box should be checked.
Section L. Settlement Charges.
Line 700 is used to enter the sales commission charged by the sales
agent or real estate broker.
Lines 701--702 are to be used to state the split of the commission
where the settlement agent disburses portions of the commission to two
or more sales agents or real estate brokers.
Line 703 is used to enter the amount of sales commission disbursed
at settlement. If the sales agent or real estate broker is retaining a
part of the deposit against the sales price (earnest money) to apply
towards the sales agent's or real estate broker's commission, include
in Line 703 only that part of the commission being disbursed at
settlement and insert a note on Line 704 indicating the amount the
sales agent or real estate broker is retaining as a "P.O.C."
item.
Line 704 may be used for additional charges made by the sales agent
or real estate broker, or for a sales commission charged to the
Borrower, which will be disbursed by the settlement agent.
Line 801 is used to record "Our origination charge," which
includes all charges received by the loan originator, except any charge
for the specific interest rate chosen (points). This number must not be
listed in either the buyer's or seller's column. The amount shown in
Line 801 must include any amounts received for origination services,
including administrative and processing services, performed by or on
behalf of the loan originator.
Line 802 is used to record "Your credit or charge (points) for
the specific interest rate chosen," which states the charge or
credit adjustment as applied to "Our origination charge," if
applicable. This number must not be listed in either column or shown on
page one of the HUD--1.
For a mortgage broker originating a loan in its own name, the amount
shown on Line 802 will be the difference between the initial loan
amount and the total payment to the
{{12-31-08 p.7028}}mortgage broker from the
lender. The total payment to the mortgage broker will be the sum of the
price paid for the loan by the lender and any other payments to the
mortgage broker from the lender, including any payments based on the
loan amount or loan terms, and any flat rate payments. For a mortgage
broker originating a loan in another entity's name, the amount shown
on Line 802 will be the sum of all payments to this mortgage broker
from the lender, including any payments based on the loan amount or
loan terms, and any flat rate payments.
In either case, when the amount paid to the mortgage broker exceeds
the initial loan amount, there is a credit to the borrower and it is
entered as a negative amount. When the initial loan amount exceeds the
amount paid to the mortgage broker, there is a charge to the borrower
and it is entered as a positive amount. For a lender, the amount shown
on Line 802 may include any credit or charge (points) to the Borrower.
Line 803 is used to record "Your adjusted origination
charges." which states the net amount of the loan origination
charges, the sum of the amounts shown in Lines 801 and 802. This amount
must be listed in the columns as either a positive number (for example,
where the origination charge shown in Line 801 exceeds any credit for
the interest rate shown in Line 802 or where there is an origination
charge in Line 801 and a charge for the interest rate (points) is shown
on Line 802) or as a negative number (for example, where the credit for
the interest rate shown in Line 802 exceeds the origination charges
shown in Line 801).
In the case of "no cost" loans, where "no cost" refers
only to the loan originator's fees, the amounts shown in Lines 801 and
802 should offset, so that the charge shown on Line 803 is zero. Where
"no cost" includes third party settlement services, the credit
shown in Line 802 will more than offset the amount shown in Line 801.
The amount shown in Line 803 will be a negative number to offset the
settlement charges paid indirectly through the loan originator.
Lines 804--808 may be used to record each of the "Required
services that we select." Each settlement service provider must be
identified by name and the amount paid recorded either inside the
columns or as paid to the provider outside closing ("P.O.C."), as
described in the General Instructions.
Line 804 is used to record the appraisal fee.
Line 805 is used to record the fee for all credit reports.
Line 806 is used to record the fee for any tax service.
Line 807 is used to record any flood certification fee.
Lines 808 and additional sequentially numbered lines, as needed, are
used to record other third party services required by the loan
originator. These Lines may also be used to record other required
disclosures from the loan originator. Any such disclosure must be
listed outside the columns.
Line 901--904. This series is used to record the items which the
Lender requires to be paid at the time of settlement, but which are not
necessarily paid to the lender (e.g., FHA mortgage insurance premium),
other than reserves collected by the Lender and recorded in the
1000-series.
Line 901 is used if interest is collected at settlement for a part
of a month or other period between settlement and the date from which
interest will be collected with the first regular monthly payment.
Enter that amount here and include the per diem charges. If such
interest is not collected until the first regular monthly payment, no
entry should be made on Line 901.
Line 902 is used for mortgage insurance premiums due and payable at
settlement, including any monthly amount due at settlement and any
upfront mortgage insurance premium, but not including any reserves
collected by the Lender and recorded in the 1000-series. If a lump sum
mortgage insurance premium paid at settlement is included on Line 902,
a note should indicate that the premium is for the life of the loan.
Line 903 is used for homeowner's insurance premiums that the Lender
requires to be paid at the time of settlement, except reserves
collected by the Lender and recorded in the 1000-series.
{{12-31-08 p.7029}}
Lines 904 and additional sequentially numbered lines are used to
list additional items required by the Lender (except for reserves
collected by the Lender and recorded in the 1000-series), including
premiums for flood or other insurance. These lines are also used to
list amounts paid at settlement for insurance not required by the
Lender.
Lines 1000--1007. This series is used for amounts collected by the
Lender from the Borrower and held in an account for the future payment
of the obligations listed as they fall due. Include the time period
(number of months) and the monthly assessment. In many jurisdictions
this is referred to as an "escrow", "impound", or
"trust" account. In addition to the property taxes and insurance
listed, some Lenders may require reserves for flood insurance,
condominium owners' association assessments, etc. The amount in line
1001 must be listed in the columns, and the itemizations in lines 1002
through 1007 must be listed outside the columns.
After itemizing individual deposits in the 1000 series, the servicer
shall make an adjustment based on aggregate accounting. This adjustment
equals the difference between the deposit required under aggregate
accounting and the sum of the itemized deposits. The computation steps
for aggregate accounting are set out in 24 CFR § 3500.17(d). The
adjustment will always be a negative number or zero (-0-), except for
amounts due to rounding. The settlement agent shall enter the aggregate
adjustment amount outside the columns on a final line of the 1000
series of the HUD--1 or HUD--1A statement. Appendix E to this part sets
out an example of aggregate analysis.
Lines 1100--1108. This series covers title charges and charges by
attorneys and closing or settlement agents. The title charges include a
variety of services performed by title companies or others and include
fees directly related to the transfer of title (title examination,
title search, document preparation), fees for title insurance, and fees
for conducting the closing. The legal charges include fees for
attorneys representing the lender, seller, or borrower, and any
attorney preparing title work. The series also includes any settlement,
notary, and delivery fees related to the services covered in this
series. Disbursements to third parties must be broken out in the
appropriate lines or in blank lines in the series, and amounts paid to
these third parties must be shown outside of the columns if included in
Line 1101. Charges not included in Line 1101 must be listed in the
columns.
Line 1101 is used to record the total for the category of "Title
services and lender's title insurance." This amount must be listed
in the columns.
Line 1102 is used to record the settlement or closing fee.
Line 1103 is used to record the charges for the owner's title
insurance and related endorsements. This amount must be listed in the
columns.
Line 1104 is used to record the lender's title insurance premium
and related endorsements.
Line 1105 is used to record the amount of the lender's title policy
limit. This amount is recorded outside of the columns.
Line 1106 is used to record the amount of the owner's title policy
limit. This amount is recorded outside of the columns.
Line 1107 is used to record the amount of the total title insurance
premium, including endorsements, that is retained by the title agent.
This amount is recorded outside of the columns.
Line 1108 used to record the amount of the total title insurance
premium, including endorsements, that is retained by the title
underwriter. This amount is recorded outside of the columns.
Additional sequentially numbered lines in the 1100-series may be
used to itemize title charges paid to other third parties, as
identified by name and type of service provided.
Lines 1200--1206. This series covers government-recording and
transfer charges. Charges paid by the borrower must be listed in the
columns as described for lines 1201 and 1203, with itemizations shown
outside the columns. Any amounts that are charged to the seller and
that were not included on the Good Faith Estimate must be listed in the
columns.
Line 1201 is used to record the total "Government recording
charges," and the amount must be listed in the columns.
{{12-31-08 p.7030}}
Line 1202 is used to record, outside of the columns, the itemized
recording charges.
Line 1203 is used to record the transfer taxes, and the amount must
be listed in the columns.
Line 1204 is used to record, outside of the columns, the amounts for
local transfer taxes and stamps.
Line 1205 is used to record, outside of the columns, the amounts for
State transfer taxes and stamps.
Line 1206 and additional sequentially numbered lines may be used to
record specific itemized third party charges for government recording
and transfer services, but the amounts must be listed outside the
columns.
Line 1301 and additional sequentially numbered lines must be used to
record required services that the borrower can shop for, such as fees
for survey, pest inspection, or other similar inspections. These lines
may also be used to record additional itemized settlement charges that
are not included in a specific category, such as fees for structural
and environmental inspections; pre-sale inspections of heating,
plumbing or electrical equipment; or insurance or warranty coverage.
The amounts must be listed in either the borrower's or seller's
column.
Line 1400 must state the total settlement charges as calculated by
adding the amounts within each column.
Page 3
Comparison of Good Faith Estimate (GFE) and HUD1/1A Charges
The comparison chart must be prepared using the exact information
and amounts from the GFE and the actual settlement charges shown on the
HUD--1/1A Settlement Statement. The comparison chart is comprised of
three sections: "Charges That Cannot Increase", "Charges That
Cannot Increase More Than 10%", and "Charges That Can
Change".
"Charges That Cannot Increase". The amounts shown in Blocks 1
and 2, in Line A, and in Block 8 on the borrower's GFE must be entered
in the appropriate line in the Good Faith Estimate column. The amounts
shown on Lines 801, 802, 803 and 1203 of the HUD--1/1A must be entered
in the corresponding line in the HUD--1/1A column. The HUD1/1A column
must include any amounts shown on page 2 of the HUD--1 in the column as
paid for by the borrower, plus any amounts that are shown as P.O.C. by
or on behalf of the borrower. If there is a credit in Block 2 of the
GFE or Line 802 of the HUD--1/1A, the credit should be entered as a
negative number.
"Charges That Cannot Increase More Than 10%". A description
of each charge included in Blocks 3 and 7 on the borrower's GFE must
be entered on separate lines in this section, with the amount shown on
the borrower's GFE for each charge entered in the corresponding line
in the Good Faith Estimate column. For each charge included in Blocks
4, 5 and 6 on the borrower's GFE for which the loan originator
selected the provider or for which the borrower selected a provider
identified by the loan originator, a description must be entered on a
separate line in this section, with the amount shown on the borrower's
GFE for each charge entered in the corresponding line in the Good Faith
Estimate column. The loan originator must identify any third party
settlement services for which the borrower selected a provider other
than one identified by the loan originator so that the settlement agent
can include those charges in the appropriate category. Additional lines
may be added if necessary. The amounts shown on the HUD--1/1A for each
line must be entered in the HUD--1/1A column next to the corresponding
charge from the GFE, along with the appropriate HUD--1/1A line number.
The HUD--1/1A column must include any amounts shown on page 2 of the
HUD--1 in the column as paid for by the borrower, plus any amounts that
are shown as P.O.C. by or on behalf of the borrower.
The amounts shown in the Good Faith Estimate and HUD--1/1A columns
for this section must be separately totaled and entered in the
designated line. If the total for the HUD--1/1A column is greater than
the total for the Good Faith Estimate column, then the amount of the
increase must be entered both as a dollar amount and as a percentage
increase in the appropriate line.
{{12-31-08 p.7031}}
"Charges That Can Change". The amounts shown in Blocks 9, 10
and 11 on the borrower's GFE must be entered in the appropriate line
in the Good Faith Estimate column. Any third party settlement services
for which the borrower selected a provider other than one identified by
the loan originator must also be included in this section. The amounts
shown on the HUD--1/1A for each charge in this section must be entered
in the corresponding line in the HUD--1/1A column, along with the
appropriate HUD--1/1A line number. The HUD--1/1A column must include
any amounts shown on page 2 of the HUD--1 in the column as paid for the
borrower, plus any amounts that are shown as P.O.C. by or on behalf of
the borrower. Additional lines may be added if necessary.
Loan Terms
This section must be completed in accordance with the information
and instructions provided by the lender. The lender must provide this
information in a format that permits the settlement agent to simply
enter the necessary information in the appropriate spaces, without the
settlement agent having to refer to the loan documents themselves.
Instructions for Completing HUD1A
Note: The HUD--1A is an optional form that may be used
for refinancing and subordinate-lien federally related mortgage loans,
as well as for any other one-party transaction that does not involve
the transfer of title to residential real property. The HUD--1 form may
also be used for such transactions, by utilizing the borrower's side
of the HUD--1 and following the relevant parts of the instructions as
set forth above. The use of either the HUD--1 or HUD--1A is not
mandatory for open-end lines of credit (home-equity plans), as long as
the provisions of Regulation Z are followed.
Background
The HUD--1A settlement statement is to be used as a statement of
actual charges and adjustments to be given to the borrower at
settlement, as defined in this part. The instructions for completion of
the HUD--1A are for the benefit of the settlement agent who prepares
the statement; the instructions are not a part of the statement and
need not be transmitted to the borrower. There is no objection to using
the HUD--1A in transactions in which it is not required, and its use in
open-end lines of credit transactions (home-equity plans) is
encouraged. It may not be used as a substitute for a HUD--1 in any
transaction that has a seller.
Refer to the "definitions" section (§ 3500.2) of 24 CFR part
3500 (Regulation X) for specific definitions of terms used in these
instructions.
General Instructions
Information and amounts may be filled in by typewriter, hand
printing, computer printing, or any other method producing clear and
legible results. Refer to 24 CFR 3500.9 regarding rules for
reproduction of the HUD--1A. Additional pages may be attached to the
HUD--1A for the inclusion of customary recitals and information used
locally for settlements or if there are insufficient lines on the
HUD--1A. The settlement agent shall complete the HUD--1A in accordance
with the instructions for the HUD--1 to the extent possible, including
the instructions for disclosing items paid outside closing and for no
cost loans.
Blank lines are provided in Section L for any additional settlement
charges. Blank lines are also provided in Section M for recipients of
all or portions of the loan proceeds. The names of the recipients of
the settlement charges in Section L and the names of the recipients of
the loan proceeds in Section M should be set forth on the blank lines.
Line-Item Instructions
Page 1
The identification information at the top of the HUD--1A should be
completed as follows:
The borrower's name and address is entered in the space provided.
If the property securing the loan is different from the borrower's
address, the address or other location information on the property
should be entered in the space provided. The loan number
is
{{12-31-08 p.7032}}the lender's
identification number for the loan. The settlement date is the date of
settlement in accordance with 24 CFR 3500.2, not the end of any
applicable rescission period. The name and address of the lender should
be entered in the space provided.
Section L. Settlement Charges. This section of the
HUD--1A is similar to Section L of the HUD--1, with minor changes or
omissions, including deletion of lines 700 through 704, relating to
real estate broker commissions. The instructions for Section L in the
HUD--1, should be followed insofar as possible. Inapplicable charges
should be ignored, as should any instructions regarding seller items.
Line 1400 in the HUD--1A is for the total settlement charges charged
to the borrower. Enter this total on line 1601. This total should
include Section L amounts from additional pages, if any are attached to
this HUD--1A.
Section M. Disbursement to Others. This section is used
to list payees, other than the borrower, of all or portions of the loan
proceeds (including the lender, if the loan is paying off a prior loan
made by the same lender), when the payee will be paid directly out of
the settlement proceeds. It is not used to list payees of settlement
charges, nor to list funds disbursed directly to the borrower, even if
the lender knows the borrower's intended use of the funds.
For example, in a refinancing transaction, the loan proceeds are
used to pay off an existing loan. The name of the lender for the loan
being paid off and the pay-off balance would be entered in Section M.
In a home improvement transaction when the proceeds are to be paid to
the home improvement contractor, the name of the contractor and the
amount paid to the contractor would be entered in Section M. In a
consolidation loan, or when part of the loan proceeds is used to pay
off other creditors, the name of each creditor and the amount paid to
that creditor would be entered in Section M. If the proceeds are to be
given directly to the borrower and the borrower will use the proceeds
to pay off existing obligations, this would not be reflected in Section
M.
Section N. Net Settlement. Line 1600 normally sets forth
the principal amount of the loan as it appears on the related note for
this loan. In the event this form is used for an open-ended home equity
line whose approved amount is greater than the initial amount advanced
at settlement, the amount shown on line 1600 will be the loan amount
advanced at settlement. Line 1601 is used for all settlement charges
that both are included in the totals for lines 1400 and 1602, and are
not financed as part of the principal amount of the loan. This is the
amount normally received by the lender from the borrower at settlement,
which would occur when some or all of the settlement charges were paid
in cash by the borrower at settlement, instead of being financed as
part of the principal amount of the loan. Failure to include any such
amount in line 1601 will result in an error in the amount calculated on
line 1604. Items paid outside of closing (P.O.C.) should not be
included in Line 1601.
Line 1602 is the total amount from line 1400.
Line 1603 is the total amount from line 1520.
Line 1604 is the amount disbursed to the borrower. This is
determined by adding together the amounts for lines 1600 and 1601, and
then subtracting any amounts listed on lines 1602 and 1603.
Page 2
This section of the HUD--1A is similar to page 3 of the HUD--1. The
instructions for page 3 of the HUD--1, should be followed insofar as
possible. The HUD--1/1A Column should include any amounts shown on page
1 of the HUD--1A in the column as paid for by the borrower, plus any
amounts that are shown as P.O.C. by the borrower. Inapplicable charges
should be ignored.
{{12-31-08 p.7033}}_______
{{12-31-08 p.7034}}_______
Form HUD-1 -- Settlement Statement (pdf) (89Kb, PDF file - PDF help or hard copy)
{{12-31-08 p.7035}}_______
{{12-31-08 p.7036}}_______
Form HUD-1A -- Settlement Statement (pdf) (50Kb, PDF file - PDF help or hard copy)
{{12-31-08 p.7037}}_______
{{12-31-08 p.7038}}
[Codified to 24 C.F.R. Part 3500, Appendix A] (Approved by
the Office of Management and Budget under control number 2502-0265)
[Appendix A amended at 57 Fed. Reg. 56856, December 1, 1992,
effective December 2, 1992; 59 Fed. Reg. 6515, February 10, 1994,
effective August 9, 1994; 59 Fed. Reg. 53908, October 26, 1994,
effective April 24, 1995; 60 Fed. Reg. 8816, February 15, 1995; 60 Fed.
Reg. 24735, May 9, 1995, effective May 24, 1995; 61 Fed. Reg. 13251,
March 26, 1996, effective April 25, 1996; 63 Fed. Reg. 3237, January
21, 1998, effective February 20, 1998; revised at 73 Fed. Reg. 68243,
November 17, 2008, effective January 16, 2009]
Appendix B to Part 3500Illustration of Requirements of RESPA
The following illustrations provide additional guidance on the
meaning and coverage of the provisions of RESPA. Other provisions of
federal or state law may also be applicable to the practices and
payments discussed in the following illustrations.
1. Facts: A, a provider of settlement services,
provides settlement services at abnormally low rates or at no charge at
all to B, a builder, in connection with a subdivision being developed
by B. B agrees to refer purchasers of the completed homes in the
subdivision to A for the purchase of settlement services in connection
with the sale of individual lots by B.
Comments: The rendering of services by A to B at little
or no charge constitutes a thing of value given by A to B in return for
the referral of settlement services business and both A and B are in
violation of section 8 of RESPA.
2. Facts: B, a lender, encourages persons who receive
federally-related mortgage loans from it to employ A, an attorney, to
perform title searches and related settlement services in connection
with their transaction. B and A have an understanding that in return
for the referral of this business A provides legal services to B or B's
officers or employees at abnormally low rates or for no charge.
Comments: Both A and B are in violation of section 8 of
RESPA. Similarly, if an attorney gives a portion of his or her fees to
another attorney, a lender, a real estate broker or any other provider
of settlement services, who had referred prospective clients to the
attorney, section 8 would be violated by both persons.
3. Facts: A, a real estate broker, obtains all
necessary licenses under state law to act as a title insurance agent. A
refers individuals who are purchasing homes in transactions in which A
participates as a broker to B, an unaffiliated title company, for the
purchase of title insurance services. A performs minimal, if any, title
services in connection with the issuance of the title insurance policy
(such as placing an application with the title company). B pays A a
commission (or A retains a portion of the title insurance premium) for
the transactions or alternatively B receives a portion of the premium
paid directly from the purchaser.
Comments. The payment of a commission or portion of the
title insurance premium by B to A, or receipt of a portion of the
payment for title insurance under circumstances where no substantial
services are being performed by A is a violation of section 8 of RESPA.
It makes no difference whether the payment comes from B or the
purchaser. The amount of the payment must bear a reasonable
relationship to the services rendered. Here A really is being
compensated for a referral of business to B.
4. Facts: A is an attorney who, as a part of his
legal representation of clients in residential real estate
transactions, orders and reviews title insurance policies for his
clients. A enters into a contract with B, a title company, to be an
agent of B under a program set up by B. Under the agreement, A agrees
to prepare and forward title insurance applications to B, to re-examine
the preliminary title commitment for accuracy and if he chooses to
attempt to clear exceptions to the title policy before closing, A
agrees to assume liability for waiving certain exceptions to title, but
never exercises this authority. B performs the necessary title search
and examination work, determines insurability of title, prepares
documents containing substantive information in title commitments,
handles closings for A's clients and issues title policies. A receives
a fee from his client for legal services and an additional fee for his
title agent "services" from the client's title insurance premium
to B.
{{12-31-08 p.7039}}
Comments: A and B are violating
section 8 of RESPA. Here, A's
clients are being double billed because the work A performs as a
"title agent" is that which he already performs for his client in
his capacity as an attorney. For A to receive a separate payment as a
title agent, A must perform necessary core title work and may not
contract out the work. To receive additional compensation as a title
agent for this transaction, A must provide his client with core title
agent services for which he assumes liability, and which includes, at a
minimum, the evaluation of the title search to determine insurability
of the title, and the issuance of a title commitment where customary,
the clearance of underwriting objections, and the actual issuance of
the policy or policies on behalf of the title company. A may not be
compensated for the mere re-examination of work performed by B. Here, A
is not performing these services and may not be compensated as a title
agent under section 8(c)(1)(B). Referral fees or splits of fees may not
be disguised as title agent commissions when the core title agent work
is not performed. Further, because B created the program and gave A the
opportunity to collect fees (a thing of value) in exchange for the
referral of settlement service business, it has violated section 8 of
RESPA.
5. Facts: A, a "mortgage originator," receives
loan applications, funds the loans with its own money or with a
wholesale line of credit for which A is liable, and closes the loans in
A's own name. Subsequently, B, a mortgage lender, purchases the loans
and compensates A for the value of the loans, as well as for any
mortgage servicing rights.
Comments: Compensation for the sale of a mortgage loan
and servicing rights constitutes a secondary market transaction, rather
than a referral fee, and is beyond the scope of section 8 of RESPA. For
purposes of section 8, in determining whether a bona fide
transfer of the loan obligation has taken place, HUD examines the
real source of funding, and the real interest of the named settlement
lender.
6. Facts: A, a credit reporting company, places a
facsimile transmission machine (FAX) in the office of B, a mortgage
lender, so that B can easily transmit requests for credit reports and A
can respond. A supplies the FAX machine at no cost or at a reduced
rental rate based on the number of credit reports ordered.
Comments: Either situation violates section 8 of RESPA.
The FAX machine is a thing of value that A provides in exchange for the
referral of business from B. Copying machines, computer terminals,
printers, or other like items which have general use to the recipient
and which are given in exchange for referrals of business also violate
RESPA.
7. Facts: A, a real estate broker, refers title
business to B, a company that is a licensed title agent for C, a title
insurance company. A owns more than 1% of B. B performs the title
search and examination, makes determinations of insurability, issues
the commitment, clears underwriting objections, and issues a policy of
title insurance on behalf of C, for which C pays B a commission. B pays
annual dividends to its owners, including A, based on the relative
amount of business each of its owners refers to B.
Comments: The facts involve an affiliated business
arrangement. The payments of a commission by C to B is not a violation
of section 8 of RESPA if the amount of the commission constitutes
reasonable compensation for the services performed by B for C. The
payment of a dividend or the giving of any other thing of value by B to
A that is based on the amount of business referred to B by A does not
meet the affiliated business agreement exemption provisions and such
actions violate section 8. Similarly, if the amount of stock held by A
in B (or, if B were a partnership, the distribution of partnership
profits by B to A) varies based on the amount of business referred or
expected to be referred, or if B retained any funds for subsequent
distribution to A where such funds were generally in proportion to the
amount of business A referred to B relative to the amount referred by
other owners such arrangements would violate
section 8. The exemption for
controlled business arrangements would not be available because the
payments here would not be considered returns on ownership interests.
Further, the required disclosure of the affiliated business arrangement
and estimated charges have not been provided.
8. Facts: Same as illustration 7, but B pays annual
dividends in proportion to the amount of stock held by its owners,
including A, and the distribution of annual dividends is not based on
the amount of business referred or expected to be referred.
{{12-31-08 p.7040}}
Comments: If A and B meet the requirements of the
affiliated business arrangement exemption there is not a violation of
RESPA. Since the payment is a return on ownership interests, A and B
will be exempt from section 8 if (1) A also did not require anyone to
use the services of B, and (2) A disclosed its ownership interest in B
on a separate disclosure form and provided an estimate of B's charges
to each person referred by A to B (see appendix D of this part), and
(3) B makes no payment (nor is there any other thing of value
exchanged) to A other than dividends.
9. Facts: A, a franchisor for franchised real estate
brokers, owns B, a provider of settlement services. C, a franchisee of
A, refers business to B.
Comments: This is an affiliated business arrangement. A,
B and C will all be exempt from section 8 if C discloses its franchise
relationship with the owner of B on a separate disclosure form and
provides an estimate of B's charges to each person referred to B (see
appendix D of this part) and C does not require anyone to use B's
services and A gives no thing a value to C under the franchise
agreement (such as an adjusted level of franchise payment based on the
referrals), and B makes no payments to A other than dividends
representing a return on ownership interest (rather than, e.g.,
an adjusted level of payment being based on the referrals). Nor
may B pay C anything of value for the referral.
10. Facts: A is a real estate broker who refers
business to its affiliate title company B. A makes all required written
disclosures to the homebuyer of the arrangement and estimated charges
and the homebuyer is not required to use B. B refers or contracts out
business to C who does all the title work and splits the fee with B. B
passes its fee to A in the form of dividends, a return on ownership
interest.
Comments: The relationship between A and B is an
affiliated business arrangement. However, the affiliated business
arrangement exemption does not provide exemption between an affiliated
entity, B, and a third party, C. Here, B is a mere "shell" and
provides no substantive services for its portion of the fee. The
arrangement between B and C would be in violation of section 8(a) and
(b). Even if B had an affiliate relationship with C, the required
exemption criteria have not been met and the relationship would be
subject to section 8.
11. Facts: A, a mortgage lender, is affiliated with B,
a title company, and C, an escrow company, and offers consumers a
package of mortgage, title, and escrow services at a discount from the
prices at which such services would be sold if purchased separately. A,
B, and C are subsidiaries of H, a holding company, which also controls
a retail stock brokerage firm, D. None of A, B, or C requires consumers
to purchase the services of its sister companies, and each company
sells such services separately and as part of the package. A also pays
an employee T, a full-time bank teller who does not perform settlement
services, a bonus for each loan, title insurance binder, or closing
that T generates for A, B, or C. A pays T these bonuses out of A's own
funds and receives no reimbursements for these bonuses from B, C, or H.
At the time that T refers customers to B and C, T provides the
customers with a disclosure using an affiliated business arrangement
disclosure format. Also, Z, a stockbroker employee of D, occasionally
refers her customers to A, B, or C; gives a statement in an affiliated
business disclosure format; and receives a payment from D for each
referral.
Comments: Selling a package of settlement services at a
discount is not prohibited by RESPA, consistent with the definition of
"required use" in 24 CFR
3500.2. Also, A is always allowed to compensate its own
employees for business generated for A's company.Here, A may also
compensate T, an employee who does not perform settlement services in
this or any transaction, for referring business to a business entity in
an affiliate relationship with A. Z, who does not perform settlement
services in this or any transaction, can also be compensated by D, but
not by anyone else. Employees who perform settlement services cannot be
compensated for referrals to other settlement service providers. None
of the entities in an affiliated relationship with each other may pay
for referrals received from an affiliate's employees.
Sections
3500.15(b)(3)(i)(A) and (B) set forth the permissible exchanges
of funds between affiliated business entities. In all circumstances
described a
{{12-31-08 p.7041}}statement in the
controlled business disclosure format must be provided to a potential
consumer at or before the time that the referral is made.
12. Facts: A, a real estate broker is affiliated with
B, a mortgage lender, and C, a title agency. A employs F to advise and
assist any customers of A who have executed sales contracts regarding
mortgage loans and title insurance. F collects and transmits (by
computer, fax, mail, or other means) loan applications or other
information to B and C for processing. A pays F a small salary and a
bonus for every loan closed with B or title insurance issued with C. F
furnishes the controlled business disclosure to consumers at the time
of each referral. F receives no other compensation from the real estate
or mortgage transaction and performs no settlement services in any
transaction. At the end of each of A's fiscal years, M, a managerial
employee of A, receives a $1,000 bonus if 20% of the consumers who
purchase a home through A close a loan on the home with B and have the
title issued by C. During the year, M acted as a real estate agent for
his neighbor and received a real estate sales commission for selling
his neighbor's home.
Comments: Under
§ 3500.14(g)(1),
employers may pay their own bona fide employees for
generating business for their employer (§ 3500.14(g)(1)(vii)).
Employers may also pay their own bona fide employees for
generating business for their affiliate business entities
(§ 3500.14(g)(1)(ix)), as long as the employees do not perform
settlement services in any transaction and disclosure is made. This
permits a company to employ a person whose primary function is to
market the employer's or its affiliate's settlement services
(frequently referred to as a Financial Services Representative, or
"FSR"). An FSR may not perform any settlement services including,
for example, those services of a real estate agent, loan processor,
settlement agent, attorney, or mortgage broker. In accordance with the
terms of the exemption at § 3500.14(g)(1)(ix), the marketing of a
settlement service or product of an affiliated entity, including the
collection and conveyance of information or the taking of an
application or order for the services of an affiliated entity, does not
constitute the performance of a settlement service. Under the
exemption, marketing of a settlement service or product also may
include incidental communications with the consumer after the
application or order, such as providing the consumer with information
about the status of an application or order; marketing may not include
serving as the ongoing point of contact for coordinating the delivery
and provision of settlement services.
Thus, in the circumstances described, F and M may receive the
additional compensation without violating RESPA.
Also, employers may pay managerial employees compensation in the
form of bonuses based on a percentage of transactions completed by an
affiliated company (frequently called a "capture rate"), as long
as the payment is not directly calculated as a multiple of the number
or value of the referrals. 24 CFR 3500.14(g)(1)(viii). A managerial
employee who receives compensation for performing settlement services
in three or fewer transactions in any calendar year "does not
routinely" deal directly with the consumer and is not precluded from
receiving managerial compensation.
13. Facts: A is a mortgage broker who provides
origination services to submit a loan to a Lender for approval. The
mortgage broker charges the borrower a uniform fee for the total
origination services, as well as a direct up-front charge for
reimbursement of credit reporting, appraisal services or similar
charges.
Comment: The mortgage broker's fee must be itemized in
the Good Faith Estimate and on the HUD--1 Settlement Statement. Other
charges which are paid for by the borrower and paid in advance are
listed as P.O.C. on the HUD--1 Settlement Statement, and reflect the
actual provider charge for such services. Also, any other fee or
payment received by the mortgage broker from either the lender or the
borrower arising from the initial funding transaction, including a
servicing release premium or yield spread premium, is to be noted on
the Good Faith Estimate and listed in the 800 series of the HUD--1
Settlement Statement.
14. Facts: A is a dealer in home improvements who has
established funding arrangments with several lenders. Customers for
home improvements receive a proposed contract from A. The proposal
requires that customers both execute forms authorizing a
{{12-31-08 p.7042}}credit check and
employment verification, and, frequently, execute a dealer consumer
credit contract secured by a lien on the customer's (borrower's) 1- to
4-family residential property. Simultaneously with the completion and
certification of the home improvement work, the note is assigned by the
dealer to a funding lender.
Comments: The loan that is assigned to the funding
lender is a loan covered by RESPA, when a lien is placed on the
borrower's 1- to 4-family residential structure. The dealer loan or
consumer credit contract originated by a dealer is also a RESPA-covered
transaction, except when the dealer is not a "creditor" under the
definition of "federally related mortgage loan" in
§ 3500.2. The lender to
whom the loan will be assigned is responsible for assuring that the
lender or the dealer delivers to the borrower a Good Faith Estimate of
closing costs consistent with Regulation X, and that the HUD--1 or
HUD--1A Settlement Statement is used in conjunction with the settlement
of the loan to be assigned. A dealer who, under § 3500.2, is covered
by RESPA as a creditor is responsible for the Good Faith Estimate of
Closing Costs and the use of the appropriate settlement statement in
connection with the loan.
[Codified to 24 C.F.R. Part 3500, Appendix B]
[Appendix B amended at 59 Fed. Reg. 6521, February 10,
1994, effective August 9, 1994; 61 Fed. Reg. 13251, March 26, 1996,
effective April 1, 1996; 61 Fed. Reg. 29253, June 7, 1996, effective
October 7, 1996; 61 Fed. Reg. 58476, November 15, 1996, effective
January 14, 1997]
Appendix C to Part 3500 Instructions for Completing Good Faith
Estimate (GFE) Form
The following are instructions for completing the GFE
required under section 5 of RESPA and 24 CFR 3500.7 of the Department
of Housing and Urban Development regulations. The standardized form set
forth in this Appendix is the required GFE form and must be provided
exactly as specified. The instructions for completion of the GFE are
primarily for the benefit of the loan originator who prepares the form
and need not be transmitted to the borrower(s) as an integral part of
the GFE. The required standardized GFE form must be prepared completely
and accurately. A separate GFE must be provided for each loan where a
transaction will involve more than one mortgage loan.
General Instructions
The loan originator preparing the GFE may fill in information and
amounts on the form by typewriter, hand printing, computer printing, or
any other method producing clear and legible results. Under these
instructions, the "form" refers to the required standardized GFE
form. Although the standardized GFE is a prescribed form, Blocks 3, 6,
and 11 on page 2 may be adapted for use in particular loan situations,
so that additional lines may be inserted there, and unused lines may be
deleted.
All fees for categories of charges shall be disclosed in U.S. dollar
and cent amounts.
Specific Instructions
Page 1
Top of the Form--The loan originator must enter its name,
business address, telephone number, and email address, if any, on the
top of the form, along with the applicant's name, the address or
location of the property for which financing is sought, and the date of
the GFE.
"Purpose."--This section describes the general
purpose of the GFE as well as additional information available to the
applicant.
"Shopping for your loan."--This section requires no
loan originator action.
"Important dates."--This section briefly states
important deadlines after which the loan terms that are the subject of
the GFE may not be available to the applicant. In Line 1, the loan
originator must state the date and, if necessary, time until which the
interest rate for the GFE will be available. In Line 2, the loan
originator must state the date until which the
{{12-31-08 p.7043}}estimate of all other
settlement charges for the GFE will be available. This date must be at
least 10 business days from the date of the GFE. In Line 3, the loan
originator must state how many calendar days within which the applicant
must go to settlement once the interest rate is locked. In Line 4, the
loan originator must state how many calendar days prior to settlement
the interest rate would have to be locked, if applicable.
"Summary of your loan."--In this section, for all
loans the loan originator must fill in, where indicated:
(i) The initial loan amount;
(ii) The loan term; and
(iii) The initial interest rate.
The loan originator must fill in the initial monthly amount owed for
principal, interest, and any mortgage insurance. The amount shown must
be the greater of: (1) The required monthly payment for principal and
interest for the first regularly scheduled payment, plus any monthly
mortgage insurance payment; or (2) the accrued interest for the first
regularly scheduled payment, plus any monthly mortgage insurance
payment.
The loan originator must indicate whether the interest rate can
rise, and, if it can, must insert the maximum rate to which it can rise
over the life of the loan. The loan originator must also indicate the
period of time after which the interest rate can first change.
The loan originator must indicate whether the loan balance can rise
even if the borrower makes payments on time, for example in the case of
a loan with negative amortization. If it can, the loan originator must
insert the maximum amount to which the loan balance can rise over the
life of the loan. For federal, state, local, or tribal housing programs
that provide payment assistance, any repayment of such program
assistance should be excluded from consideration in completing this
item. If the loan balance will increase only because escrow items are
being paid through the loan balance, the loan originator is not
required to check the box indicating that the loan balance can rise.
The loan originator must indicate whether the monthly amount owed
for principal, interest, and any mortgage insurance can rise even if
the borrower makes payments on time. If the monthly amount owed can
rise even if the borrower makes payments on time, the loan originator
must indicate the period of time after which the monthly amount owed
can first change, the maximum amount to which the monthly amount owed
can rise at the time of the first change, and the maximum amount to
which the monthly amount owed can rise over the life of the loan. The
amount used for the monthly amount owed must be the greater of: (1) The
required monthly payment for principal and interest for that month,
plus any monthly mortgage insurance payment; or (2) the accrued
interest for that month, plus any monthly mortgage insurance payment.
The loan originator must indicate whether the loan includes a
prepayment penalty, and, if so, the maximum amount that it could be.
The loan originator must indicate whether the loan requires a
balloon payment and, if so, the amount of the payment and in how many
years it will be due.
"Escrow account information."--The loan originator
must indicate whether the loan includes an escrow account for property
taxes and other financial obligations. The amount shown in the
"Summary of your loan" section for "Your initial monthly
amount owed for principal, interest, and any mortgage insurance"
must be entered in the space for the monthly amount owed in this
section.
"Summary of your settlement charges."--On this
line, the loan originator must state the Adjusted Origination Charges
from subtotal A of page 2, the Charges for All Other Settlement
Services from subtotal B of page 2, and the Total Estimated Settlement
Charges from the bottom of page 2.
Page 2
"Understanding your estimated settlement
charges."--This section details 11 settlement cost categories
and amounts associated with the mortgage loan. For purposes of
determining whether a tolerance has been met, the amount on the GFE
should be compared with the
{{12-31-08 p.7044}}total of any amounts
shown on the HUD--1 in the borrower's column and any amounts paid
outside closing by or on behalf of the borrower.
``Your Adjusted Origination Charges''
Block 1, "Our origination charge."--The loan
originator must state here all charges that all loan originators
involved in this transaction will receive, except for any charge for
the specific interest rate chosen (points). A loan originator may not
separately charge any additional fees for getting this loan, including
for application, processing, or underwriting. The amount stated in
Block 1 is subject to zero tolerance, i.e., the amount may not increase
at settlement.
Block 2, "Your credit or charge (points) for the specific
interest rate chosen."--For transactions involving mortgage
brokers, the mortgage broker must indicate through check boxes whether
there is a credit to the borrower for the interest rate chosen on the
loan, the interest rate, and the amount of the credit, or whether there
is an additional charge (points) to the borrower for the interest rate
chosen on the loan, the interest rate, and the amount of that charge.
Only one of the boxes may be checked; a credit and charge cannot occur
together in the same transaction.
For transactions without a mortgage broker, the lender may choose
not to separately disclose in this block any credit or charge for the
interest rate chosen on the loan; however, if this block does not
include any positive or negative figure, the lender must check the
first box to indicate that "The credit or charge for the interest
rate you have chosen" is included in "Our origination charge"
above (see Block 1 instructions above), must insert the interest rate,
and must also insert "0" in Block 2. Only one of the boxes may be
checked; a credit and charge cannot occur together in the same
transaction.
For a mortgage broker, the credit or charge for the specific
interest rate chosen is the net payment to the mortgage broker from the
lender (i.e., the sum of all payments to the mortgage broker from the
lender, including payments based on the loan amount, a flat rate, or
any other computation, and in a table funded transaction, the loan
amount less the price paid for the loan by the lender). When the net
payment to the mortgage broker from the lender is positive, there is a
credit to the borrower and it is entered as a negative amount in Block
2 of the GFE. When the net payment to the mortgage broker from the
lender is negative, there is a charge to the borrower and it is entered
as a positive amount in Block 2 of the GFE. If there is no net payment
(i.e., the credit or charge for the specific interest rate chosen is
zero), the mortgage broker must insert "0" in Block 2 and may
check either the box indicating there is a credit of "0" or the
box indicating there is a charge of "0".
The amount stated in Block 2 is subject to zero tolerance while the
interest rate is locked, i.e., any credit for the interest rate chosen
cannot decrease in absolute value terms and any charge for the interest
rate chosen cannot increase. (Note: An increase in the credit is
allowed since this increase is a reduction in cost to the borrower. A
decrease in the credit is not allowed since it is an increase in cost
to the borrower.)
Line A, "Your Adjusted Origination Charges."--The
loan originator must add the numbers in Blocks 1 and 2 and enter this
subtotal at highlighted Line A. The subtotal at Line A will be a
negative number if there is a credit in Block 2 that exceeds the charge
in Block 1. The amount stated in Line A is subject to zero tolerance
while the interest rate is locked.
In the case of "no cost" loans, where "no cost" refers
only to the loan originator's fees, Line A must show a zero charge as
the adjusted origination charge. In the case of "no cost" loans
where "no cost" encompasses third party fees as well as the
upfront payment to the loan originator, all of the third party fees
listed in Block 3 through Block 11 to be paid for by the loan
originator (or borrower, if any) must be itemized and listed on the
GFE. The credit for the interest rate chosen must be large enough that
the total for Line A will result in a negative number to cover the
third party fees.
``Your Charges for All Other Settlement Services''
There is a 10 percent tolerance applied to the sum of the prices of
each service listed in Block 3, Block 4, Block 5, Block 6, and Block 7,
where the loan originator requires the use of a particular provider or
the borrower uses a provider selected or identified by the loan
originator. Any services in Block 4, Block 5, or Block 6 for which the
borrower
{{12-31-08 p.7045}}selects a provider other
than one identified by the loan originator are not subject to any
tolerance and, at settlement, would not be included in the sum of the
charges on which the 10 percent tolerance is based. Where a loan
originator permits a borrower to shop for third party settlement
services, the loan originator must provide the borrower with a written
list of settlement services providers at the time of the GFE, on a
separate sheet of paper.
Block 3, "Required services that we select."--In
this block, the loan originator must identify each third party
settlement service required and selected by the loan originator
(excluding title services), along with the estimated price to be paid
to the provider of each service. Examples of such third party
settlement services might include provision of credit reports,
appraisals, flood checks, tax services, and any upfront mortgage
insurance premium. The loan originator must identify the specific
required services and provide an estimate of the price of each service.
Loan originators are also required to add the individual charges
disclosed in this block and place that total in the column of this
block. The charge shown in this block is subject to an overall 10
percent tolerance as described above.
Block 4, "Title services and lender's title
insurance."--In this block, the loan originator must state the
estimated total charge for third party settlement service providers for
all closing services, regardless of whether the providers are selected
or paid for by the borrower, seller, or loan originator. The loan
originator must also include any lender's title insurance premiums,
when required, regardless of whether the provider is selected or paid
for by the borrower, seller, or loan originator. All fees for title
searches, examinations, and endorsements, for example, would be
included in this total. The charge shown in this block is subject to an
overall 10 percent tolerance as described above.
Block 5, "Owners's title insurance."--In this
block, for all purchase transactions the loan originator must provide
an estimate of the charge for the owner's title insurance and related
endorsements, regardless of whether the providers are selected or paid
for by the borrower, seller, or loan originator. For non-purchase
transactions, the loan originator may enter "NA" or "Not
Applicable" in this Block. The charge shown in this block is subject
to an overall 10 percent tolerance as described above.
Block 6, "Required services that you can shop
for."--In this block, the loan originator must identify each
third party settlement service required by the loan originator where
the borrower is permitted to shop for and select the settlement service
provider (excluding title services), along with the estimated charge to
be paid to the provider of each service. The loan originator must
identify the specific required services (e.g., survey, pest inspection)
and provide an estimate of the charge of each service. The loan
originator must also add the individual charges disclosed in this block
and place the total in the column of this block. The charge shown in
this block is subject to an overall 10 percent tolerance as described
above.
Block 7, "Government recording charges."--In this
block, the loan originator must estimate the state and local government
fees for recording the loan and title documents that can be expected to
be charged at settlement. The charge shown in this block is subject to
an overall 10 percent tolerance as described above.
Block 8, "Transfer taxes."--In this block, the loan
originator must estimate the sum of all state and local government fees
on mortgages and home sales that can be expected to be charged at
settlement, based upon the proposed loan amount or sales price and on
the property address. A zero tolerance applies to the sum of these
estimated fees.
Block 9, "Initial deposit for your escrow
account."--In this block, the loan originator must estimate the
amount that it will require the borrower to place into a reserve or
escrow account at settlement to be applied to recurring charges for
property taxes, homeowner's and other similar insurance, mortgage
insurance, and other periodic charges. The loan originator must
indicate through check boxes if the reserve or escrow account will
cover future payments for all tax, all hazard insurance, and other
obligations that the loan originator requires to be paid as they fall
due. If the reserve or escrow account includes some, but not all,
property taxes or hazard insurance, or if it includes mortgage
insurance, the loan originator should check "other" and then list
the items included.
Block 10, "Daily interest charges."--In this block,
the loan originator must estimate the total amount that will be due at
settlement for the daily interest on the loan from the date of
settlement until the first day of the first period covered by scheduled
mortgage payments. The loan originator must also indicate how this
total amount is calculated by providing the
{{12-31-08 p.7046}}amount of the interest
charges per day and the number of days used in the calculation, based
on a stated projected closing date.
Block 11, "Homeowner's insurance."--The loan
originator must estimate in this block the total amount of the premiums
for any hazard insurance policy and other similar insurance, such as
fire or flood insurance that must be purchased at or before settlement
to meet the loan originator's requirements. The loan originator must
also separately indicate the nature of each type of insurance required
along with the charges. To the extent a loan originator requires that
such insurance be part of an escrow account, the amount of the initial
escrow deposit must be included in Block 9.
Line B, "Your Charges for All Other Settlement
Services."--The loan originator must add the numbers in Blocks
3 through 11 and enter this subtotal in the column at highlighted Line
B.
Line A+B, "Total Estimated Settlement
Charges."--The loan originator must add the subtotals in the
right-hand column at highlighted Lines A and B and enter this total in
the column at highlighted Line A+B.
Page 3
``Instructions''
"Understanding which charges can change at
settlement."--This section informs the applicant about which
categories of settlement charges can increase at closing, and by how
much, and which categories of settlement charges cannot increase at
closing. This section requires no loan originator action.
"Using the tradeoff table."--This section is
designed to make borrowers aware of the relationship between their
total estimated settlement charges on one hand, and the interest rate
and resulting monthly payment on the other hand. The loan originator
must complete the left hand column using the loan amount, interest
rate, monthly payment figure, and the total estimated settlement
charges from page 1 of the GFE. The loan originator, at its option, may
provide the borrower with the same information for two alternative
loans, one with a higher interest rate, if available, and one with a
lower interest rate, if available, from the loan originator. The loan
originator should list in the tradeoff table only alternative loans for
which it would presently issue a GFE based on the same information the
loan originator considered in issuing this GFE. The alternative loans
must use the same loan amount and be otherwise identical to the loan in
the GFE. The alternative loans must have, for example, the identical
number of payment periods; the same margin, index, and adjustment
schedule if the loans are adjustable rate mortgages; and the same
requirements for prepayment penalty and balloon payments. If the loan
originator fills in the tradeoff table, the loan originator must show
the borrower the loan amount, the alternative interest rate,
alternative monthly payment, the change in the monthly payment from the
loan in this GFE to the alternative loan, the change in the total
settlement charges from the loan in this GFE to the alternative loan,
and the total settlement charges for the alternative loan. If these
options are available, an applicant may request a new GFE, and a new
GFE must be provided by the loan originator.
"Using the shopping chart."--This chart is a
shopping tool to be provided by the loan originator for the borrower to
complete, in order to compare GFEs.
"If your loan is sold in the future."--This section
requires no loan originator action.
{{12-31-08 p.7047}}_______
{{12-31-08 p.7048}}_______
{{12-31-08 p.7049}}_______
{{12-31-08 p.7050}}
[Codified to 24 C.F.R. Part 3500, Appendix C]
[Appendix C amended at 57 Fed. Reg. 56856, December 1,
1992, effective December 2, 1992; 58 Fed. Reg. 17165, April 1, 1993,
effective December 2, 1992; 59 Fed. Reg. 6521, February 10, 1994,
effective August 9, 1994; 63 Fed. Reg. 3237, January 21, 1998,
effective February 20, 1998; 73 Fed. Reg. 68253, November 17, 2008,
effective January 16, 2009]
APPENDIX D TO PART 3500 Affiliated
Business Arrangement Disclosure Statement Format
Notice
To: |
_______ |
Property: _______ |
From: |
_______ |
Date: _______ |
| (Entity
Making Statement)
|
This is to give you notice that [referring party]
has a business relationship with
[settlement services provider(s)] . [Describe the
nature of the relationship between the referring party and the
provider(s), including percentage of ownership interest, if
applicable.] Because of this relationship, this referral may provide
[referring party] a financial or other benefit.
[A.] Set forth below is the estimated charge or range of charges
for the settlement services listed. You are NOT required to use the
listed provider(s) as a condition for [settlement of your loan on]
[or] [purchase, sale, or refinance of] the subject property. THERE
ARE FREQUENTLY OTHER SETTLEMENT SERVICE PROVIDERS AVAILABLE WITH
SIMILAR SERVICES. YOU ARE FREE TO SHOP AROUND TO DETERMINE THAT YOU ARE
RECEIVING THE BEST SERVICES AND THE BEST RATE FOR THESE
SERVICES.
[provider
and settlement service] |
[charge or range of
charges] |
|
____________________________________________ |
_____________________ |
|
____________________________________________ |
_____________________
|
[B.] Set forth below is the estimated charge or range of charges
for the settlement services of an attorney, credit reporting agency, or
real estate appraiser that we, as your lender, will require you to use,
as a condition of your loan on this property, to represent our
interests in the transaction.
[provider
and settlement service] |
[charge or range of
charges] |
|
____________________________________________ |
_____________________ |
|
____________________________________________ |
_____________________
|
ACKNOWLEDGEMENT
I/we have read this disclosure form, and understand that
[referring party] is referring me/us to purchase the
above-described settlement service(s) and may receive a financial or
other benefit as the result of this referral.
|
_____________________ Signature
|
---|
{{12-31-08 p.7050.01}}
[INSTRUCTIONS TO PREPARER:] [Use paragraph A for referrals other
than those by a lender to an attorney, a credit reporting agency, or a
real estate appraiser that a lender is requiring a borrower to use to
represent the lender's interests in the transaction. Use paragraph B
for those referrals to an attorney, credit reporting agency, or real
estate appraiser that a lender is requiring a borrower to use to
represent the lender's interests in the transaction. When applicable,
use both paragraphs. Specific timing rules for delivery of the
affiliated business disclosure statement are set forth in 24 CFR
3500.15(b)(1) of Regulation X). These INSTRUCTIONS TO PREPARER should
not appear on the statement.]
[Codified to 24 C.F.R. Part 3500, Appendix D]
[Appendix D amended at 57 Fed. Reg. 56856, December 1,
1992, effective December 2, 1992; 58 Fed. Reg. 17165, April 1, 1993,
effective December 2, 1992; 61 Fed. Reg. 29254, June 7, 1996, effective
October 7, 1996; 61 Fed. Reg. 41944, August 12, 1996, effective October
7, 1996; 61 Fed. Reg. 58477, November 15, 1996, effective January 14,
1997]
APPENDIX EARITHMETIC STEPS
I. Example Illustrating Aggregate Analysis:
ASSUMPTIONS:
Disbursements:
$360 for school taxes disbursed on September 20
$1,200 for county property taxes:
$500 disbursed on July 25
$700 disbursed on December 10
Cushion: One-sixth of estimated annual disbursements
Settlement: May 15
First Payment: July
1
STEP
1.--INITIAL TRIAL | STEP 2.--ADJUSTED | STEP 3.--TRIAL
BALANCE |
BALANCE | TRIAL BALANCE | WITH
CUSHION |
| [Increase monthly balances
to | |
| eliminate negative
balances] |
| Aggregate
| | Aggregate
| | Aggregate |
|
pmt |
disb |
bal |
|
pmt |
disb |
bal |
|
pmt |
disb |
bal |
Jun |
0 |
0 |
0 |
Jun |
0 |
0 |
780 |
Jun |
0 |
0 |
1040 |
Jul |
130 |
500 |
370 |
Jul |
130 |
500 |
410 |
Jul |
130 |
500 |
670 |
Aug |
130 |
0 |
240 |
Aug |
130 |
0 |
540 |
Aug |
130 |
0 |
800 |
Sep |
130 |
360 |
470 |
Sep |
130 |
360 |
310 |
Sep |
130 |
360 |
570 |
Oct |
130 |
0 |
340 |
Oct |
130 |
0 |
440 |
Oct |
130 |
0 |
700 |
Nov |
130 |
0 |
210 |
Nov |
130 |
0 |
570 |
Nov |
130 |
0 |
830 |
Dec |
130 |
700 |
780 |
Dec |
130 |
700 |
0 |
Dec |
130 |
700 |
260 |
Jan |
130 |
0 |
650 |
Jan |
130 |
0 |
130 |
Jan |
130 |
0 |
390 |
Feb |
130 |
0 |
520 |
Feb |
130 |
0 |
260 |
Feb |
130 |
0 |
520 |
Mar |
130 |
0 |
390 |
Mar |
130 |
0 |
390 |
Mar |
130 |
0 |
650 |
Apr |
130 |
0 |
260 |
Apr |
130 |
0 |
520 |
Apr |
130 |
0 |
780 |
May |
130 |
0 |
130 |
May |
130 |
0 |
650 |
May |
130 |
0 |
910 |
Jun |
130 |
0 |
0 |
Jun |
130 |
0 |
780 |
Jun |
130 |
0 |
1040
| |
{{12-31-08 p.7050.02}}
II. Example Illustrating Single-Item Analysis
Assumptions:
Disbursements:
$360 for school taxes disbursed on September 20
$1,200 for county property taxes:
$500 disbursed on July 25
$700 disbursed on December 10
Cushion: One-sixth of estimated annual disbursements
Settlement: May 15
First Payment: July 1
STEP 1.INITIAL TRIAL
BALANCE
| Single-item
| Taxes | School
taxes
|
pmt |
disb |
bal |
pmt |
disb |
bal |
Jun |
0 |
0 |
0 |
0 |
0 |
0 |
Jul |
100 |
500 |
400 |
30 |
0 |
30 |
Aug |
100 |
0 |
300 |
30 |
0 |
60 |
Sep |
100 |
0 |
200 |
30 |
360 |
270 |
Oct |
100 |
0 |
100 |
30 |
0 |
240 |
Nov |
100 |
0 |
0 |
30 |
0 |
210 |
Dec |
100 |
700 |
600 |
30 |
0 |
180 |
Jan |
100 |
0 |
500 |
30 |
0 |
150 |
Feb |
100 |
0 |
400 |
30 |
0 |
120 |
Mar |
100 |
0 |
300 |
30 |
0 |
90 |
Apr |
100 |
0 |
200 |
30 |
0 |
60 |
May |
100 |
0 |
100 |
30 |
0 |
30 |
Jun |
100 |
0 |
0 |
30 |
0 |
0
| |
---|
|
---|
STEP 2.ADJUSTED TRIAL BALANCE (INCREASE MONTHLY
BALANCES TO ELIMINATE NEGATIVE
BALANCES)
| Single-item
| Taxes | School
taxes
|
pmt |
disb |
bal |
pmt |
disb |
bal |
Jun |
0 |
0 |
600 |
0 |
0 |
270 |
Jul |
100 |
500 |
200 |
30 |
0 |
300 |
Aug |
100 |
0 |
300 |
30 |
0 |
330 |
Sep |
100 |
0 |
400 |
30 |
360 |
0 |
Oct |
100 |
0 |
500 |
30 |
0 |
30 |
Nov |
100 |
0 |
600 |
30 |
0 |
60 |
Dec |
100 |
700 |
0 |
30 |
0 |
90 |
Jan |
100 |
0 |
100 |
30 |
0 |
120 |
Feb |
100 |
0 |
200 |
30 |
0 |
150 |
Mar |
100 |
0 |
300 |
30 |
0 |
180 |
Apr |
100 |
0 |
400 |
30 |
0 |
210 |
May |
100 |
0 |
500 |
30 |
0 |
240 |
Jun |
100 |
0 |
600 |
30 |
0 |
270
| |
---|
|
---|
{{12-31-08 p.7050.03}}
STEP 3.TRIAL BALANCE WITH
CUSHION
| Single-item
| Taxes | School
taxes
|
pmt |
disb |
bal |
pmt |
disb |
bal |
Jun |
0 |
0 |
800 |
0 |
0 |
330 |
Jul |
100 |
500 |
400 |
30 |
0 |
360 |
Aug |
100 |
0 |
500 |
30 |
0 |
390 |
Sep |
100 |
0 |
600 |
30 |
360 |
60 |
Oct |
100 |
0 |
700 |
30 |
0 |
90 |
Nov |
100 |
0 |
800 |
30 |
0 |
120 |
Dec |
100 |
700 |
200 |
30 |
0 |
150 |
Jan |
100 |
0 |
300 |
30 |
0 |
180 |
Feb |
100 |
0 |
400 |
30 |
0 |
210 |
Mar |
100 |
0 |
500 |
30 |
0 |
240 |
Apr |
100 |
0 |
600 |
30 |
0 |
270 |
May |
100 |
0 |
700 |
30 |
0 |
300 |
Jun |
100 |
0 |
800 |
30 |
0 |
330
| |
---|
|
---|
[Codified to 24 C.F.R. Part 3500, Appendix E]
[Appendix F added at 59 Fed. Reg. 53908, October 26, 1994,
effective April 24, 1995; amended at 60 Fed. Reg. 8816, February 15,
1995, effective May 24, 1995; Appendix F redesignated as Appendix E at
61 Fed. Reg. 29255, June 7, 1996, effective October 7, 1996; 73 Fed.
Reg. 68259, November 17, 2008, effective January 16,
2009]
Appendix MS1 to Part 3500
[Sample language; use business stationery or similar
heading] [Date]
SERVICING DISCLOSURE STATEMENT NOTICE TO FIRST LIEN MORTGAGE
LOAN APPLICANTS: THE RIGHT TO COLLECT YOUR MORTGAGE LOAN PAYMENTS MAY
BE TRANSFERRED
You are applying for a mortgage loan covered by the Real Estate
Settlement Procedures Act (RESPA) (12 U.S.C. 2601 et seq.).
RESPA gives you certain rights under Federal law. This statement
describes whether the servicing for this loan may be transferred to a
different loan servicer. "Servicing" refers to collecting your
principal, interest, and escrow payments, if any, as well as sending
any monthly or annual statements, tracking account balances, and
handling other aspects of your loan. You will be given advance notice
before a transfer occurs.
Servicing Transfer Information
[We may assign, sell, or transfer the servicing of your loan while
the loan is outstanding.]
[or]
[We do not service mortgage loans of the type for which you
applied. We intend to assign, sell, or transfer the servicing of your
mortgage loan before the first payment is due.]
[or]
[The loan for which you have applied will be serviced at this
financial institution and we do not intend to sell, transfer, or assign
the servicing of the loan.]
[INSTRUCTIONS TO PREPARER: Insert the date and select the
appropriate language under "Servicing Transfer Information." The
model format may be annotated with further information that clarifies
or enhances the model language.]
{{12-31-08 p.7050.04}}
[Codified to 24 C.F.R. Part 3500, Appendix MS--1]
[Appendix MS--1 added at 59 Fed. Reg. 65452, December 19,
1994; amended at 60 Fed. Reg. 2643, January 10, 1995, effective June
19, 1995; 60 Fed. Reg. 5962, January 31, 1995; revised at 73 Fed. Reg.
68259, November 17, 2008, effective January 16,
2009
APPENDIX MS-2 to PART 3500
[Sample language; use business stationery or similar
heading]
NOTICE OF ASSIGNMENT, SALE, OR TRANSFER OF SERVICING RIGHTS
You are hereby notified that the servicing of your mortgage loan,
that is, the right to collect payments from you, is being assigned,
sold or transferred from
_____________________ to _____________________, effective
_______.
The assignment, sale or transfer of the servicing of the
mortgage loan does not affect any term or condition of the mortgage
instruments, other than terms directly related to the servicing of your
loan.
Except in limited circumstances, the law requires that your
present servicer send you this notice at least 15 days before the
effective date of transfer, or at closing. Your new servicer must also
send you this notice no later than 15 days after this effective date or
at closing. [In this case, all necessary information is combined in
this one notice].
Your present servicer is ____________________________________________. If you have any
questions relating to the transfer of servicing from your present
servicer call ____________________________________________[enter the name of an individual or
department here] between _______a.m. and _______p.m. on
the following days _______. This is a [toll-free] or [collect
call] number.
Your new servicer will be _____________________.
The business address for your new servicer is:
_______
____________________________________________ .
{{6-30-05 p.7051}}
The [toll-free] [collect call] telephone number of your
new servicer is _______. If you have any questions relating to
the transfer of servicing to your new servicer call _____________________[enter
the name of an individual or department here] at _______[toll
free or collect call telephone number] between _______a.m. and
_______p.m. on the following days _______.
The date that your present servicer will stop accepting
payments from you is _______. The date that your new servicer
will start accepting payments from you is _______. Send all
payments due on or after that date to your new servicer.
[Use this paragraph if appropriate; otherwise omit] The
transfer of servicing rights may affect the terms of or the continued
availability of mortgage life or disability insurance or any other type
of optional insurance in the following manner:
_______
_______
_______
_______
_______ .
and you should take the following action to maintain coverage:
_______
_______
_______ .
You should also be aware of the following information, which
is set out in more detail in Section 6 of the Real Estate Settlement
Procedures Act (RESPA) (12 U.S.C. 2605):
During the 60-day period following the effective date of the
transfer of the loan servicing, a loan payment received by your old
servicer before its due date may not be treated by the new loan
servicer as late, and a late fee may not be imposed on you.
Section 6 of RESPA (12 U.S.C.
2605) gives you certain consumer rights. If you send a
"qualified written request" to your loan servicer concerning the
servicing of your loan, your servicer must provide you with a written
acknowledgment within 20 Business Days of receipt of your request. A
"qualified written request" is a written correspondence, other
than notice on a payment coupon or other payment medium supplied by the
servicer, which includes your name and account number, and your reasons
for the request. [If you want to send a "qualified written
request" regarding the servicing of your loan, it must be sent to
this address:
_______
____________________________________________ ]
Not later than 60 Business Days after receiving your
request, your servicer must make any appropriate corrections to your
account, and must provide you with a written clarification regarding
any dispute. During this 60-Business Day period, your servicer may not
provide information to a consumer reporting agency concerning any
overdue payment related to such period or qualified written request.
However, this does not prevent the servicer from initiating foreclosure
if proper grounds exist under the mortgage documents.
A Business Day is a day on which the offices of the business
entity are open to the public for carrying on substantially all of its
business functions.
Section 6 of RESPA also provides for damages and costs for
individuals or classes of individuals in circumstances where servicers
are shown to have violated the requirements of that Section. You should
seek legal advice if you believe your rights have been
violated.
{{6-30-05 p.7052}}
[INSTRUCTIONS TO PREPARER: Delivery means placing the notice
in the mail, first class postage prepaid, prior to 15 days before the
effective date of transfer (transferor) or prior to 15 days after the
effective date of transfer (transferee). However, this notice may be
sent not more than 30 days after the effective date of the transfer of
servicing rights if certain emergency business situations occur.
See 24 CFR
§ 3500.21(d)(1)(ii). "Lender" may be substituted for
"present servicer" where appropriate. These instructions should
not appear on the format.]
____________________________________________ _______
PRESENT SERVICER [Signature not required] Date
[and][or]
____________________________________________ _______
FUTURE SERVICER [Signature not required] Date
[Codified to 24 C.F.R. Part 3500, Appendix MS--2]
[Appendix MS--2 added at 61 Fed. Reg. 13252, March 26,
1996, effective April 25, 1996]
{{6-30-05 p.7053}}
RESPA INTERPRETIVE RULING
[RESPA Interpretive Rule 1993--1]
Escrow Accounting Methods
The Department of Housing and Urban Development interprets section
10(a)(1) and (2) of the Real Estate Settlement Procedures Act (RESPA)
with respect to permissible escrow accounting methods as follows:
Both "individual- (or) single-item analysis" and "aggregate
(or) composite analysis" are acceptable escrow accounting methods
under sections 10(a)(1) and (2)
of RESPA for determining the maximum amounts which may be accumulated
in escrow accounts for purposes of this section. (Nothing in this
interpretation shall prevent mortgage loan documents from specifying an
accounting method or any other limitation which leads to lesser escrow
amounts than would result from these analyses.) Under individual- (or)
single-item analysis, each item accounted for may represent only a
single payee and the account for that payee may not be subdivided into
separate sub-accounts. The following appendix contains examples of
algorithms which illustrate these accounting methods. These
illustrations should not be interpreted as, in any manner, establishing
minimum balance requirements for escrow accounts; they are intended
only to illustrate these methods.
Appendix
"Aggregate (or) composite analysis" is a method of
computing required escrow balances and deposits considering all escrow
items as a whole. The following explains the accompanying chart:
Step 1. Under the aggregate method, in establishing
required payments from the borrower, the servicer would first project a
trial monthly (month-end) balance for the account as a whole over the
next twelve months (a trial running balance), assuming each estimated
disbursement is made in the month it is due and assuming payments from
the borrower equal to 1/12 of the estimated total annual escrow
account disbursements are received each month.
Step 2. The servicer would then examine the monthly
trial balance and would add to the first monthly balance an amount just
sufficient to bring the lowest monthly trial balance to zero and adjust
all subsequent monthly balances accordingly.
Step 3. The servicer then would add to the monthly
balance, if it chooses a "cushion" under section 10 of RESPA, up
to one-sixth of the estimated total annual escrow account
disbursements. This amount represents up to two months of escrow
payments to the servicer (net of any increases or decreases because of
prior year shortages or surpluses respectively).
Under this algorithm, when the account is being newly established,
at settlement, the monthly balance prior to the first payment (see step
3) is the amount to start the escrow account. If there are
disbursements after settlement but prior to the first monthly payment,
funds may also be collected for these disbursements. For ongoing
accounts, the servicer should compare the actual balance in the account
to the projected monthly balance after Step 3 to determine any shortage
to be made up by the borrower over the period or any surplus to be
returned to the borrower.
"Individual- (or) single-item analysis" is a method
of computing required escrow balances and deposits considering each
escrow item independently. The following explains the accompanying
chart:
Step 1. Under the single-item method, in establishing
required payments from the borrower, the servicer would first project a
separate trial monthly (month-end) balance for each item over the next
twelve months (a trial running balance), assuming each estimated
disbursement is made in the month it is due and assuming payments from
the borrower equal to 1/12 of the estimated total annual escrow
account disbursements for each item are received each month.
{{6-30-05 p.7054}}
Step 2. The servicer would then examine the monthly
trial balance for each item and would add to the first monthly balance
an amount just sufficient to bring the lowest monthly trial balance for
that item to zero and would adjust all subsequent monthly balances
accordingly.
Step 3. The servicer then would add to the monthly
balances for each item, if it chooses a "cushion" under section
10 of RESPA, up to one-sixth of the estimated total annual
disbursements for that escrow item. This amount represents up to two
months of escrow payments for each item to the servicer (net of any
increases or decreases because of prior year shortages or surpluses
respectively).
Under this algorithm, when the account is being newly established,
at settlement, the monthly balance prior to the first payment (see step
3) is the amount to start the escrow account. If there are
disbursements after settlement but prior to the first monthly payment,
funds may also be collected for these disbursements. For ongoing
accounts, the servicer should compare the actual balance for each item
in the account to the projected monthly balance after Step 3 to
determine any shortage to be made up by the borrower over the period or
any surplus to be returned to the borrower. Under this method, a
shortage or surplus is based on an analysis of the sum of all
individual item accounts.
Examples Illustrating Aggregate and Single-Item Analyses
Disbursements: $360 for school taxes disbursed
on September 20; $1,200 for county property taxes--$500 disbursed on
July 25, $700 disbursed on December 10.
Cushion: Two months.
Settlement: May 15.
First Payment: July 1.
{{6-30-05 p.7055}}
Single-item | Aggregate
| Taxes | School
taxes | All
|
Pmt |
Disb |
Bal |
Pmt |
Disb |
Bal |
Pmt |
Disb |
Bal |
Step
1--Initial Trial
Balance |
June |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
0 |
July |
100 |
500 |
-400 |
30 |
0 |
30 |
130 |
500 |
-370 |
August |
100 |
0 |
-300 |
-30 |
0 |
60 |
130 |
0 |
-240 |
September |
100 |
0 |
-200 |
30 |
360 |
-270 |
130 |
360 |
-470 |
October |
100 |
0 |
-100 |
30 |
0 |
-240 |
130 |
0 |
-340 |
November |
100 |
0 |
0 |
30 |
0 |
-210 |
130 |
0 |
-210 |
December |
100 |
700 |
-600 |
30 |
0 |
-180 |
130 |
700 |
-780 |
January |
100 |
0 |
-500 |
30 |
0 |
-150 |
130 |
0 |
-650 |
February |
100 |
0 |
-400 |
30 |
0 |
-120 |
130 |
0 |
-520 |
March |
100 |
0 |
-300 |
30 |
0 |
-90 |
130 |
0 |
-390 |
April |
100 |
0 |
-200 |
30 |
0 |
-60 |
130 |
0 |
-260 |
May |
100 |
0 |
-100 |
30 |
|
-30 |
130 |
0 |
-130 |
June |
100 |
0 |
0 |
30 |
0 |
0 |
130 |
0 |
0 |
Step
2--Adjusted Trial Balance--Increase Monthly Balances to Eliminte
Negative
Balance |
June |
0 |
0 |
600 |
0 |
0 |
270 |
0 |
0 |
780 |
July |
100 |
500 |
200 |
30 |
0 |
300 |
130 |
500 |
410 |
August |
100 |
0 |
300 |
30 |
0 |
330 |
130 |
0 |
540 |
September |
100 |
0 |
400 |
30 |
360 |
0 |
130 |
360 |
310 |
October |
100 |
0 |
500 |
30 |
0 |
30 |
130 |
0 |
440 |
November |
100 |
0 |
600 |
30 |
0 |
60 |
130 |
0 |
570 |
December |
100 |
700 |
0 |
30 |
0 |
90 |
130 |
700 |
0 |
January |
100 |
0 |
100 |
30 |
0 |
120 |
130 |
0 |
130 |
February |
100 |
0 |
200 |
30 |
0 |
150 |
130 |
0 |
260 |
March |
100 |
0 |
300 |
30 |
0 |
180 |
130 |
0 |
390 |
April |
100 |
0 |
400 |
30 |
0 |
210 |
130 |
0 |
250 |
May |
100 |
0 |
500 |
30 |
0 |
240 |
130 |
0 |
650 |
June |
100 |
0 |
600 |
30 |
0 |
270 |
130 |
0 |
780
| |
---|
|
{{6-30-05 p.7056}}
Single-item | Aggregate
| Taxes | School
taxes | All
|
Pmt |
Disb |
Bal |
Pmt |
Disb |
Bal |
Pmt |
Disb |
Bal |
Step
3--Trial Balance With
Cushion |
June |
0 |
0 |
800 |
0 |
0 |
330 |
0 |
0 |
1040 |
July |
100 |
500 |
400 |
30 |
0 |
360 |
130 |
500 |
670 |
August |
100 |
0 |
500 |
30 |
0 |
390 |
130 |
0 |
800 |
September |
100 |
0 |
600 |
30 |
360 |
60 |
130 |
960 |
570 |
October |
100 |
0 |
700 |
30 |
0 |
190 |
130 |
0 |
700 |
November |
100 |
0 |
800 |
30 |
0 |
120 |
130 |
0 |
830 |
December |
100 |
700 |
200 |
30 |
0 |
150 |
130 |
700 |
260 |
January |
100 |
0 |
300 |
30 |
0 |
180 |
130 |
0 |
390 |
February |
100 |
0 |
400 |
30 |
0 |
210 |
130 |
0 |
520 |
March |
100 |
0 |
500 |
30 |
0 |
240 |
130 |
0 |
650 |
April |
100 |
0 |
600 |
30 |
0 |
270 |
130 |
0 |
780 |
May |
100 |
0 |
700 |
30 |
0 |
300 |
130 |
0 |
910 |
June |
100 |
0 |
800 |
30 |
0 |
330 |
130 |
0 |
1040
| |
---|
|
[Source: 58 Fed. Reg. 5520, January 21,
1993]
{{6-30-05 p.7057}}
[RESPA Interpretive Rule 1993--2]
The Department hereby interprets section 908 of the Housing and
Community Development Act of 1992, Pub. L. 102--550, Approved October
28, 1992 (the 1992 Act), as requiring the Department to first complete
required rulemaking under the 1992 Act, which rulemaking will have its
own effective date, before junior or subordinate lien loans are covered
under RESPA. The provisions respecting refinancings have previously
been through rulemaking and are not affected by this interpretation.
This interpretation is an "interpretation" of RESPA for the
purpose of 19(a) of RESPA (12 U.S.C.
2617) (see also 24 CFR
3500.4(b)(ii) of the Revised RESPA Rule, effective December 2,
1992, found at 57 FR 49600). This interpretation is directed to all
regulatory agencies and any other concerned persons.
[Source: 58 Fed. Reg. 13706, March 15, 1993]
[The page following this is 7071.]
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