T his part of the Booklet discusses the settlement services which you may be required to get and pay for and which are itemized in Section L of the HUD-1 Settlement Statement. You also will find a sample of the HUD-1 form to help you to understand the settlement transaction. When shopping for settlement services, you can use this section as a guide, noting on it the possible services required by various lenders and the different fees quoted by service providers.
Settlement costs can increase the cost of your loan, so compare carefully. This commission is typically a percentage of the selling price of the home. Items Payable in Connection with Loan : These are the fees that lenders charge to process, approve and make the mortgage loan:. Loan Origination : This fee is usually known as a loan origination fee but sometimes is called a "point" or "points. Often expressed as a percentage of the loan, the fee will vary among lenders.
Generally, the buyer pays the fee, unless otherwise negotiated. Loan Discount : Also often called "points" or "discount points," a loan discount is a one-time charge imposed by the lender or broker to lower the rate at which the lender or broker would otherwise offer the loan to you. Each "point" is equal to one percent of the mortgage amount. Appraisal Fee : This charge pays for an appraisal report made by an appraiser.
Credit Report Fee : This fee covers the cost of a credit report, which shows your credit history. The lender uses the information in a credit report to help decide whether or not to approve your loan and how much money to lend you. Lender's Inspection Fee : This charge covers inspections, often of newly constructed housing, made by employees of your lender or by an outside inspector.
Pest or other inspections made by companies other than the lender are discussed in line Mortgage Insurance Application Fee : This fee covers the processing of an application for mortgage insurance. Assumption Fee : This is a fee which is charged when a buyer "assumes" or takes over the duty to pay the seller's existing mortgage loan.
Mortgage Broker Fee : Fees paid to mortgage brokers would be listed here. A CLO fee would also be listed here. This amount must be listed in the columns as either a positive number for example, where the origination charge shown in Line exceeds any credit for the interest rate shown in Line or where there is an origination charge in Line and a charge for the interest rate points is shown on Line or as a negative number for example, where the credit for the interest rate shown in Line exceeds the origination charges shown in Line The amount shown in Line will be a negative number to offset the settlement charges paid indirectly through the loan originator.
Lines 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 disclosures must be listed outside the columns. Lines 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. Line 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 Line is used for mortgage insurance premiums due and payable at settlement, including any monthly amounts due at settlement and any upfront mortgage insurance premium, but not including any reserves collected by the Lender and recorded in the series.
If a lump sum mortgage insurance premium paid at settlement is included on Line , a note should indicate that the premium is for the life of the loan. Line 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 series.
Lines 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 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.
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 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 must be listed in the columns, and the itemizations in lines through must be listed outside the columns. After itemizing individual deposits in the 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 12 CFR The adjustment will always be a negative number or zero , except for amounts due to rounding. The settlement agent shall enter the aggregate adjustment amount outside the columns on a final line of the series of the HUD-1 or HUD-1A statement. Appendix E to this part sets out an example of aggregate analysis. 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 Charges not included in Line must be listed in the columns.
Line is used to record the charges for the owner's title insurance and related endorsements. This amount must be listed in the columns. Line is used to record the amount of the lender's title policy limit. This amount is recorded outside of the columns.
Line is used to record the amount of the owner's title policy limit. Line is used to record the amount of the total title insurance premium, including endorsements, that is retained by the title agent. Line used to record the amount of the total title insurance premium, including endorsements, that is retained by the title underwriter. Additional sequentially numbered lines in the series may be used to itemize title charges paid to other third parties, as identified by name and type of service provided.
This series covers government recording and transfer charges. Charges paid by the borrower must be listed in the columns as described for lines and , 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 is used to record, outside of the columns, the amounts for local transfer taxes and stamps. Line is used to record, outside of the columns, the amounts for state transfer taxes and stamps. Line 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 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 must state the total settlement charges as calculated by adding the amounts within each column. The comparison chart on page 3 of the HUD-1 must be prepared using the exact information and amounts for the services that were purchased or provided as part of the transaction, as that information and those amounts are shown on the GFE and in the HUD If a service that was listed on the GFE was not obtained in connection with the transaction, pages 1 and 2 of the HUD-1 should not include any amount for that service, and the estimate on the GFE of the charge for the service should not be included in any amounts shown on the comparison chart on Page 3 of the HUD 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. 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.
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.
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 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 12 CFR 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 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. 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. Beyond just loans, settlement statements may also be used whenever a large settlement has taken place. Thus, settlement statements can be used in large business transactions or potentially in the legal, insurance, banking , and trading industries.
In its most common form, a settlement statement is part of a loan closing package provided to a borrower, usually from a loan officer at a lending institution.
Comprehensive settlement statement documentation is required for mortgage loan products. It is also usually required for other types of loans as well. Commercial and personal loan borrowers will usually work with a loan officer who presents them with the closing, settlement statement.
Some online lending and credit card agreements may provide different iterations of settlement statements that a borrower receives electronically. Borrowers are usually required to review and sign a closing, settlement statement in order to fully complete the lending process and receive their loan. The signing of the settlement statement also usually binds all of the terms associated with a loan, which typically cannot be easily amended. In mortgage lending, there are two main types of settlement statements a borrower may encounter: closing disclosures and HUD-1 settlement statements.
A mortgage closing disclosure is a type of standard settlement statement that is formulated and regulated for the mortgage lending market. The HUD-1 settlement statement is a type of closing statement used in reverse mortgages. RESPA has been revised and updated throughout history to help manage mortgage lending disclosures and protect borrowers. Both the HUD-1 and mortgage closing disclosure are standardized forms. The HUD-1 is a three-page form generally required to be provided to a borrower one day before closing.
The mortgage closing disclosure is a five-page form generally required to be provided to a borrower three days before closing. Both the HUD-1 and mortgage closing disclosure provide information on all aspects of a loan, including terms as well as personal or entity information about the borrower. Loan terms are also included, such as details on principal, interest, variable rates, prepayment penalties, and any special clauses associated with a loan such as escrow requirements.
Loan settlement statements come with a package of disclosures that help a borrower to fully understand all of the terms and conditions of their loan. All loans come with interest, but some loans have a variety of added charges as well. Some of these added charges may include:. A settlement statement provides a clear summary of all of the fees associated with a loan. The term settlement statement is most often associated with the closing of a loan.
However, other types of settlements can occur, which create the need for a unique type of settlement statement. Debt settlement : A debt settlement statement can provide a summary of debts written off, reduced, or otherwise amended after a debt settlement has completed.
Lawyers and debt settlement companies work on behalf of borrowers with overwhelming amounts of debt, in order to help them reduce some or all of their obligations.
Legal settlement: A legal settlement is typically written documentation detailing the terms and conditions under which a legal matter has been settled. Legal settlement statements may include a summary of payments required to a plaintiff or ongoing conditions required in a family custody settlement.
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