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What Bankers always wanted to know about the HUD-1, but were afraid to ask. Margaret Davey

What Bankers always wanted to know about the HUD-1, but were afraid to ask. Margaret Davey. Most Common HUD-1 Questions. What is an Insured Closing Letter?.

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What Bankers always wanted to know about the HUD-1, but were afraid to ask. Margaret Davey

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  1. What Bankers always wanted to know about the HUD-1, but were afraid to ask.Margaret Davey

  2. Most Common HUD-1 Questions What is an Insured Closing Letter? The title insurance company provides a letter that states they agree to replace settlement funds that are lost as the direct, proximate cause of fraud or dishonesty by the title insurance company’s agent or by the failure of the agent to follow closing instruction not inconsistent with the terms of the letter, subject to the terms of the letter. Some states charge a fee to provide this Insured Closing Letter. Only one Insured Closing Letter per title insurer each year. No need for one on each transaction unless investor requires.

  3. Most Common HUD-1 Questions Why is a title company preferred over closing at the lender’s office? A title company checks the authenticity of the sellers right to sell their home, if purchase money transaction. The settlement agent or closing attorney acts as a third party to facilitate real estate transactions. They oversee the completion and accuracy of all paperwork necessary to the closing, including escrows accounts and sometimes title matters. They are either licensed escrow officers or licensed attorney.

  4. Most Common HUD-1 Questions How does the Lender verify that the HUD-1 is acceptable regarding the tolerances? Our closing instructions reflect all the fees in each tolerance section i.e. zero tolerance, 10% tolerance and fees borrower can shop for. Our instructions reflect any overages for zero or ten percent tolerance. Use our closing instructions when you review a HUD-1 and the two should match perfectly. Any differences you should contact PeirsonPatterson for corrections which will amend the tolerance section.

  5. Most Common HUD-1 Questions Where should the survey fee be disclosed on the HUD-1? Depends on who requires the survey. (1) If lender required a survey as a condition of the loan and selected the surveyor it is reflected in 800 series. (2) If lender required a survey as a condition of the loan and borrower selected surveyor from provider list, it is shown in 1301 and itemized. (3) If survey was required to issue a lender’s or owners title insurance policy, charge is reflected in 1101 and must be further itemized and shown as a third party.

  6. Most Common HUD-1 Questions When you have 3rd party origination fees how are the fees broken down? Any third party fees (i.e. contract, processing, or underwriters) should be reflected on the itemized Addendum to the HUD-1.

  7. Most Common HUD-1 Questions Is it possible for a lender to include a credit in line 802 when it is not related to premium pricing or the interest rate? NO! Any other lender credit should be shown on page 1 of the HUD-1, line 204 or 205.

  8. Most Common HUD-1 Questions If the credit in line 802 increases due to interest rate change do I need to re-disclose? Yes, if you Relock/Lock loan.

  9. Most Common HUD-1 Questions If the credit in line 802 increases because the actual fees have increased on HUD-1 vs. GFE do I need to re-disclose? No, and any increases in the fees will be reflected and paid either in the zero tolerance or 10% tolerance category and credited on page 1 of HUD-1 line 204.

  10. Most Common HUD-1 Questions What line item does the Lock Extension Fee go on? Lock Extension Fees should be reflected on Line 802.

  11. Most Common HUD-1 Questions Why can’t borrower pay fees in line 1109 inside the box and in subsequent 1100 series? (i.e. 1109, 1110, 1111, 1112, etc.) All borrower fees must be listed in line 1101 detail box and can be further itemized outside the box in line 1109, or itemized on the Addendum to the HUD-1.

  12. Most Common HUD-1 Questions If Title Co. provides the lender with a flat fee for their title service fees (i.e. recording fees, courier fee, escrow or settlement fees, download fees, e-filing, tax certificates, guaranty fee, etc.), how do I handle it on the HUD-1? If the title company provides you a flat fee and no breakdown of any fees, then insert the full fee in line 1101 and none of the charges will be included in the APR calculation per Reg Z 226.4. This includes the recording fee.

  13. Most Common HUD-1 Questions What line item in the 1100 series do you charge for title endorsements? Some title companies reflect in detail box for 1101 and some include in total lender’s title insurance in line 1104.

  14. Most Common HUD-1 Questions What fees can be reflected in 1109, 1110, 1111, etc? Review of Warranty Deed can be reflected in borrower column if seller is providing their own deed and lender wants us to review and approve. If an attorney fee to clear title i.e. preparation of release of lien, other deeds, affidavits to set vested owner, this fee must be paid.

  15. Most Common HUD-1 Questions I know FHA MIP or PMI Premium is reflected in 902, but what line number is the VA Funding Fee and the USDA upfront fees shown? The same line is used for all the above types. Be sure to type in the payee “USDA /Guarantee Fee to USDA” or VA Funding Fee to VA”.

  16. Most Common HUD-1 Questions What if consumer (borrower) does not use service as shown on the GFE? You cannot reflect in the GFE column any fee that does not have a corresponding HUD-1 fee per RESPA roundup dated 7/1/2010 and effective 9/1/2010.

  17. Most Common HUD-1 Questions What fees are not required to be shown on a GFE? Any fee that is required by title company or contract to issue title insurance and close the transaction i.e. past due taxes, HOA fees, HOA transfer fees, etc. or fees borrower can shop for per the contract i.e. pest inspection, home warranty, etc., but not required by lender.

  18. Most Common HUD-1 Questions Does zero tolerance for HUD-1 line 803 mean that loan originators must double the cure of a tolerance violation of Line 801 or Line 802, because each tolerance violation on those lines also result in an increase in the Adjusted Origination Charge on Line 803? No, Correcting a Line 801 or Line 802 tolerance violation will serve to correct a tolerance violation that stems from the calculation of line 803. Lines 801 and 802 stand alone – each with own tolerance. Overage on one will not compensate for shortage on the other. Line 803 has no tolerance issues.

  19. Most Common HUD-1 Questions Provider List for Title Company: What if lender only gave a service provider for the Owner’s Title Insurance, but failed to list a provider for the title services and lenders title insurance? The Provider List must reflect the title company and address for the title service /lenders title insurance, in addition, must list the title company and address again for the owner’s title insurance. Since the title company for the title services is not listed on the provider list, then line 1101 and the roll up from line 1102 and 1104 must remain in the 10% tolerance category.

  20. Most Common HUD-1 Questions On Page 3 of the HUD-1 “Your Loan Term Is”, which is completed, the amortization period or the loan term if a balloon? The amortization period or the note term? RESPA states the loan term should be disclosed here, and the balloon due dates are also disclosed elsewhere in the “Summary of your Loan” box on the GFE and the HUD-1 forms. Per RESPA roundup 7/2010 Vol. 1 #11.

  21. Most Common HUD-1 Questions Where do I show on the HUD-1 collection of past due property taxes? On a refinance or cash out Line 104, 105 etc., if purchase money. Typically seller pays the taxes and it is shown either in the 1300 series or line 506 after payoffs.

  22. Most Common HUD-1 Questions Where do I show on the HUD-1 payoffs for 1st lien, 2nd lien, credit card payoffs on a refinance or cash out transaction? Payoffs should be reflected on Lines 104, 105, etc.

  23. Most Common HUD-1 Questions Where do I show on the HUD-1 to collect an Escrow Holdback for Repairs or Improvements? Escrow Holdback for Repairs or Improvements should be reflected on Lines 104, 105, etc.

  24. Most Common HUD-1 Questions When you are ordering closing docs, is there a revised GFE if the loan amount is more than the GFE disclosed but not out of APR tolerance, zero tolerance nor 10% tolerance? No, it is not a regulation but TIB requires revised GFE for their protection. Many investors require this regardless if required by regulation. HUD-1 to match GFE.

  25. Most Common HUD-1 Questions How do the Banks (lenders) selling to TIB reflect their compensation on the HUD-1 paid by TIB? In line 801 detail box reflect the fee in a blank line item as follows: Compensation paid by Lender $2,000.00 and in line 802 show a credit of -$2,000.00. Never show as an origination point in the detail box of 801 unless Borrower Paid Origination Point.

  26. Most Common HUD-1 Questions Can a Bank (lender) charge a flat 3% origination fee with regard to the 3% cap on Texas Home Equity loans? Yes.  If the fees are in excess of the 3%, a credit should be reflected to the borrower on page 2 in the 200 series of the HUD-1.  If the fees fall under the 3% cap, the difference can only be made –up in the lender’s origination fee if there is a changed circumstance, otherwise you will be out of the zero tolerance.

  27. Most Common HUD-1 Questions Can borrower receive cash back on a VA purchase money transaction? Yes.  If the total loan proceeds do not exceed the purchase price plus all financed (borrowed paid) closing costs, the earnest money and any fees paid outside of closing (POC)  i.e. Appraisal fee, maybe refunded to borrower and reflected on the HUD-1.

  28. Thank you for your business!

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