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F ed er a l R eser ve Ba n k o f D allas DALLAS, TEXAS 75222 C irc u la r No. 75-84 June 18, 1975 REAL ESTATE SETTLEMENT PROCEDURES A CT (RESPA) TO ALL STATE MEMBER BANKS IN THE ELEVENTH FEDERAL RESERVE DISTRICT: Enclosed is FEDERAL REGISTER material relating to the Real Estate Settlement Procedures Act (P .L . 93-533) which is to become effective June 20, 1975. The material includes copies of the Disclosure/Settlement Statement. This statement consists of a three page standard ized form. The firs t two pages are for the disclosure of settlement costs and w ere developed by the Department of Housing and Urban Development (HUD) . Th e th ird page is for T r u t h - i n Lending disclosures and was developed by the Board of Governors of the Federal Reserve Sys tem. Instructions for completing all three pages of the statement are also included. It should be noted that when the regulations w ere p rin te d , page 2 of HUD Form 1 on page 22455 was in te r changed with page 2 of HUD Form 1 on page 22462. In addition, the FEDERAL REGISTER material includes HUD's Regulation X which im plements the Real Estate Settlement Procedures Act and provides instructions on the timing of the disclosu res. Not included in the FEDERAL REGISTER material is a copy of the Interpretation of Sec tion 226.102 of Regulation Z which seeks to c la rify questions on the use of the T ru th -in -L e n d in g form (page 3 of the Interpretation) and compliance with RESPA and the T ru th -In -L e n d in g A ct. A copy of this In terpretation, which was disseminated with the Board's Press Release dated May 12, 1975, is printed on the following pages. Section 11 (a) of the Real Estate Settlement Procedures Act also adds a Section 25 to the Federal Deposit Insurance Act (12 U . S . C . 1831) . This new section prohibits all insured banks from making "any federally related mortgage loan to any agent, trustee, nominee, or other person acting in a fid uciary capacity without the p rio r condition that the Identity of the person receiving the beneficial interest of such loan shall at all times be revealed to the b a n k ." Moreover, the Act authorizes the FDIC to request such banks to report to the FDIC "on the iden tity of such person and the nature and amount of the loan, discount, or other extension of credit" and to exempt by regulation classes or types of transactions from these provisions if it d e te r mines that the req u ired disclosure with respect to these transactions w ill not m aterially advance the purposes of the Act. At the present time no exemption as to certain loan transactions has been made nor have any specific requirements been established that the Identity of persons receiving the bene ficial interest in federally related mortgage loans be reported to the Federal superviso ry author ities. However, compliance by insured State member banks with the provisions of Section 25 should, of course, be reflected by the en try of the req u ired disclosures in appropriate bank re c o rd s . Questions arisin g on the use of the settlement cost disclosures should be directed to HUD. Questions on the T ru th -in -L e n d in g disclosure may be directed to this Reserve Bank's Regulations Department. Sincerely yours, T . W. Plant First Vice President Enclosure This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org) CHAPTER II--FEDERAL RESERVE SYSTEM SUBCHAPTER A--BO ARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM [Reg. Z] PART 226— TRUTH IN LENDING D isclo su res m ade in connection with the R eal E state Settlem ent P roced u res Act. This interpretation is w ritten to cla rify the application of Regula tion Z to the standardized form , including Truth in Lending d isclo su re s and in stru ction s, p rescrib ed by the Department of Housing and Urban Develop m ent to m eet the d isclo su re requirem ents of the Real Estate Settlem ent P roced u res Act* F or exam ple, the standardized form is designed for the d isclo su re of loans and credit s a le s , and it should be used reg a rd less of any differing requirem ents in Regulation Z. Section 226. 1 0 2 -- P isc lo su r e s m ade in connection with the Real E state Settlem ent P rocedures Act of 1974. The Real E state Settlem ent P roced ures Act of 1974 (P. L. 93-533) requires the Department of Housing and Urban Development to p re scr ib e a standardized form for the d isclo su re of settlem ent c o sts, which m u st be given to home buyers in tran saction s which involve federally related m ortgage loans. Section 4 of the statute sp ecifica lly req uires that such form include a ll information and data required to be d isclo se d by the F ed eral Truth in Lending Act. A Truth in Lending d isclo su re form (hereinafter referred to as "form") and instructions to be used in com ple ting such form have been p rescrib ed as a part of the standardized form. B ecause of the unavoidable com plexity inherent in combining settlem ent and credit c o sts into ohe form, the Requirements relating to thte u se of the standardized form differ to som e degree from the requirem ents im posed under Regulation Z. It is the purpose of this interpretation to elim inate any confusion as to the steps cred itors m u st take in com plying with the Truth in Lending d isclosu re requirem ents in com pleting the form and to cla rify the interrelationship between the Truth in Lending A ct and the Real E state Settlem ent Procedures Act. Sections 226.6(b), 2 2 6 .8 (c), and 226.8(d) of Regulation Z ch a ra cterize cred it transactions as loans or credit s a le s and require differing d isc lo su r e s for each. The form is designed for the d isclo su re of both cred it s a le s and loans. The form should be used for consum er credit tran saction s subject to the Real E state Settlem ent P roced ures Act reg a rd less of whether the transaction m ay be ch aracterized as a loan or a credit sa le and such use sh all not constitute a violation o f the Truth in Lending Act. Notwithstanding the provisions of § 226.8(a)(1), the form p r e cludes the inclusion of the p rom issory note o r other instrum ent evidencing the obligation. Notwiths tan ding the p rovision s of § 22 6 .6 (c)(2 ), the form precludes the inclusion of any inconsisten t State d isc lo su r e requirem ents. Notwithstanding the provisions of § 226. 8(a), item ization and d isclo su re of charges excludable from the finance charge under § 226.4(b) m ay be made on the settlem ent costs portion of the combined form . The form , when properly com pleted in accordance with Regulation Z and the instructions provided with the form , constitutes com pliance with the provisions o f § 226.6(a) relating to " clear, con spicuous, and m eaningful sequence" d isclo su re requirem ents. (Under § 226. 6(a) cred ito rs m ust continue to d is c lo se m ore conspicuously the te rm s "annual percentage rate " and "finance ch arg e" as w all a t m aking num eric d isclo su res under the type sise req u irem en ts specified. ) H ie in stru ctio ns accom panying the form p erm it c re d ito rs to d elate inappli cable d isclo su res, to substitute m ore p ertin en t d isclo su res fo r those p resen tly included, to provide for additional space o r language w here n ecessary to satisfy full disclosure, and to m ake additional d isclo su res not p resen tly included w here such a re req u ired . Such p erm issiv e changes to the form should be made in com pliance w ith § 226.6(a). The form provides for the optional d isclo su re of the sim ple annual ra te of co n tract in te re st. The d isclo su re of such ra te does not constitute a violation of $ 226.6(c). The definition of "federally rela ted m ortgage loan" provided in § 3 of the Real E state Settlem ent P ro ced u res A ct (12 U. S. C. $2602) could be in terp reted as requiring settlem ent co st d isclo su res in tra n s actions which a re exem pt under | 226. 3. In such cases, the form need not be provided. The effective date of this in terp retatio n is June 20, 1975, which coincides w ith that of the Real E state Settlem ent P ro ced u res Act. (Interprets and applies 12 C. F . R. 226.4, 226.6, and 226.8) By o rd er of the Board of G overnors, May 5, 1975. (signed) G riffith L. Garwood G riffith L. Garwood A ssistant S ecretary of the Board [SEAL] THURSDAY, MAY 22, 1975 WASHINGTON, D.C. Volume 40 ■ Number 100 . PART III DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Office of Assistant Secretary for Housing Production and Mortgage Credit-Federal Housing Commissioner Real Estate Settlement Procedures and Costs RULES AND REGULATIONS 22448 Title 24— Department of Housing and Urban Development SUBTITLE A— OFFICE OF THE SECRETARY [Docket No. R75-318] PART 82— REAL ESTATE SETTLEMENT PROCEDURES On February 18, 1975, 40 PR 7072, the Departm ent published a notice of proposed rulemaking which would amend Subtitle A by adding a new Part 82. This part im plem ents sections 4, 5 and 6 of the Real Estate Settlem ent Procedures Act of 1974, 12 U.S.C. 2601, which pro vide for a settlem ent cost statem ent form, a special inform ation booklet to be distributed at tim e of loan application, and an item ized disclosure of each charge arising in connection w ith each settle ment that involves a federally related mortgage loan transaction. A general no tice prescribing the text of the special inform ation booklet is being published concurrently with the regulations. The final versions of the uniform disclosure settlem ent statem ent, and the Truth in Lending statem ent which is a part of it, are included as Appendices A and B of the regulations. The uniform disclosure settlem ent statem ent is required by sec tion 4 of the Act to include the inform a tion and data required for relevant transactions under the Federal Truth in Lending Act and the regulations issued thereunder by the Federal Reserve Board. On March 24,1975, (40 FR 13008) the Board published a proposed standard Truth in Lending Statem ent to satisfy the requirements of the Act. The Board’s final revision of the form and instruc tions are included in these regulations as Appendix B. As a result of the invitation for public com m ent contained in the no tice for rulemaking, more than 500 re sponses have been received. The Depart m ent has considered each comment care fully and as a result has adopted certain changes in both the regulations and the accompanying form, as they were pro posed. The principal changes are as follow s: G eneral C o m m e n t s A number of com m ents objected to the overall concept of the Act, arguing that the conduct of real estate transactions was essentially a local m atter, that uni form ity in forms was im practical, that advance disclosure would not be of as sistance to consumers, and that the pro cedures required by the Act would add to paperwork and costs of lenders and providers of settlem ent services. C overage Numerous comments requested that the scope of coverage be defined. The final regulations provide that they apply to cases involving a purchase or transfer of property. Refinancings, junior m ort gages, consumer borrowings, and other cases in which there is no transfer of title to the real estate are not covered. Transfers in which an existing loan is assumed or taken subject to are covered only if the loan terms are modified or final regulations clarify the term, so that general advertising would not be re garded as a loan commitment. On the other hand, suggestions that the term be confined to w ritten com m itments were not adopted, since under such a rule, lenders m ight in some cases forego giv ing w ritten commitments. Numerous commentators believed that the lender or its employees were required to prepare and transm it the advance dis closure. The final regulations have been clarified to perm it the lender either to do such work itself or to cause it to be done by some other party, such as a title, settlem ent, or escrow company or a law yer. However, under the Act (section 6 (b )) the lender remains responsible. Some comments raised questions con cerning the degree of efforts which the lender or other person preparing the ad vance disclosure m ust exert to determine the charges to be made for various serv ices. If no provider of a particular service has been selected for the transaction at the tim e of disclosure, the lender may make an estim ate based on its knowledge of general practices in the area. If a provider has been selected, that provider should be contacted and asked w hat his fee will be, unless the lender already knows the provider’s schedule of fees and reasonably expects th at schedule to be followed in the present case. Advance disclosure of prorations of taxes and assessm ents may be based on estim ates if exact figures are not avail able. Such advance disclosure m ay be based on the assumption that no taxes or assessm ents are delinquent. A number of comments asked if the advance disclosure must be reissued if more inform ation about settlem ent charges become available to the lender after the initial disclosure but prior to settlem ent. Under the final regulations, reissuance of the advance disclosure is not required. Some comments pointed out that the retention-of-records requirements in the proposed regulations were not clear and were not identical to the requirements for Truth in Lending statem ents. Under the final regulations, copies of the ad vance disclosure and the settlem ent statem ent m ust be retained by the lender for two years, except where the loan file is transferred, and copies m ust be A dvance D is c lo su r e subm itted to the Departm ent upon re The advance disclosure required by quest. This requirement will enable the the Act m ust be made at least 12 days Departm ent to fulfill its statutory duty prior to settlem ent unless the 12-day under section 14 of the Act to study and period is waived. Many comments re investigate settlem ent costs and to report quested that a period shorter than 12s to Congress thereon. The proposed regulations required the days be made standard, but section 6(a)* of the Act does not leave this m atter to signatures of the borrower and the seller on the advance disclosure statem ent, and the Departm ent’s discretion. In general, advance disclosure m ust be several comments objected to this proce given not later than 7 days after the date dure or requested clarification. In the of the loan commitment. In cases in final regulations all requirements for which a loan com m itment is made more signature on either the advance dis than 60 days before the anticipated date closure or the settlem ent statem ent have of settlem ent, the disclosure may be been dropped. M ailing of the advance disclosure is given later than the loan commitment, but not less than 60 days prior to settle perm itted by the final regulations, but ment. in certain cases the applicable tim e lim its Many comments asked for a clarifica are 3 days earlier where advance dis tion of the term “loan com m itm ent”. The closure is mailed. the lender imposes charges exceeding $50. The geographical coverage of the pro posed regulation was unclear, as several comments pointed out. The final regula tions apply to all territories and posses sions of the United States in addition to the continental United States and Puerto Rico. Several comments requested that ex clusions be made for agriculture property and for builders or developers. In re sponse to these comments, the final regulations do not apply to real estate purchased for the purpose of resale to a customer in the ordinary course of busi ness. The final regulations apply to m ort gages covering agricultural properties. Although numerous com m ents requested that the regulations not apply to corpo rations, partnerships, and other business entities, such an exclusion was not made and does not appear to be permissible. Several comments asked th at sales of vacant land be exempted from the regu lations. The final regulations exem pt such land unless the proceeds of the loan involved in the transaction are to be used, in whole or in part, to finance the construction of a dwelling. Several comments requested clarification of the coverage of mobile homes. The final reg ulations cover mobile homes and mobile home lots only if both the mobile home and the lot on which it is to be located are being purchased with the proceeds of the loan in question. It was suggested that the effective date of the regulations be extended beyond June 20, 1975, in order to permit more tim e for the persons who must im plem ent the Act to study it, prepare forms, and train their personnel. Section 19 of the Act does not give the Department dis cretion in this regard. In response to numerous requests, the final regulations provide that lenders may, w ithout special approval, place their own covers on the special inform a tion booklets which m ust be given to loan applicants. Other lim ited changes are permitted, as set forth in the final regu lations or as approved by the Secretary. Lenders may translate the booklet into other languages for the benefit of their customers, w ith the approval of the Secretary. FEDERAL REGISTER, VOL. 40 , NO. 160— THURSDAY, MAY 22, 1975 22449 RULES AND REGULATIONS W aiver of A dvance D isc lo su r e Several com m ents requested clarifica tion whether a seller or borrower can bind the other by a waiver. The final 1 regulations specify th at each party who has not received tim ely advance disclo sure .waives th is right, so that one party cannot waive for the other. ^Numerous com m ents objected to the shortness of the 18-day period processing rule. The final regulations extend this period to 21 days. The final regulations provide th at advance disclosure may be made prior to com m itment. This w ill en able lenders, by m aking advance disclo sure before com m itm ent as to loans re quiring speedy settlem ents, to be able to hold settlem ent on such loans as soon as the com m itm ent is issued. Some com m ents objected to the 3-day advance disclosure requirement in the proposed regulations. The provisions in the final regulations as to waiver take into account the express directions in the Act that, in its prescribing of the waiver regulations and form, th e Secre tary should take in to account the need to protect the borrower’s and seller’s right to tim ely disclosure. In keeping w ith th e Act, th e final regu lations require th a t the advance disclo sure be received by th e parties on or be fore the tim e of th e loan com m itm ent but not less than 3 days prior to settle m ent in any waiver situation. A number of com m ents pointed out , that the execution of th e waiver by th e lender served no purpose and th is re quirement was om itted in th e final regu lations. Sim ilarly, th e witness lines are om itted from the waiver form. S e t t l e m e n t S ta tem en t J ' ■ I f | ; I I ! I t j j I Many of th e com m ents indicated a lack of understanding of th e relationship between the advance disclosure form and the settlem ent statem ent. Although the sam e basic form at is used for both, it is permissible for lenders to print such forms separately and to place titles on them accordingly. The official version published in these final regulations can be used for both purposes by checking the appropriate square near the top of the form. Ordinarily som e of the entries on th e settlem ent statem ent w ill differ from those on the advance disclosure (because som e charges are different than estim ated, or because th e date of actual settlem ent is different from the date estim ated). The final regulations specify that copies of the settlem ent statem ent m ust be provided to th e buyer and seller as soon after settlem ent as practicable, and in no case later than three days after settlem ent. W hen charges are paid directly by the borrower or seller, rather than paid through th e settlem ent agent, som e com m ents asked w hether it would be neces sary to show them on th e forms. The final regulations provide special rules for haz ard insurance charges, attorney’s fees and charges for certain other services independently procured by the borrower or seller. F o rm D e s ig n Many comments requested flexibility in th e design of the form. The final regulations allow some degree of flexi bility. Additional item s describing com mon local charges may be inserted in blank spaces on th e form. The spacing between lines may be increased for com puter printing, and the lender or settle m ent agent may add a firm nam e or logotype to th e title block. Signature lines may be added. Numerous comments objected to the number of subtotals which the proposed form required. These have been largely elim inated in the final version. The “dis bursem ents” column has also been elim inated, since nearly all comments which discussed it thought that it would confuse consumers. A large number of com m ents requested that separate forms be provided for bor rower and seller. The form was rede signed so that separate summaries of the borrower’s and seller’s transactions ap pear on page 1, but the inform ation on page 2 m ust be provided to both bor rower and seller, as required by the Act. The instructions permit the lender or settlem ent agent to send a copy of the form to the borrower with the seller’s summary left blank, and sim ilarly to send a copy to the seller with the bor rower’s summary left blank. A large number of com m ents objected to inclusion in the advance disclosure of the liens and charges against the seller’s land; these comments asserted that such inform ation would not be available until a title search was com pleted and payoff letters from existing lenders were obtained, and that the am ounts could not theretofore be esti m ated in any m eaningful way. The D e partm ent believes th a t this view is cor rect, and the final instructions to the form perm it the portions dealing w ith these m atters to be left blank when the form is used for advance disclosure. This means that in m ost cases the advance disclosure will not indicate to the seller the am ount of cash he can expect to realize from the transaction. However, the portions of the form summarizing the buyer’s transaction m ust be com pleted when the form is used for advance disclosure, thus indicating to the buyer the am ount of cash he will need to com plete settlem ent. The Departm ent has determined this rule does not have significant im pact on the environm ent and a finding of inap plicability has been prepared pursuant to HUD Handbook 1390.1. A copy of this finding is available during regular busi ness hours for public inspection in the Office of the Rules Docket Clerk, Office of General Counsel, Room 10245, De partm ent of Housing and Urban Devel opment, 451 7th Street SW., W ashing ton, D.C. 20410. Accordingly, Subtitle A of T itle 24 is amended by adopting a new Part 82— Real Estate Settlem ent Procedures to read as follows: PART 82— REAL ESTATE SETTLEMENT PROCEDURES Sec. 82.1 82.2 82.3 A u th o rity , scope a n d purpose. D efinitions. R eliance u p o n ru le, reg u latio n s or in te rp re ta tio n by HUD of RESPA. 82.4 A pplicability. 82.5 In fo rm atio n booklet fo r persons a p p lying for loans to p u rchase re si d e n tia l real property. 82.6 U niform D isc lo su re /S ettle m en t S ta te m e n t Forin. 82.7 A dvance disclosure of se ttle m e n t costs by lender. 82.8 U niform S e ttle m e n t S ta te m en t. 82.9 M ailing. 82.10 No fee. 82.11 R e la tio n to S ta te laws. Au th ority : R eal E state S e ttle m e n t Proce d u res Act of 1974, P ub. L. 93-533 (12 U.S.C. 2601). R e g u la tio n X § 8 2 .1 A u thority, sco p e and p u rp ose. This part, which m ay be referred to as R egulation X, comprises the regula tions issued by th e Secretary of Housing and Urban Developm ent pursuant to the Real E state Settlem ent Procedures Act of 1974 (Pub. L. 93-533), 12 U.S.C. 2601, herein “RESPA”. This part applies to certain 1 to 4 fam ily mortgages, defined as “Home M ortgages” in this part. RESPA Section 4 (Uniform Settlem ent Statem ent) authorizes and directs the Secretary to prescribe a uniform settle m ent statem ent to be used in the settle m ent o f Home Mortgages. RESPA Sec tion 5 authorizes and directs the Secre tary to prescribe special inform ation booklets to be provided by the Lender to each person borrowing money to fi nance th e purchase of certain residential real estate transactions so that he or she m ay better understand the nature and costs of real estate settlem ent services. RESPA Section 6 authorizes and directs the Secretary to prescribe the form and im plem enting regulations by which every Lender, w ith respect to a Home Mort gage subject to Section 6, shall disclose in advance of settlem ent every charge arising in connection with the settle ment. RESPA Section 12 prohibits im position by a lender of a fee for or on account of preparing and subm itting the statem ents required by Sections 4 and 6 or by th e Truth in Lending Act, 15 U.S.C. 1601 et seq. RESPA section 18(a) authorizes the Secretary to determine w hether state laws w ith respect to settle m ent practices are inconsistent with any provision of RESPA. Section 18(b) pro vides that no provision of RESPA or of the laws of a state shall apply to any act done or om itted in good faith in con form ity w ith any rule, regulation, or in terpretation thereof by the Secretary. § 8 2 .2 D efin itio n s. For purposes of this part, the follow ing definitions apply, unless the context indicates otherwise. (a) “Assumption Approval” m eans the approval by the Lender or his duly au thorized agent or representative of an assumption of, or a sale subject to, a Home Mortgage where such approval is FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 22450 RULES AND REGULATIONS nection with the purchase of or transfer of title to the mortgaged property; (2) The loan is secured by a lien on or other security interest in real estate, including a fee simple, life estate, re mainder interest, or leasehold estate, upon which there is located a structure, including a mobile home owned or to be owned by the borrower and covered or to be covered by the mortgage, designed principally for the occupancy of from 1 to 4 fam ilies or upon which such a structure is to be constructed, or pur chased in the case of a mobile home, us ing part or all of the proceeds of the loan, or the loan is secured by a lien or other security interest covering a 1 to 4 fam ily residential condominium unit, or the loan is secured by a pledge of cooperative stock or interest correspond ing to a 1 to 4 fam ily residential coopera tive unit; (3) The Mortgaged Property is located in a State; and (4) The loan is made by a Federal Lender, or is made in whole or in part, or insured, guaranteed, supplemented, or assisted in any way, by the Secretary or any other officer or agency of the Federal Government, or is made in con nection with a housing or urban devel opment program administered by the Secretary or other agency of the Federal Government, or is eligible for purchase by the Federal N ational Mortgage As sociation (FNM A), the Government Na tional Mortgage Association (GNM A), or the Federal Home Loan Mortgage Cor poration (FHLMC). Note th a t GNMA’s authority to purchase mortgages includes broad authority under 12 U.S.C. 1720(a) “to purchase such types, classes, or cate gories of home m ortgages” as the Presi dent shall determine to carry out the purposes of 12 U.S.C. 301(b). (f) “Lender” m eans, in th e case of a new loan, the secured creditor or cred itors named as such in the debt obliga tion and document creating the lien or other security interest, and in the case of an Assumption Approval with respect to a preexisting loan, the current owner or owners of the Home Mortgage at the tim e of the Assumption Approval. (g) “Loan Application” m eans an oral or w ritten application for a Home Mort gage or Assumption Approval received by the Lender or his agent or representative (f) T he te rm “c re d ito r” refers only to creditors who reg u larly extend, o r arran g e or independent contractor originating the Home Mortgage in the name of the fo r th e ex tension of, c red it fo r w hich th e p a y m e n t of a finance charge is required, Lender or servicing the Home Mortgage w h eth er in c o n n ectio n w ith loans, sales of for the Lender. The date of Loan Appli p ro p erty o r services, o r otherw ise. T h e p ro cation is the date of actual receipt. visions of th is title apply to any su c h cred (h) “Loan Commitment” means a ito r, irrespective of h is or its s ta tu s as a promise by a Lender to a borrower, oral n a tu ra l p erson o r an y type o f o rganization. or written, to make a Home M ortgage or (e) “Home M ortgage” means a loan Assumption Approval, w ith respect to a w hich is not made to finance an exem pt specified property, whether or not such transaction under section 82.4(b) and promise is subject to any conditions and which m eets all of the following four re whether or not the borrower is obligated quirements: to accept such Home Mortgage or As (1) The proceeds of the loan are usedsumption Approval. in whole or in part to finance the pur (i) “Mortgaged Property” means the chase by the borrower, or other transfer real property covered by the Home Mort of title, of the mortgaged property or the gage, or the cooperative unit w ith re loan was previously made and the lender spect to which stock is pledged to secure makes an assumption approval in con the Home Mortgage loan. conditioned or based upon a change in the interest rate or other terms and con ditions of the promissory note or docu m ent creating th e mortgage lien, or is made in consideration of the payment of a fee in excess of fifty dollars ($50) paid to the Lender or his agent, representa tive or servicer. (b) “D ate of Settlem ent” means, in the case of a sale or transfer financed by a new mortgage, th e date on which the documents creating the mortgage become effective as between th e borrower and the Lender, and in the case of a pur chase of a property subject to an exist ing mortgage, whether or not the buyer assumes personal liability, the date on which title is transferred as between seller and buyer not subject to revocation by seller or buyer. (c) “Days” are computed as follows: All tim e periods in th is part are ex pressed in days. Periods do not include the day from w hich they are measured. Where the last day on which an act or event is perm itted to occur is a Saturday, Sunday or Federal or State holiday, such act or event may occur on the next suc ceeding day which is not a Saturday, Sunday or Federal or State holiday. Where a period is 7 days or more, it is measured in calendar days. W here a pe riod is less than 7 days and not specified as calendar days, it is measured in busi ness days, excluding Saturdays, Sundays and Federal or State holidays. (d) “Federal Lender” m eans: (1) A lending institution, the deposits or ac counts of which are insured by th e Fed eral Savings and Loan Insurance Cor poration (FSLIC), th e Federal Deposit Insurance Corporation (FDIC) or any other agency of the Federal Government, or (2) a lending institution which is reg ulated by the Federal Home Loan Bank Board or any other agency of the Federal Government, or (3) a “creditor,” as de fined in section 103(f) of the Consumer Credit Protection Act (15 U.S.C. 1602 (f) ) , who makes or made new invest m ents in residential real estate loans ag gregating more than $1,000,000 in either the calendar year in which the D ate of Settlem ent of the Home M ortgage in question occurs or the calendar year prior thereto. Section 103(f) defines “creditor” as follow s: (j) “Person” means any individual, corporation, partnership, trust, associa tion or other entity. (k) “RESPA”. The Real E state S et tlem ent Procedures Act of 1974 (Pub. L. 93-533), 12 U.S.C. 2601, as amended. (1) “Secretary.” The Secretary of Housing and Urban Development or any official delegated the authority of the Secretary w ith respect to RESPA. (m) “S tate” means any State of the United States, the D istrict of Columbia, the Commonwealth of Puerto Rico, and any territory or possession of the United States. § 8 2 .3 R elia n ce upon ru le, r egu latio n or in terp retation by HUD o f RESPA . (a) Section 18(b) of RESPA provides: i ' 1 . No provision of th is A ct o r of th e law s of any S ta te im posing an y lia b ility shall apply to any a c t done o r o m itte d in good fa ith in conform ity w ith an y ru le, re g u latio n , or in te rp re ta tio n th ere o f by th e S ecretary, n o t w ith stan d in g t h a t a fte r su ch a c t or om ission h a s occurred, su ch ru le, re g u latio n , o r in te rp re ta tio n is am ended, rescinded, or de term in ed by Judicial or o th e r a u th o rity to be Invalid fo r an y reason. (b) For purposes of section 18(b), only the following constitute a “rule, regula tion, or interpretation thereof by the Secretary” : (1) The Uniform D isclosure/Settle m ent Statem ent, HUD Form J, and HUD instructions set forth in Appendix A, but not including page 3 of the form and the Federal Reserve Board instructions thereto, set forth in Appendix B; (2) All other provisions and Appendices contained in this part, but not in eluding any document referred to in this part except to the extent such document is set forth in th is part; and (3) Each formal legal opinion regarding RESPA, designated as a “RESPA Legal Opinion,” numbered and dated, by the General Counsel of the Department, (c) A “rule, regulation, or interpreta tion thereof by th e Secretary” for pur poses of RESPA section 18(b) shall not include the Special Inform ation Booklet prescribed by the Secretary or any other statem ent or issuance, whether oral or w ritten, by an officer or representative of HUD, letter or memorandum by th e Secretary, General Counsel, any Assistant Secretary or other officer or employee of HUD, preamble to a regulation or other issuance of HUD, report to Congress, pleading, affidavit or other document in litigation, pamphlet, handbook, guide, telegraphic communication, expla nation, instructions to forms, speech or other m aterial of any nature which is not specifically included in paragraph (b) of this section. § 8 2 .4 j j ; ; 1 , i i 1 1 j j | j ( | | ) A p plicab ility. (a) T r a n s a c t i o n s c o v e r e d . This part applies to loans which constitute Home Mortgages as defined in § 82.2(e). As de fined therein, Home Mortgage does not include a home improvement loan or other loan secured by a lien on a 1 to 4 ) fam ily residential property where the j proceeds of the loan are not used to finance the purchase or transfer of the property. Nor does Home Mortgage in- FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 22451 RULES AND REGULATIONS elude refinancing of a mortgage loan secured by a lien on a 1 to 4 fam ily residential property where there is no transfer of title. (b) E x e m p t t r a n s a c t i o n s . This part shall not apply to purchases of property for resale in the ordinary course of busi ness. (c) C o m m e n c e m e n t o f a p p l i c a b i l i t y — (!) I n f o r m a t i o n b o o k l e t . The Special In form ation Booklet m ust be distributed with respect to every Loan Application received on or after June 20, 1975. (2) A d v a n c e d is c l o s u r e . A fter June 20, 1975, advance disclosure, as required by § 82.7 of this Part, m ust be provided with respect to every Home Mortgage except a Home Mortgage (i) w hich is made pur suant to a Loan Commitment evidenced by a letter or written agreem ent signed by the Lender prior to June 20,1975, and (ii) as to which the D ate of Settlem ent occurs on or before October 20, 1975. Where advance disclosure is required, it may be made prior to June 20, 1975. (3) S e t t l e m e n t s t a t e m e n t . The U ni form D isclosure/Settlem ent Statem ent shall be used as the settlem ent statem ent w ith respect to every Home Mortgage subject to the advance disclosure re quirements pursuant to paragraph (c) (2) of this section. § 8 2 .5 In fo rm atio n b o o k let fo r p ersons a p p ly in g fo r lo a n s to pu rchase resi d en tia l real property. (a) L e n d e r b o o k l e t . Every to p r o v id e in f o r m a tio n lender shall provide a copy of the Special Inform ation Booklet cur rently prescribed by the Secretary to every person who makes a loan applica tion. Where more than one individual makes a loan application, the lender is required to supply a copy of the Special Inform ation Booklet to at least one of the individuals applying. The lender shall supply the Special Inform ation Booklet by delivering it to or placing it in the mail to the applicant not later than the third business day of the lender following the day on which th e applica tion is received. (b) P r i n t i n g a n d d u p l i c a t i o n . The Spe cial Inform ation Booklet may be ob tained from the Superintendent of Docu m ents, U.S. Government Printing Office, W ashington, D.C. 20402. The Secretary may from tim e to tim e revise the Spe cial Inform ation Booklet. The Special Inform ation Booklet m ay be printed or reproduced in any form, provided that no change is made, other than as per m itted under paragraph (c) of th is sec- . tion. The Special Inform ation Booklet m ay not be made a part of a larger docu m ent for purposes of distribution under RESPA and this section. Any color, size and quality of paper, type of print, and m ethod of reproduction may be used so long as the booklet is clearly legible and easily readable. (c) P e r m is s i b le c h a n g e s . No change to, deletion from or addition to the Fore word and text of the Special Inform ation Booklet currently prescribed by the Sec retary shall be m ade other than those specified below or any others approved in writing by the Secretary: (1) The cover of the booklet m ay be in any form and may contain any draw ings, pictures, or artwork, provided that the words “settlem ent costs” are used in the title. Names, addresses and tele phone numbers of the lender or others and sim ilar inform ation may appear on the cover, but no discussion of the m at ters covered in the booklet shall appear. (2) The Special Inform ation Booklet may be translated into other languages. (3) The wording may be deleted which precedes the foreword, authorizing the reprinting of the booklet and referring to sale by the Superintendent of Docu m ents, but not the first paragraph, re ferring to preparation of the booklet by the Secretary. (4) In the last sentence of the fore word, “a lending institution” may be added after “local consumer affairs agency.” (5) In the “Advance disclosure” sec tion, the third sentence of the second paragraph may be deleted. (6) In the section, “2. Settlem ent a t torneys, escrow and closing agents,” the second paragraph and first sentenbe of the third paragraph may be deleted. (7) In section B6, in th e paragraph entitled “c. Settlem ent Agent,” the words “and location” may be deleted from the last sentence. § 82.6 U niform D isclosure/Settlem ent Statement Form. (a) U s e o f F o r m . HUD Form 1, “D is closure/Settlem ent Statem ent,” pages 1 and 2 of which, w ith instructions, are set forth in Appendix A to this part, and the third page of which, with instruc tions, is set forth in Appendix B to this part, shall be used as the advance dis closure statem ent under RESPA section 6 and § 82.7 of this Part, and as the settlem ent statem ent under RESPA sec tion 4 and § 82.8 of this Part. (b) P r i n t i n g a n d d u p l i c a t i o n o f F o r m . The Uniform D isclosure/Settlem ent Statem ent Form may be reproduced by lenders or others. Lenders are required to use the form, with the first two pages as prescribed by th e Secretary and the third page as prescribed by the Federal Reserve Board. Only the following per missible changes and insertions m ay be made: (1) In Block A, th e lender or other company reproducing the form may in sert its business nam e and/or logotype and may rearrange, but not delete, the other inform ation which appears in Block A. (2) In Block F, the name, address ahd other inform ation regarding the lender may be printed, and a space or spaces may be printed for lender’s loan number or sim ilar inform ation. (3) The form m ay be printed sepa rately to be used only as an advance disclosure form or to be used only as a form for settlem ent, in w hich-cases the paragraph entitled “STATEMENT OF ACTUAL COSTS” and item s 500 through 603 may be deleted from the form used for advance disclosure, and thp para graph entitled “ADVANCE DISCLO SURE OF COSTS” may be deleted from the form used for settlem ent. (4) A statem ent may be printed at the end of the paragraph “ADVANCE D IS CLOSURE OF COSTS”, in any style or type of print, that advance disclosure of prorations of taxes and assessm ents is based upon the assumption that taxes and assessm ents are not delinquent. Such statem ent if printed on the form will then be stricken where advance disclo sure is not based upon such assumption. See § 82.7(k). (5) No changes in the size or type style of print or the layout of the first two pages of the form shall be ni'ade, except as follows: (A) The layout of the form may only be reset in type if such type style is approximately the same size and appearance, is easily read able, and the entire form layout is iden tical to the form as prescribed by HUD; and (B) where necessary to accommo date computer equipment, the first two pages of the form may be printed in a larger size of print and different type style and the distance between lines may be increased, but not decreased, but there shall be no other change in the layout and placem ent of inform ation on the form. As to the third page, see R egula tion Z, 12 CFR Part 226, and the Federal Reserve Board instructions in Appen dix B. (6) In the first two pages, item s listed in the form not used locally or not used in connection w ith mortgages by the lender m ay be lined out in a m anner so that they may still be read. (7) In the first two pages, charges not listed which are made locally m ay be in serted in blank spaces in any style or type of print of sim ilar size, but which is different from the style and type of print used in the balance of the form (to in dicate item s not listed nationw ide). (8) Signature lines and customary lo cal recitals prior to signature lines may be added at the end of the second page or at th e end of the third page. (9) Additional blank space m ay be added above and/or below each page and the form may be printed on rolls, which may have sprocket holes e.g. for com puter purposes. The pages m ay be printed on separate sheets or placed on the front and back of a single sheet, or one above the other on a single, continuous sheet. (10) The form may be printed on light shades of tinted paper and may be printed in one or more colors of clearly legible inks. (11) The form may be printed in m ulti-copy tear-out sets. Such sets or any other method for m aking copies may delete Block J, lines 100 through 303, from the seller’s copy and Block K, lines 400 through 603, from the Borrower’s copy. (12) The form may be translated into any other language w ith the approval of the Secretary, but item s of the Truth in Lending Statem ent required by law to be stated in English m ust be so stated. (13) Any other deviation in pages 1 and 2 of the form is only permissible upon receipt of written approval of the Secretary. Any other deviation in the FEDERAL REGISTER, VOL. 40 , NO. 100— THURSDAY, MAY 22, 1975 RULES AND REGULATIONS 22452 Where as of the date of W a i v e s t o R e d u c e P e r i o d B e t w e e n A d v a n c e D is c l o s u r e a n d S e t t l e m e n t loan commitment, the date of settlem ent is anticipated by the lender, based upon Id e n tifica tio n of T ran sac tio n : inform ation given to the lender, to occur B o rro w e r(s): _______;______________________ more than 60 calendar days after the S e lle r(s ): ________________________________ date of loan - com m itment, the lender P ro p erty : ________________________________ may in its discretion m ail or deliver the Loan a m o u n t:____________________________ advance disclosure statem ent subsequent L e n d e r : __________________________________ to the tim e prescribed in paragraph (b ), D ate of s e ttle m e n t:_______________ ________ but not later than 60 days prior to the I hereby acknow ledge an d affirm t h a t I anticipated date of settlem ent. There know t h a t th e R eal E sta te S e ttle m e n t Proce after, if the lender is advised th at the d u res A ct of 1974 re q u ire s th e L ender to m ail date of settlem ent is expected to occur to m e a n advance item ized disclosure in w rit of each ch arg e a risin g in c o n n ectio n w ith still later, the lender may in its dis ing th is s e ttle m e n t n o t la te r th a n 15 calen d ar cretion m ail or deliver the advance dis days p rio r to th e d a te of se ttle m e n t, or de closure statem ent at any tim e n ot later liver su c h disclosure to m e n o t la te r th a n 12 than 60 calendar days prior to such re days p rio r to th e d a te of se ttle m e n t. I f u r vised anticipated date of settlem ent. If th e r u n d e rsta n d t h a t if th e len d er falls to at any tim e subsequent to the date of provide th e re q u ire d disclosure I m ay recover loan com m itm ent the lender is advised from i t $500 o r a c tu a l dam ages, w hichever that the date of settlem ent is anticipated is g reater, p lu s c o u rt costs a n d a reasonable rn e y ’s fee as d eterm in ed by th e court. earlier than previously anticipated, lend a tto N o tw ith stan d in g th e above, I h ereby waive er shall mail or deliver the advance dis th e rig h t to receive su c h disclosure 12 days closure statem ent on or before 60 days or have i t m ailed 15 days p rio r to se ttle m e n t prior to such revised anticipated date of a n d I fu rth e r c ertify th a t: (1) A pplication fo r th is lo an was m ade settlem ent or, if such revised date is w ithin 67 days of the date lender is ad n o t m ore th a n 21 calen d ar days p rio r to s e t tle m e n t d a te a n d I have consented to se ttle vised of the revised anticipated date of settlem ent, lender shall m ail or deliver m e n t o n th a t d ate; a n d (2) I received th e advance disclosure of the advance disclosure statem ent not s e ttle m e n t costs a t le a st 3 days (excluding later than 7 calendar days after being S aturdays, S undays a n d holidays) p rio r to advised of such revised date of settle th e d a te of se ttle m e n t. m ent. Nothing in this subsection (c) (3) I u n d e rsta n d t h a t I am n o t req u ired shall alter or affect the minimum periods to execute th is w aiver a n d m ay, in stead , d e between disclosure and settlem ent set term in e n o t to w aive a n d to re q u ire th e a d § 82.7 Advance disclosure o f settlem ent forth in the third sentence of paragraph vance disclosure o f se ttle m e n t costs to be costs by lender. to m e 12 days before se ttle m e n t o r (b) of this section. See paragraph (p) delivered m ailed to m e 15 days before se ttle m e n t; a n d (a) L e n d e r t o p r o v i d e . As required by of this section regarding Truth in Lend (4) I u n d e rsta n d t h a t if I sig n th is w aiver RESPA section 6, each lender m aking a ing disclosure. in advance of th e d a te o f se ttle m e n t, I m ay home mortgage or assumption approval E xam ple 2. L oan C om m itm ent is m ade revoke th is w aiver a t an y tim e p rio r to th e of a home m ortgage shall make or cause Ju ly 1 a n d s e ttle m e n t is a n tic ip a te d to occur d a te of se ttle m e n t. to be made advance disclosure of settle O ctober 15. L ender m ay m all o r deliver a d S ig n a tu re (s) D ate m ent costs on HUD Form 1 in accordance vance disclosure a t a n y tim e o n o r before A ugust 14 (60 days before, a n d n o t including, w ith this section. (e) M o r e t h a n o n e l e n d e r . Where two ctober 15). As of A ugust 1, L ender h a s n o t (b) T i m i n g o f a d v a n c e d is c l o s u r e . Ex O y e t m ade advance disclosure a n d is advised cept as provided in paragraphs (c) and t h a t s e ttle m e n t is a n tic ip a te d Novem ber 15. or more home mortgages are made w ith (d) of this section, the lender shall place L ender m ay m ail or deliver advance d is respect to the same sale or transfer of in th e m ail to or deliver to the borrower closure sta te m e n t an y tim e o n or before the mortgaged property, each lender may and the seller the advance disclosure S eptem ber 14. O n S eptem ber 1, t e n d e r Is a d independently satisfy the advance dis statem ent (on HUD Form 1) at any vised th a t se ttle m e n t Is a n tic ip a te d to occur closure requirements, or they may jointly tim e not later than 7 calendar days N ovem ber 1. L ender m u st m ail o r deliver satisfy the advance disclosure require disclosure sta te m e n t o n o r before m ents. In either case, each lender shall after the date of loan commitment. Ad advance S eptem ber 8. be fully responsible to the borrower and vance disclosure may be made prior to seller to make the required disclosure. loan commitment. Settlem ent shall not (d) W a iv e r o f m in im u m p e r io d b e (f) G o o d f a i t h e s t i m a t e s . W here the occur less than 15 calendar days after t w e e n a d v a n c e d is c l o s u r e a n d s e t t l e m e n t . such m ailing or 12 calendar days after The minimum period between advance exact am ount of a charge required to be such delivery. Where advance disclosure disclosure and settlem ent provided in stated in the advance disclosure state statem ents to different parties are m ailed paragraph (b) m ay be reduced to 3 days m ent is not known, the lender m ay state or delivered on different dates, the m ini from actual receipt of the advance dis a good faith estim ate made by th e lender, mum period to settlem ent provided above closure statem ent by the borrower and or an estim ate obtained by the lender shall be the latest date required w ith re the seller where settlem ent is held not from a provider of settlem ent services spect to any one disclosure statem ent. later than 21 days after the date the loan w hich the lender reasonably believes is See paragraph (p) of th is section regard application was made. Such reduction a good faith estim ate. Each estim ate ing Truth in Lending disclosure. shall only be made where a copy of the m ust be stated as a specific figure, and not as a range of possible figures. The Exam ple 1. L oan C om m itm ent is m ade following waiver form is voluntarily advance disclosure statem ent shall state Ju ly 2. S e ttle m e n t is a n tic ip a te d to occur executed by each borrower and seller an “ (e )” after each figure which is an w ith in 60 days. A dvance disclosure s ta te who has not been m ailed or delivered the estim ate. m e n t is delivered to one seller o n Ju ly 5, advance disclosure statem ent on or be (g) C h a r g e s t o b e d is c lo s e d . The ad m ailed to a second seller on Ju ly 7 and fore the tim e lim it specified in paragraph m ailed to borrow er on Ju ly 9. S e ttle m e n t m ay (b) of this section and is attached to vance disclosure statem ent shall state the n o t be held p rio r to Ju ly 24 (15 days from , am ount or estim ated amount of the a n d n o t in clu d in g , Ju ly 9 ). A dvance d is the settlem ent statem ent. Such waiver charges to be imposed upon the borrower does not waive any applicable right of closure is tim ely because i t is m ade n o t and the seller shall set forth in th e U ni la te r th a n Ju ly 9 (7 days from , a n d n o t in rescission under the Truth in Lending form D isclosure/Settlem ent Statem ent cluding, Ju ly 2 ). Act; see R egulation Z, 12 CFR Part 226, (HUD Form 1) lines 700 through 1400 (c) T i m i n g w h e r e s e t t l e m e n t i s a n for requirements applicable to waiver of and all sim ilar charges to be paid by bor rower and seller which are not listed in tic ip a t e d m o r e t h a n 60 d a y s a f t e r lo a n right of rescission. page 3 Truth in Lending disclosure must be in accordance w ith requirements of the Board of Governors of the Federal Reserve System. See Regulation Z, 12 CFR 226.102 and form instructions in Appendix B to this Part. A request to the Secretary for approval m ust be submitted in writing to the A ssistant Secretary for Housing Production and Mortgage Credit—Federal Housing Commissioner, Room 6100, 451.7th Street, SW„ W ash ington, D.C. 20410, stating the reasons why the applicant believes such devia tion is needed. Prior to receiving such approval, the prescribed form m ust be used. (c) H U D - p r e s c r i b e d a d d i t i o n s o f i t e m s t o f o r m . HUD reserves the right to direct the order and the m anner in which addi tional item s are added to the first two pages of the form or in which any other changes are made in the first two pages of the form for any locality, jurisdiction or area. (d) A d d i t i o n a l s h e e t . W here there is an unusually large number of insertions for which blank spaces in the first two pages of the form are not sufficient, an additional sheet for such item s may be added to the form and referenced a t the appropriate place or places in the form. Such additional sheets may be printed. The reverse side of the form m ay be used instead of an additional sheet. c o m m it m e n t. FEDERAL REGISTER, VOL. 4 0 , NO. 100— THURSDAY, MAY 22, 1975 RULES AND REGULATIONS said lines 700 through 1400, except as provided in paragraph (h) of this section regarding hazard insurance, paragraph (i) of th is section regarding attorney’s fees, and paragraph (j) of this section regarding inspection charges and other charges. Blocks J and K shall be com pleted; adjustm ents may be made in ac cordance with paragraph (k) of this sec tion. At the lender’s option, lender may delete Block J from the disclosure to the seller. A t the lender’s option, lender may om it Block K from the disclosure state m ent to the borrower. (h) E x c e p t i o n t o a d v a n c e d is c l o s u r e o f h a z a r d i n s u r a n c e c h a r g e s . The charges for hazard insurance binder or policy covering the mortgaged property are not required to be stated in the advance dis closure statem ent where the borrower independently obtains his own hazard insurance binder or policy, whether or not the lender requires such binder or policy to be obtained for settlem ent, pro vided that the binder or policy has not been obtained by, and the carrier or in surance broker or agent has not been se lected for the borrower by, any of the following persons: The lender; an agent or representative of the lender or inde pendent contractor originating the home mortgage in the nam e of th e lender; the real estate agent or broker; or the per son selected to conduct the settlem ent. (i) E x c e p t i o n t o a d v a n c e d is c l o s u r e o f a t t o r n e y ’ s fe e s . Pees or estim ated fees to be paid by borrower to borrower’s attor ney or by seller to seller’s attorney are not required to be stated in the advance disclosure statem ent where such attor ney is not retained to perform the title search or other services required by the lender and the borrower or seller, as the case m ay be, independently elects to be represented by an attorney and inde pendently selects th e particular attorney. Attorney’s fees or estim ates thereof are, however, required to be stated in the following cases: (1) Pees to be paid by th e borrower for an attorney representing the lender, the seller or any other person; (2) Fees to be paid by the seller for an attorney representing the lender, the borrower or any other person; (3) Fees to be paid by the borrower or the seller for an attorney represent ing the borrower or seller, respectively, if the borrower or seller is required by the lender or his agent or representative or independent contractor originating the home m ortgage in the nam e of the lender to be represented by counsel; (4) Fees to be paid by the borrower or the seller for an attorney representing the borrower or seller, respectively, if the lender or his agent or representative or independent contractor originating the home mortgage in the nam e of the lender selects the attorney. For purposes of this paragraph (i) (4 ), the lender or such other person is not considered to select the attorney if he merely recom mends a list of at least three attorneys and does not require the borrower to select an attorney from such list. 22453 lished by the third sentence of para graph (b). (2) A lender shall not be liable under Charges or estim ates thereof for services RESPA for a violation which was not in not required by the lender or his agent tentional and resulted from a bona fide or representative or independent con error notw ithstanding the m aintenance tractor originating the home mortgage of procedures adopted to avoid such an for the lender are not required to be error. (3) In order to show actual damages stated in the advance disclosure sta te m ent where the borrower or seller inde under RESPA, the borrower(s) or the pendently elects to obtain such services seller (s) seeking damages above $500 and independently selects the provider of must establish on the particular facts of the case th at had the required disclosure such services. (k) D is c l o s u r e o f a d j u s t m e n t s f o r t a x e s been made, the borrower (s) or the sell er (s) would have obtained settlem ent a n d a s s e s s m e n ts . Lender may make the disclosure of adjustm ents for taxes and services costing at least $500 less than assessm ents based upon the assumption those he or she actually paid. (4) Loss based upon seller’s claimed th at no taxes and assessm ents are delin quent, in lieu of determ ining from the loss of a sale, borrower’s claim th at he appropriate records whether delinquen was unable to purchase due to lender’s cies exist. W here lender irlakes disclosure failure to make proper'disclosure, bor based upon such assumption, lender shall rower’s claim that he would have pur place in Block C a statem ent that ad chased a different property, or damages vance disclosure of prorations of taxes other than described in paragraph (M) and assessm ents is based upon the as (3) of this section may not be the basis sumption that taxes and assessm ents are for a claim under RESPA for actual not delinquent. See § 82.6(b) (4) regard damages in excess of $500. (o) N o F e e f o r P r e p a r a tio n o f A d v a n c e ing the printing of such a statem ent. . (1) S i n g l e d is c l o s u r e . W here subsequent D is c l o s u r e S t a t e m e n t . See § 82.10. (p) T r u t h i n L e n d i n g d is c lo s u r e . The to m ailing or delivering the advance dis closure statem ent, changes in anticipated third page of the Uniform D isclosure/ charges come to the attention of the Settlem ent Statem ent, Appendix B to lender no additional or revised advance this part, setting forth the Truth in disclosure statem ent is required to be Lending disclosure, shall be com pleted provided. The lender may in its discre and provided in accordance w ith the tion, but is not required to, provide up Truth in Lending Act, Regulation Z of dated or corrected am ounts to a party the Federal Reserve Board, 12 CFR Part tiie lender understands will pay the 226, and any other Federal Reserve charges in question or all parties by let Board requirements. Where R egulation Z establishes a tim e lim it for the making ter or otherwise. (m ) R e c o r d - k e e p i n g . Lender shall re of such Truth in Lending disclosure tain a copy of the advance disclosure which is earlier than the applicable time statem ent required to be prepared pur lim it under paragraphs (b ), (c) and (d) suant to RESPA section 6 for 2 years, ex of this section for the m aking of ad cept th at in the event lender disposes of vance disclosure, the Truth in Lending its interest in the Home Mortgage and disclosure m ust be m ade at the tim e re does not service the hom e mortgage, quired by R egulation Z. In such cases, lender m ay permit its copy of the ad the first two pages of the Uniform D is vance disclosure statem ent to be deliv closure/Settlem ent Statem ent, HUD ered to the owner or servicer of the home Form 1, may be m ailed or delivered sub mortgage as part of the transfer of the sequently, but w ithin th e applicable tim e loan file. A copy of the advance disclo lim its established in this part, and the sure statem ent m ay be required to be third page Truth in Lending disclosure subm itted to the Secretary and/or to is not required to be given a second tim e other Federal agencies. Nothing in this when pages 1 and 2 are m ailed or Part alters, amends or in any way re delivered. duces the separate record keeping re § 8 2.8 Uniform Settlem ent Statement. quirements of Regulation Z of the Fed (a) U s e o f H U D F o r m 1 . As required eral Reserve Board. See 12 CFR 226.6 (i). (n) D a m a g e s . As provided in RESPA by RESPA section 4, th e Uniform S et section 6(b ), a lender which fails to tlem ent/D isclosure Statem ent, HUD provide the prospective borrower(s) or Form 1, shall be used as the settlem ent seller(s) with the required advance dis statem ent for every Home Mortgage set closure shall be liable to such borrow tlem ent transaction involving a purchase er ^ ) or to such seller(s), as the case or transfer of a mortgaged property for may be, in an am ount equal to actual every home mortgage settlem ent pur damages or $500 to all borrowers and suant to an assumption approval. (b) C h a r g e s t o b e s t a t e d . The Uniform $500 to all sellers, whichever is greater, and in the event a court action is filed D isclosure/Settlem ent Statem ent, HUD and judgment is obtained against the Form 1, shall be completed to item ize lender, court costs and a reasonable a t all charges imposed upon the borrower torney’s fee as determined by the court, and the seller in connection with the provided that: ( 1 ) A lender shall not be settlem ent, other than charges exempted liable under RESPA for m ailing or de from advance disclosure under § 82.7 livering the disclosure statem ent later (h ), (i) and (j) and which borrower or than the tim e lim its established in this seller contract to pay for separately out section, if w ithin the tim e lim its estab side of the settlem ent. The person pre(j) E x c e p t i o n t o a d v a n c e d i s c l o s u r e f o r c h a r g e s f o r c e r t a i n o t h e r s e r v ic e s i n d e p e n d e n t l y p r o c u r e d b y b o r r o w e r o r s e ll e r . FEDERAL REGISTER, V O L 4 0 , NO. 100— THURSDAY, MAY 22, 1975 22454 RULES AND REGULATIONS paring the settlem ent statem ent is not required to supply the inform ation in Block J in the copy supplied to th e seller, nor to supply the inform ation in Block K to the borrower. (c) D e l i v e r y . The settlem ent statem ent shall be delivered or m ailed to th e bor rower and the seller on th e date of settle m ent or as soon thereafter as practicable, and in any case not later than 3 days after the date o f settlem ent. (d) R e c o r d k e e p i n g . Lender shall re tain a copy of each settlem ent statem ent required to be prepared pursuant to RESPA section 4 for 2 years, except that in the event lender disposes of its inter est in the home m ortgage and does not service th e home mortgage, lender may perm it its copy of the settlem ent state m ent to be delivered to th e owner or serv icer of th e hom e m ortgage as part of the transfer of the loan file. N othing in this part alters, amends or in any way re duces th e separate recordkeeping re quirements of Regulation Z of th e Fed eral Reserve Board. See 12 CFR 226.6(1). A copy of the settlem ent statem ent may be required to be subm itted to the Secre tary an d/or other Federal agencies. § 8 2 .9 a . T Y P E O F LOAN, U.S. DEPARTMENT of housing and urban development ! • { " 5 FH A A **,« V * BISCLOSUP.E'SETTLEMEMT STATEMEHT It f/ir* 2m\y S 7 ; r.f in £ A c t nppti## to th is transaction, n Truth-in-Len dIn£ * • M° B T O . :s p u£v j o f r/if?* form._________________________________ FMHA 3 . 1 7 3 CONV* UNINS* COWV. INS. F I L S N U M BgF t No fee. Relation to State laws. RESPA section 18(a) provides: T h is A ct does n o t a n n u l, a lte r, or affect, or exem pt a n y p erson su b je ct to th e provisions of th is Act from com plying w ith , th e law s of an y S ta te w ith resp ect to se ttle m e n t p ra c tices, except to th e e x te n t t h a t those law s are in c o n siste n t w ith a n y provision of th is Act, a n d th e n only to th e e x te n t o f th e in consistency, T he S ecretary is a u th o rized to d e te rm in e w h eth er su c h inconsistencies exist. T he S ecretary m ay n o t d e term in e th a t an y S ta te law is in c o n siste n t w ith an y provision ______ 7. L O A N N U M B S il in s. c a s e n o . C. N075: T h is'to rr, is •flu s h e d to yr.u prior to settlement to give you information about your settlement costs;, and again after settlem ent to sIio*** th«* j.'-tuiit costa; you have paid. The present copy of the form Is: ' * ADVANCE blSCLCb'URf. Or COSTS, Soms items are estimated, and are marked " (e)*'. Some amounts may change if inr*. is hv!d cm a date other than the d a te estimated below. T h e preparer o f th is form Is c o t responsible for errors or chiiR£*?s m amount!* furnished by others* STATEMENT OF ACTUAL COSTS. Amounts paid to and by the settlem ent fluent are shown. Items marked ’fy -t/.c ./* ttv.y .».i 1 piitsiJo the closing: they are shown here for inforantfonal oum oses and am not itighidggf fn total?, BORROWER H# SETTLEMENT ACENT LO C A TIO N LOAN COMMITMENT As provided in RESPA section 12, no fee shall be imposed or charge made upon any other person, as a part of set tlem ent costs or otherwise, by a lender in connection with or on account of th e preparation and distribution required by RESPA of the statem ent or statem ents required by RESPA section 4 (Settlem ent S tatem en t), RESPA section 6 (Advance Disclosure) or by the Truth in Lending Act. § 8 2 .1 1 C arla H . H il l s , S e c r e ta r y o f H o u s in g a n d U f b a n D e v e lo p m e n t. A determ ination by th e Secretary that such an inconsistency exists shall be made, after consultation w ith appropri M ailing. The provisions of th is part requiring ox perm itting m ailing of advance disclosure statem ents, Special Inform ation Book lets or settlem ent statem ents shall be deemed to be satisfied by placing the document in the m ail (whether or not received by th e addressee) addressed to the address stated in the loan applica tion or in other inform ation submitted to or obtained by lender at the tim e of loan application, or subm itted to or ob tained by the person conducting the settlem ent, except that a revised address shall be used where the lender or such other person has been expressly informed in writing of a change of address. § 8 2.1 0 ate Federal agencies, by publication of a notice in the F ederal R e g is t e r . E f f e c t i v e d a t e . These regulations are effective as of June 20,1975. of th is A ct if th e S ecretary d eterm in es th a t su c h law gives g re ater p ro tec tio n to th e con sum er. I n m ak in g th e se d e te rm in a tio n s th e S ecretary sh all c o n su lt w ith th e a p p ro p ri a te F ederal agencies. A D VA N CE D IS CLO SU RE date settlem ent F I . A C E O f? S E T T L E M E N T o r prorations if d iff er e n t from s ettle ment ■ K. SUMMARY OF SELLER'S TRANSACTION J. SUMMARY OF BORROWER'S TRANSACTION 400. CROSS AMOUNT DUE TO SELLER: 401. Contract sales price 402. Personal property 403. 404. ICO. CROSS AMOUNT OUE FROM BORROWER: 101. Contract sales price 102. Personal property 103. Settlement charges Is borrower .. t tffOtt lln1! ttQO. Srrtlan L) 1C4. :t05. 405. City/town taxes 406. County taxes 407. Assessments 408. 40?. 410. 411. to to to to to to to 200. AMOUNTS PAID BY OR IN BEHALF OF BORROWER: 503. Settlement charges to seller ffront Itrtti 1400. Section f.J 504. Existing toan(s) taken subject to 505. SOS. 507. 503. 50?. Credits lo borrower for items unpaid by seller: 206. City/town taxes to 207. County taxes to 203. Assessments to . 20?. *o .210. ‘ to " ..S I’ . to 2!.’. • " ■ ' " —“ t o .......................... jj ,. TOTAL AMOUNTS PAID BY Oil IN BEHALF O.P * 80S'!0VfiR 510. Cily/town taxes 511. County taxes 512. Assessments 513. 514. 515. PAYABLE TO/ BORROWER: to to to to to to ---------------- 520. TOTAL REDUCTIONS IN AMOUNT DUE TO SELLER: 331. Grass amount due frora borrower ■ f w i ifni* 120) ” ; REqUIREO f r o m ; OR ------------------- Credits to borrower for items unpaid by seller: SSC. c v n AT SETTLEMENT REQUIRED FROM ORPAYABLE .TO SORROWER, cash :" ■ NOTE: T he following 500 and 600 se rie s se ctio n s aro not required lo b e completed when th is form is u sed for advance disclosure ot settlem ent c o sts prior lb settlem ent. 500. REDUCTIONS IN AMOUNT DUE TO SELLER: 501. Poyolf ot first mortgoge loan 502. Poyolf of second mortgage loan 231. Deposit or earnest money 202. Principal amount of new loan(s) 203. Existing loan(s) taken subject to 204. 205. . ' W3. to to to to to to to 420. CROSS AMOUNT DUE TO SELLER 120. CROSS AMOUHT DUE FROM BORROWER: )J2. Lets oawunts paid by or in behalf of borrower ’ { i-m fa e 'J O f ' Adjustments for items paid by seller in advance: Adjustments for items paid by seller in odvoncc: 106.,/ City/town taxes WA County taxes 108. Assessments 109. 110. 111. 112. < ) 600. CASH TO SELLER FROM SETTLEMENT: 601. Gross amount due to seller I from line 4201 602. Less lotal reductions in amount due lo seller {Frnm tinr ?.'20. ( ) 603. CASH TO SELLER FROM SETTLEMENT FEDERAL REGISTER, V O L 4 0 , NO. 100— THURSDAY, MAY 22, 1 9 7 5 M U a - i 15-75) RULES AND REGULATIONS L. SETTLEMENT CHARGES 700. SAL El'BROKER'S COMMISSION feo.«don,ric« $ 9 % PAID FROM PAID FROM BORROWER’ S FUNDS SE L LE R’S FUNDS 701. Total commission poid by seller Division of commission os follows: 702. $ to 703. S to 704. 800. ITEMS PAYABLE IN CONNECTION KITH LOAN. 801. 802. 803. 804. 805. 806. 807. 808. 809. 810. 811. Loon Oriainotion fee % Loon Discount % Appraisal Fee to Credit Report to ^ Lender's inspection fee * MortgoQc Insurance application fee to Assumption/refinancing fee | ^ -■ i t *7J ( 900. ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE. 901. 902. 903. 904. 905. Interest from to Mortgogo insurance premium for Hazard insurance premium for 9$ mo. to yrs. to Vrs. to 1000. RESERVES OEPOSITED WITH LENDER POR: 1001. 1002 1003. 1004. 1005. 1006. 1007. 1008. Hozard insurance Mortgoge insuronce City proparty taxes ' County property taxes Annuot assessments mo. mo. mo. mo. mo. mo. mo. m 0$ (1$ $$ US 0$ o / m /dov ) G eneral I n s t r u c t io n s ^ . In fo rm a tio n an d am o u n ts m ay be filled in by typew riter, h a n d p rin tin g , com puter p rin tin g , o r any o th e r m eth o d producing clear a n d legible re su lts. Copies of th e form se n t to th e borrow er a n d th e seller m ay be carbon copies, e le c tro sta tic copier copies, or o th e r clearly legible copies. R efer to R egu latio n X regarding ru les applicable to p r in t ing of th e form . W here th e re is a n u n u su a lly large n u m ber o f Insertions fo r w hich b la n k spaces in th e first tw o pages of th e fo rm are n o t s u f ficient, a n a d d itio n al sh e e t fo r su c h Item s m ay be added to th e form a n d referenced a t th e ap p ro p riate place o r places in th e form . S uch a d d itio n a l sh e e ts m ay b e p rin te d . T he reverse side of th e form m ay be used in stead of a n ad d itio n al sheet. (? L \3 ^ /mo /mo. /mo. / mo. / mo. / mo. /m o. o . ~ " ...... " Settlement or closing fee to Abstroct or title search to Title examination to Title insuronce binder to Document preparation to Notary fees to Attorney's Fees to "* A J (includ es above item s \'o .: *?j ^ i 1108. Title insurance to * (includ es above item s No.: 1109. Lender's coverogt $ 1110. Owner's coveroae $ U ll. * 1112. 1113. ^ Recording fees: L in e It e m I n s t r u c t io n s ) * 1200. GOVERNMENT RECORDING AND TRANSFER CHARGES 1201. Deed $ ; Mortgoge $ f p .c f ) Releases $ 1204. 1300. ADDITIONAL SETTLEMENT CHARGES 1301. 1302. 1303. 1304. 1305. S«v.»*o Pol insMCtiat lo e state tra n sa c tio n s is a p a rt of th e U niform D isclosure /S e ttle m e n t S ta te m en t. I t is th e th ird page of th e U niform D isclo su re/S ettle m en t F orm a n d m u st be com pleted in all cases in w hich th e • T ru th in L ending Act applies to th e tra n sa c tio n . F or specific in stru c tio n s on T ru th -in -L e n d in g disclosure re q u ire m en ts u n d e r th e R eal E sta te S e ttle m e n t Procedures Act, re fer to th e I n s tru c tio n s of th e Federal Reserve B oard, w hich appear in A ppendix B to HUD’s R egulation X (24 CFR P a rt 82). T he disclosure in advance of se ttle m e n t is th e re sp o n sib ility of th e lender. T he Act rec ognizes th a t th e precise a m o u n t of every in d iv id u al charge to be assessed a t se ttle m e n t will n o t alw ays be know n a t th e tim e of a d vance disclosure. T he A ct provides: “In th e event th e exact a m o u n t of an y su ch charge is n o t available, a good fa ith e stim a te of su ch charge m ay be provided.” As provided in R eg u latio n X, th e advance disclosure s ta te m e n t sh a ll s ta te a n “ ( e ) ” a fte r each figure w hich is a n estim ate. E ach estim a te m u st be s ta te d as a specific figure, an d n o t as a range of possible figures. {^ 1100. TITLE CHARGES: 1101. 1102. 1103. 1104. 1105. 1106. 1107. 22455 " .......................... (£ 7 ) ------- liOO. TOTAL SETTLEMENT CHARGES 'e n te re d on lines 103 anil S03. S ections / and K) NOTE: Under certain circumstances the borrower and seller may be permitted to waive the 12-day period which must normally occur between advance disclostre and settlement. In the event such a waiver is made, copies of the statements of waiver, executed as provided in the regulations of the Department of Housing and Urban Development, shall be attached to and made a pert of this form when the form is used as a settlement statement. H U D -1 (5 -7 51 In s t r u c t io n s fo r C o m p l e t in g U n if o r m D i s closure/ S e tt l em en t Statem ent (HUD F o r m 1) T he follow ing are in stru c tio n s for com p letin g th e first 2 pages of th e U niform D is c lo su re/S e ttle m e n t S ta te m e n t, HUD Form 1, req u ired u n d e r Sections 4 a n d 6 of th e Real E state S e ttle m e n t Procedures A ct of 1974 (P ublic Law 93-533) a n d th e R egulations th e re to issued by th e U.S. D ep a rtm en t of H ousing a n d U rban D evelopm ent called R egulation X (24 CFR P a rt 82). T h is fo rm is to be used to provide a n advance disclosure of costs p rio r to se ttle m e n t, a n d as a u n ifo rm sta te m e n t o f a c tu a l costs a n d a d ju s tm e n ts to be given to th e p a rtie s in co n n ectio n w ith th e se ttle m e n t. T he In stru c tio n s for com p letio n are p rim arily fo r th e benefit of th e persons w ho prepare th e sta te m e n ts an d need n o t be tra n s m itte d to th e p a rtie s as a n in te g ra l p a r t of th e form . To d eterm in e if th e U niform D isclosure /S e ttle m e n t S ta te m e n t is legally req u ired to be used in a p a r tic u la r m ortgage lo an tra n sa c tio n , refer to R egulation X of th e D e p a rtm en t of H ousing a n d U rban D evelopm ent (24 CFR P a rt 82). T here is no o bjection to th e use of th e form in tra n sa c tio n s in w hich its use is n o t legally required. T he T ru th -in -L e n d in g S ta te m e n t p re pared by th e F ederal Reserve B oard fo r real In stru c tio n s fo r com pleting th e in d iv id u al item s on th e form follow. W here n o in s tru c tio n s are given, th e ite m is th o u g h t to be self-explanatory. Section A. T he lender, title com pany, or o th e r firm p re p arin g th e form m ay in se rt its nam e a n d /o r logotype in S ectio n A. Section B. C heck a p p ro p ria te lo an type a n d com plete th e rem ain in g item s as a p plicable. Section C. Check th e a p p ro p ria te box in d ica tin g w h eth er th e p a rtic u la r copy of th e fo rm being com pleted is fo r advance d is closure purposes or is a s ta te m e n t o f a c tu a l costs a n d d isb u rsem en ts a t or a fte r s e ttle m en t. As provided In R eg u latio n X , in p re p a rin g th e advance disclosure sta te m e n t, th e L ender m ay m ake th e disclosure of a d ju s t m en ts fo r taxes a n d assessm ents based up o n th e assu m p tio n t h a t no tax es a n d assess m en ts are d e lin q u e n t, in lie u of d eterm in in g from th e ap p ro p ria te records w h e th er de lin q u en cies exist. W here L ender m akes d is closure based u p o n su ch assu m p tio n , L ender sh all place in Block C a s ta te m e n t th a t advance disclosure of p ro ra tio n s o f taxes a n d assessm ents is based u p o n th e assu m p tio n t h a t taxes a n d assessm ents are n o t d e lin q u e n t. U nder R eg u latio n X, L ender is p e rm itte d to p r in t su c h a s ta te m e n t in B lock C; w here th e s ta te m e n t Is p rin te d in th e form , i t is to be stric k e n w here n o t applicable. Sections D and E. F ill in th e n am es an d c u rre n t m ailing addresses of th e borrow er a n d th e seller. W here th e re is m ore th a n one b u y er o r seller, th e nam e a n d address of one is sufficient. FEDERAL REGISTER, V O L 4 0 , NO. 100— THURSDAY, MAY 22, 1975 22456 RULES AND REGULATIONS Section F and H. F ill in th e nam e a n d ad dress of th e len d er a n d th e se ttle m e n t agent. If, a t th e tim e of advance disclosure, th e se t tle m e n t a g en t h a s n o t yet been selected, th e advance disclosure form sh o u ld have “n o t know n” en te red in Section H. Section G. T he s tre e t address of th e se c u rity property, if any should be given. If th e re is no stre e t address, a b rief legal de sc rip tio n or o th e r lo catio n of th e pro p erty should be in serted . In a ll cases give th e zip code of th e property. Section I . F ill in th ese d a te s to th e e x te n t th ey are know n. I f advance disclosure is m ade before com m itm ent, a n e stim a te d com m itm e n t d a te sh o u ld be in se rte d a n d m arked “ ( e ) ”. If th e se ttle m e n t d a te is n o t firm a t th e tim e of advance disclosure, a n e stim ated se ttle m e n t d a te sh o u ld be in se rte d a n d m arked “ ( e ) ”. I f th e p ro ra tio n s of taxes,, in surance, etc., are to be m ade as of a d ate different th a n th e se ttle m e n t d ate, in d icate th e d a te of p ro ra tio n s on th e la s t lin e in th is section. Section J. Sum m ary o f Borrow er’s Trans a ction. T he Borrow er m ay be given a copy of th e form (in case of b o th advance d is closure an d se ttle m e n t) w hich does n o t co n t a i n th e in fo rm a tio n filled in u n d e r “S u m m ary of Seller’s T ran sac tio n ” (Block K, Ser ies 400, 500, a n d 600 ite m s ). Lines 104 and 105 are for ad d itio n al am o u n ts owed by th e buyer. F or exam ple, th e balance in th e seller’s reserve acc o u n t h eld by th e lender, if assigned to th e buyer in a loan a ssu m p tio n case, w ould be e n tered here. Lines 106 th ro u g h 112 are for item s w hich th e seller h a d p aid in advance, a n d fo r w hich th e buyer m u st th erefo re reim b u rse th e seller. O n th e advance disclosure sta te m e n t th e exact d a te fo r p ro ra tio n s will n o t u su ally be know n, a n d th ese a m o u n ts w ill th ere fo re be estim ates. Exam ples of item s fo r w hich a d ju s tm e n ts are m ade m ay include tax es a n d assessm ents paid in advance for a n e n tire year or o th e r period, w hen se ttle m e n t occurs p rio r to th e ex p iratio n of th e year o r o th e r period for w hich th e y were paid. See I n s tru c tio n for Block C above reg ard in g advance dis closure of taxes a n d assessm ents on th e a s su m p tio n th a t no taxes a n d assessm ents are d e lin q u e n t. A dditional exam ples include flood a n d h azard in su ra n ce prem ium s if th e buyer is being su b s titu te d as a n in su red u n d e r th e sam e policy; m ortgage in su ra n ce in lo an a s su m p tio n cases; PUD or condom inium asso cia tio n assessm ents paid in advance; fu e l or o th er supplies on h an d , pu rch ased by th e seller, w hich th e b uyer w ill use w hen buyer tak e s possession of th e property; a n d g round re n t p aid in advance. L in e 203 is used fo r cases in w hich th e buyer is assum ing o r ta k in g title su b je ct to a n existing loan or o th e r lien. Lines 204 and 205 m ay be used in cases in w hich th e seller h a s ta k e n a tra d e -in or o th e r p roperty from th e b u y er in p a rt p a y m e n t for th e p roperty being sold, o r w hen a te n a n t in th e p ro p erty h a s n o t y e t p a id h is r e n t fo r a period of tim e p rio r to th e se ttle m e n t, an d w hich th e buyer w ill collect. T hey m ay also be used in cases in w hich a seller (typically a b u ild er) is m aking a n “allow ance” to th e buyer for carp e ts o r d rapes w hich th e buyer is to p u rchase on h is own. S uch a n allow ance sh o u ld also be e n te red on lin es 505-509. Lines 206 th ro u g h 212 are fo r item s w hich have n o t y e t been paid, a n d w hich th e buyer is expected to pay, b u t w hich are a ttr ib u t able in p a rt to a period of tim e p rio r to th e se ttle m e n t. I n ju risd ic tio n s in w hich taxes are p aid la te in th e ta x year, m ost cases will show th e p ro ra tio n o f taxes in th ese lines. See In s tru c tio n to B lock C above regarding advance disclosure of taxes a n d assessm ents o n th e assu m p tio n th a t no taxes a n d assess m en ts are d e lin q u e n t. O ther exam ples in clude u tilitie s vised b u t n o t p aid fo r by th e seller, re n t collected in advance by th e seller from a te n a n t for a period ex tending beyond th e se ttle m e n t d ate, an d in te re st on lo an a s su m p tio n s. As w ith lin es 106 to 112, these a m o u n ts will norm ally be only e stim a te s on th e advance disclosure sta te m e n t. L in e 303 m ay in d ic a te e ith e r th e cash re q u ired from th e borrow er a t se ttle m e n t (th e u su a l case in a p u rchase tra n sa c tio n ) or cash payable to th e borrow er a t se ttle m e n t (if, for exam ple, th e b u y e r’s e arn e st m oney deposit exceeded h is cash obligations in th e tr a n s a ctio n ) . T h e a p p ro p ria te box should be checked. Section K . S um m ary o f Seller’s Transac tio n . T he Seller m ay be given a copy of th e form (in case of b o th advance disclosure a n d se ttle m e n t) w hich does n o t c o n ta in th e in fo rm atio n filled in u n d e r “S um m ary of B or row er’s T ran sac tio n ” (Block J, Series 100, 200, a n d 300 ite m s ). In stru c tio n s fo r th e use of lin es 106-112, above, apply also to lines 4Q5 to 411. As th e n o te o n th e fo rm in d icates, i t is n o t necessary to com plete lin es 500 th ro u g h 603 w hen th e form is used for advance d is closure. T he reason is t h a t in fo rm a tio n a b o u t payoff figures on existing liens m u st n o r m ally com e from a title search a n d payoff le tte rs from o th e r lenders, a n d is th erefo re o fte n n o t available a t th e tim e of advance disclosure. T here is, however, njo o b jectio n to th e com pletion o f th e se sectio n s a t th e tim e of advance disclosure if th e len d er so desires. Line 504 is used i f th e p u rc h aser is as su m in g or ta k in g title su b je c t to existing liens w hich are to be ded u cted fro m sales price. Lines 505 th ro u g h 509 m ay be used to lis t ad d itio n al liens w hich m u st be p aid off th ro u g h se ttle m e n t to clear title to th e p ro p erty. T hey m ay also be used to in d icate fu n d s to be held by th e se ttle m e n t a g en t for th e p ay m en t of rep airs th e seller is obligated to m ake or p ay m en t of w ater, fuel, or o th er u tility b ills w hich c a n n o t be p ro ra te d be tw een th e p a rtie s a t s e ttle m e n t because th e a m o u n ts used by th e seller p rio r to s e ttle m e n t are n o t y e t know n. If th e seller’s real e sta te broker h a s re ceived a n d h eld a n e a rn e st m oney deposit w hich exceeds th e com m ission owed to him , an d if he w ill te n d e r th e excess d ep o sit d i rectly to th e seller ra th e r th a n th ro u g h th e se ttle m e n t agent, th e a m o u n t of excess d e po sit should be e n tered on one of lin es 505 509, th u s red u cin g th e a m o u n t to be paid to th e seller by th e se ttle m e n t a g en t by th a t am o u n t. In stru c tio n s fo r th e use of lin es 510 th ro u g h 515 are th e sam e as th o se fo r lines 206 to 212, above. ' Section L. S e ttle m en t Charges. G eneral; F or all item s except th o se p aid to a n d re ta in e d by th e lender, th e nam e of th e p e r son or firm receiving th e p ay m en t sh o u ld be show n. L in e 700. If th e sales com m ission p a id by th e seller is based on a p ercentage of th e p u r chase price, e n te r th e p u rchase price an d th e percentage here. Lin e 701. T he d o llar a m o u n t o f th e to ta l com m ission p aid by th e seller is e n te re d here. A single e n try is m ade, regardless of w h eth er com pensation w ill be p a id to one a g en t or sp lit am ong several agents. Lines 702-703 a re to be used to s ta te th e sp lit of th e com m ission w here th e person, c o n d u ctin g th e se ttle m e n t disburses p o rtio n s of th e com m ission to tw o or m ore agents. Only th e to ta l com m ission is to be show n in th e borrow er’s or seller’s colum ns. L ine 704 m ay be u sed fo r a d d itio n al charges m ade by th e sales ag en t, or fo r a sales com m ission charged to th e buyer, w hich w ill be d isbursed by th e se ttle m e n t agent. L in e 801. E n te r th e fee charged by th e lender fo r processing o r o rig in a tin g th e loan. I f th is fee is com puted as a percentage of th e lo an am o u n t, e n te r th e percentage in th e b lan k indicated . L in e 802. E n te r th e lo an d isc o u n t charged by th e lender, an d if i t is com puted as a percentage of th e loan am o u n t, e n te r th e percentage in th e b la n k indicated. L in e 803. E n te r appraisal fees, if th e re is a charge se p a ra te from th e o rig in a tio n fee. L in e 805 is used only fo r in sp ectio n s by th e L ender o r h is personnel. C harges for o th e r p e st or s tru c tu ra l inspections req u ired by R eg u latio n X to be s ta te d should be e n te red in lines 1302-1305. L in e 806 should be used fo r a VA appraisal fee, FHA ap p lic atio n fee (w hich covers th e cost of ap p raisal by th e agency as w ell), or a fee req u ired by a p riv ate m ortgage in suran ce com pany. L in e 807 is provided fo r convenience in u s ing th e form fo r lo an a ssu m p tio n tra n s a c tio n s if a fee is charged by th e L ender fo r agreeing to a n a ssu m p tio n or tra n s fe r su b je c t to a n existing Indebtedness. L in e 901. I f in te re st is collected a t se ttle m e n t fo r a p a rt of a m o n th or o th e r period betw een se ttle m e n t a n d th e d a te from w hich in te re st w ill be collected w ith th e first re g u la r m o n th ly p aym ent, e n te r t h a t am o u n t here. If su c h in te re st is n o t collected u n til th e first reg u lar m o n th ly paym ent, n o e n try should be m ade on lin e 901. L in e 1000. T h is section is used for am o u n ts collected by th e L ender an d h e ld in a n ac c o u n t for th e fu tu re p aym ent of th e obliga tio n s liste d a s th e y fall due. In m an y ju ris d ictio n s th is is referred to as a n “escrow ”, “im p o u n d ” or “tr u s t” account. In ad d itio n to th e item s listed, som e L enders m ay require reserves fo r flood insurance, condom inium ow ners association assessm ents, etc. L in e 1100. In m any ju risd ic tio n s th e sam e person (e.g., a n a tto rn e y or a title in su ran ce com pany) perform s several of th e services listed in th is section, a n d m akes a single u n d iffere n tia te d charge fo r so doing. In such cases, e n te r th e overall fee on lin e 1107, (for a tto rn e y s) or lin e 1108 (for title co m p an ies), a n d e n te r on th e lin e provided th e ite m n u m bers of th e services liste d w hich are covered in th e overall fee. In su c h cases no am o u n ts should be e n te red fo r th e in d iv id u al item s w hich are covered by overall fees. L in e 1101. E n te r h e re th e fee of th e person o r firm c o n d u ctin g th e se ttle m e n t. I n som e ju risd ic tio n s th is is term e d a closing o r escrow fee. If tw o o r m ore persons or firm s m ake charges in connection! w ith th e sam e tra n sa c tio n , e n te r to ta l charges in th e a p p ro p riate colum ns, an d in d icate th e b re ak dow n of charges on th e lin e a fte r th e word “to ”. Lines 1102 and 1103. I n som e ju risd ic tio n s th e sam e person (e.g., a n a tto rn e y ) both searches th e title ( th a t is, perform s th e n e c essary research in th e records) an d exam ines title ( th a t is, m akes a d e te rm in a tio n as to w h a t m a tte rs affect title , a n d provides a title re p o rt or opinion.) If su c h a person charges only one fee fo r tooth services, it sh o u ld be en te red o n lin e 1103. If sep arate persons perform th ese task s, or if sep arate charges are m ade fo r searching an d exam ination, th ey should be listed separately. L in e 1105. E n te r charges fo r p re p a ra tio n of deeds, m ortgages, n o tes, etc. If m ore th a n one person receives a fee for su ch w ork in th e sam e tran sac tio n , show th e to ta l paid in th e ap p ro p riate c o lu m n and th e individual charges on th e lin e follow ing th e w ord “to ”. Lines 1108-1110. E n te r th e to ta l charge for title in su ra n ce (except th e cost of th e title bin d er) o n lin e 1108. E n te r on lin es 1109 and 1110 th e in d iv id u al charges fo r th e L ender’s a n d ow ner’s policies. N ote th a t th ese charges are n o t carried over in to th e borrow er’s and FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 22457 RULES AND REGULATIONS seller’s colum ns, since to do so w ould re su lt in a d u p lic a tio n of th e a m o u n t in lin e 1108. Lines 1111-1113. T hese lin e s are for e n try of o th e r title charges n o t already item ized. Exam ples in som e ju risd ic tio n s w ould include a fee to a p riv ate ta x service, a fee to a co unty ta x collector fo r a ta x certificate, an d a fee to a p u b lic title re g istra r for a certificate of title u n d e r a T orrens Act. Show th e len d e r’s a tto rn e y ’s fee, if any, on line 1107 a n d o th er a tto rn e y s’ fees, if re q u ire d to be s ta te d u n d e r R egulation. X, o n lines 1111-1113. Lines 1303-1305. Enlter on, th e se line® any o th e r se ttle m e n t charges n o t referrab le to th e categories liste d above o n th e form w hich are re q u ire d by R eg u latio n X to be s ta te d . Exam ples m ay include s tru c tu ra l inspections or p re-sale Inspection of h e atin g , plum bing, or e lectrical eq u ip m e n t. These in sp ectio n charges m ay in clude a fee fo r in su ran ce or w arran ty coverage. L in e 1400. E n te r th e to ta l se ttle m e n t charges p a id from borrow er’s fu n d s an d seller’s fu n d s. T hese to ta ls a re also e n te red on lin e s 103 a n d 503, respectively, in Sec tio n s J a n d K. Atta c h m en t of W aiv e r F o r m T he w aiver or w aivers red u cin g th e period betw een disclosure a n d se ttle m e n t (if any are executed by th e p a rtie s) are a p a r t of th e form w hen i t is. used as a se ttle m e n t sta te m e n t, an d sh o u ld b e a tta c h e d to th e form . EXHIBIT B • F e d e r a l T r u t h - in - L e n d in g S ta te m e n t (As p a r t o f D i s c l o s u r e / S e t t l c m e n t S ta te m e n t) I. A. Cash p r i c e ( c o n t r a c t s a l e s p r i c e ) 1. 2. 3. L e ss any ca sh downpayment Less any t r a d e - i n T o t a l downpayment $_ 5_ B. E q u a ls u n p a id b a l a n c e o f ca sh p r i c e C. P lu s any o t h e r amounts f in a n c e d : . ______________ $“ 1. 2 3. P r o p e r ty i n s u r a n c e premiums $ T o t a l o t h e r amounts f in a n c e d E q u a ls u n p aid b a l a n c e Less any p r e p a id f in a n c e c h a r g e s : 1. 4. O rig in a tio n fee o r p o in ts p a i d by bo rro w er $_____ Loan d is c o u n t o r p o i n t s p a id by s e l l e r $______ I n t e r e s t from ( s p e c i f y d a t e ) to (sp ecify d a te ) $_____ M ortgage g u a r a n ty in s u r a n c e $____ 5. ________________________________ $ _ ___ 2. 3. 6. F. * T o t a l p r e p a id f in a n c e ch arge E q u a ls amount fin a n c e d XI. The FINANCE CHARGE c o n s i s t s o f A. B. I n t e r e s t ( s im p le a n n u a l r a t e o f ______ X) I I I . A. B. T o t a l p r e p a id f in a n c e ch a rg e ( I . E. 6 .) T o t a l FINANCE CHARGE The ANNUAL PERCENTAGE RATE on th e amount fin a n c e d i s I f t h e c o n t r a c t in c lu d e s a p r o v i s i o n f o r v a r i a t i o n i n th e i n t e r e s t r a t e , d e s c r i b e ______________________________________ IV. The repayment t e r n s a r e : V. The f in a n c e ch a rg e b e g i n s to ac c ru e on (s p ecify d ate) V I. In th e e v e n t o f l a t e paym ents, c h a rg e s may be a s s e s s e d as fo llo w s : V II. CJse e i t h e r A o r B as a p p r o p r i a t e ) A. C o n d itio n s and p e n a l t i e s f o r p re p a y in g t h i s o b l i g a t i o n a r e ___ B. I d e n t i f i c a t i o n o f method L’f r e b a t e o f unearned f in a n c e cha rg e is V I I I . I n s u ra n c e ta k e n in c o n n e c tio n w ith t h i s o b l i g a t i o n : IX. The s e c u r i t y f o r t h i s o b l i g a t i o n i s * T h is fo rm is th e F ederal T ru th in L end ing disclosure p o rtio n of th e D isclosure/ S e ttle m e n t S ta te m e n t to be provided by th e D ep a rtm en t of H ousing a n d U rban Develop m e n t in co n n ectio n w ith th e R eal E state S e ttle m e n t P rocedures A ct (P ub. L. 93-533). T his fo rm is in te n d e d to provide a flexible, m in im u m disclosure s ta n d a rd in sa tisfac tio n of th e T ru th in L ending (R eg u latio n Z) re q u irem e n ts of th e R eal E state S e ttle m e n t Procedures Act. T h is form is designed to accom m odate th o se T ru th in L ending d is closures w hich are m o st com m on to real e sta te p u rch ase tra n sac tio n s. However, th e fo rm is n o t com prehensive of all cred it charges o r term s t h a t m ay be in c id e n t to any p a rtic u la r federally re la te d m ortgage loan. W hen a given tra n s a c tio n in clu d es less com m on term s, su ch a s balloon paym ents, for w hich no specific provision is m ade on th e form , th ese term s w ill also need to be disclosed a n d identified on th e form . To m a in ta in th e form as a stan d ard ized disclosure m echanism w hile s till providing creditors w ith flexibility, c e rta in changes to th e form m ay be necessary. As long as th e applicable T ru th in L ending disclosure re q u irem e n ts are m e t: (a) D isclosures provided on th e form w hich are n o t applicable to a given tr a n s actio n m ay be deleted. For exam ple, th e fi n ance charge disclosures (Ite m H ) need n o t be m ade in th e case of a pu rch ase m oney first m ortgage o n a dw elling. (b) D isclosures a n d language m ore p e r tin e n t to a specific charge or (term m ay be s u b s titu te d fo r th o se p resen tly included. F or exam ple, in Ite m VILA., if n o charge will be assessed in th e e v en t of prep ay m en t of a lo an o n w hich in te re st is co m p u ted o n th e u n p a id p rin cip a l balance, a s ta te m e n t to th a t effect m ay be su b s titu te d . (c) A dditional space a n d /o r disclosures m ay be provided w here necessary to satisfy th e re q u ire m en ts of R eg u latio n Z. F or ex am ple, a d d itio n al space m ay be provided for disclosures in Ite m IV; o th e r charges, such as co n tin u in g prem ium s fo r m ortgage g u a r a n ty in su ran ce, m ay be added u n d e r Ite m n. $______ C. D. INSTRUCTIONS FOR FEDERAL TRUTH I N LENDING STATEMENT 1 I n d i c a t e s a d a t e , r a t e o r amount t h a t i s e s t i m a t e d and may be s u b j e c t t o ch a n g e. T his fo rm is designed as a disclosure fo r b o th lo an a n d c red it sale tra n sa c tio n s a n d should be used regardless of w h eth er a given tra n s a c tio n m ay be c h aracterized as a loan or c re d it sale (§§ 226.6(d), 226.8(c) a n d 22 6 .8 (d )). T he fo rm co n ta in s c e rta in d is closure provisions w hich are re q u ire d in cre d it sales disclosures u n d e r T ru th in L end ing b u t n o t re q u ire d in lo an disclosures. Lenders who choose to m ake only th o se d is closures re q u ire d in co n n ectio n w ith loans u n d e r R egulation Z m ay delete th e a d d itio n al disclosures re la ted to th e c re d it sales. Also a c e rta in a m o u n t of d e v iatio n m ay be neces sary in m ore com plicated tra n sac tio n s, su ch as in th e case of p e rm a n en t fin an cin g fol low ing th e m a tu rity of a hom e c o n stru ctio n loan. ' T his form is in te n d e d to be used solely for th e disclosures re q u ire d u n d e r th e F ed eral T ru th in L ending Act. E xcept w ith re sp ect to rescindable tran sac tio n s, as n o ted below, all T ru th in L ending disclosures m ade in com pliance w ith th e R eal E state S e ttle m e n t Procedures Act sh a ll be m ade on one 1 N o t e : T hese in stru c tio n s are in ten d ed to a ssist in th e com pletion o f th e T ru th in L ending S ta te m en t, a n d except to th e e x te n t to w hich R eg u latio n Z is in te rp re te d to accom m odate th e R eal E state S e ttle m e n t Procedures Act, th e in stru c tio n s are in no way in te n d e d to supersede o r su p p lem en t th e provisions of R e g u latio n Z. All sectional references in th e in stru c tio n s are to R egu latio n Z (12 CFR 226). FEDERAL REGISTER, VOL. 40 , NO. 100— THURSDAY, MAY 22, 1975 22458 RULES AND REGULATIONS side of a single sh e e t regardless of any d if fering R e g u la tio n Z re q u ire m en ts. F o r ex am ple, in sp ite of th e provisions of § 226.8 (a) (1 ), for th e purposes of satisfy in g th e re q u irem e n ts of th e R eal E state S e ttle m e n t Procedures Act, prom issory n o tes or o th er c o n tra c tu a l oblig atio n s sh a ll n o t be Included on th e T ru th in L ending disclosure form . Sim ilarly, in sp ite of § 226.6(c) (2 ), ,the T ru th in L ending fo rm to be used in connection w ith th e R eal E sta te S e ttle m e n t P rocedures Act m ay n o t in clu d e in c o n siste n t S ta te d is closure re q u ire m en ts. C harges u n d e r § 226.4(b) need n o t be ite m ized on th is form , provided th ey are item ized an d disclosed o n th e se ttle m e n t cost p o rtio n of th e com bined form . In th e e v en t t h a t a given tra n s a c tio n su b je c t to th e R eal E state S e ttle m e n t P roce d ures A ct is rescindable u n d e r provisions of § 226.9 of R eg u latio n Z, tw o copies of a notice of th e r ig h t of rescission (§ 2 2 6 .9 (b )) sh a ll be given sep arately from th e prescribed fo rm to each borrow er w ho h a s th e rig h t to rescind. B ona flde e stim a te s m ay be m ade in con n ectio n w ith d a te s or charges fo r w hich exact d o llar a m o u n ts or ra te s are u n k n o w n a t th e tim e of advance disclosure (§ 2 2 6 .6 (f)). W hen e stim a te s are used, th ey sh o u ld be su itab ly desig n ated as such, fo r exam ple, by asterisk s placed n e x t to th e e stim a te d in fo r m atio n . T he R eal E state S e ttle m e n t P rocedures Act req u ires t h a t T ru th to L ending disclosures b e m ade a t le a st 12 days before se ttle m e n t a n d ag ain o n th e day o f se ttle m e n t. W hile tw o se p a rate disclosures are req u ired , in th o se in stan ces w here n o m ate ria l change o ccurs in th e in fo rm a tio n re q u ire d to be disclosed, a copy o f th e in itia l disclosure form m ay be used in sa tisfa c tio n o f th e disclosure re q u ire m en t o n th e day o f se ttle m e n t. C reditors in u sin g th e p rescrib ed form m ay d elete th e n u m b erin g system provided; th e n u m b ers used o n th e form are in clu d ed solely to aid in re la tin g p e rtin e n t in stru c tio n s. However, in d e le tin g th e n u m b ers or in m aking any o th e r a d ju s tm e n ts to th e form , cred ito rs sh o u ld be guided toy th e re q u ire m en ts o f § 226.6(a) to th e effect th a t T ru th in L ending disclosures toe m ade clearly, conspicuously, a n d in m ean in g fu l sequence. C reditors m ay also a d d sig n a tu re s, dates, a n d acknow ledgem ents to th e form . Ite m I Ite m I.A. is provided to show th e cash price (c o n tra c t sales price) w hich should e q u ate to th e a m o u n t show n o n lin e 101 of th e s e ttle m e n t cost disclosure p o rtio n of th e com bined form (§ 226.8(c) (1 )). Item s I .A.I. a n d I.A.2. are provided to show an y cash dow npaym ent o r tra d e -in . Ite m I.A.3. is provided to show th e to ta l a m o u n t of any dow npaym ents (g 226.8(c) (2 )). Ite m I.B . is provided to show th e u n p a id balance of th e cash price w hich sh o u ld equal I .A. m in u s I.A.3. (5 2 2 6 .8 (c )(3 )). Ite m I.C. is provided to show o th e r item s w hich are financed as p a r t o f th e c re d it tra n s actio n . For exam ple, p ro p erty dam age in su r ance prem ium s u n d e r I.C .l. are included' in th e a m o u n t financed, if th e y a re financed as p a rt o f th e c red it tra n sa c tio n a n d th e o th e r c o n d itio n s of § 226.4(a) (6) a re m et. The b lan k lin e I.C.2. is in te n d e d to Inclu d e sim i la r item s, w hich are financed, su c h as those liste d in § 226.4 (to) o r ( e ) . Ite m I.C.3. is p ro vided to show a to ta l of o th e r a m o u n ts fi n a n ce d (§ 226.8(c) ( 4 )). Ite m I.D. is provided to show th e u n p a id b alan ce (th e su m o f Ite m I.B. a n d I.C.) (5 2 2 6 .8 (c )(5 )). Ite m I.E. is in te n d e d to show p re p aid fi n a n ce charges a n d th e to ta l p re p aid finance charges (§§ 226.4(a)/226.8(d) (2 )/226.8(e) (1)). Ite m I.E .l. is provided to show th e o rig in a tio n fee o r p o in ts p a id d irectly by th e b o r rower, su c h as th e one p o in t p e rm itte d in VA tran sac tio n s. * Ite m I.E.2. is provided to show th o se lo an d isco u n ts or p o in ts p a id by th e seller w hen th ey are p a r t o f th e finance charge (§ 226. 406). Ite m I.E.3. is provided to show th e p re p ay m en t o f a n y accru in g in te re st charge o n th e c o n tra c t u n til th e first p a y m e n t is due. T h e b lan k spaces a re provided to show th e d ates for w hich su c h in te re s t accrues. (T he d a te s a n d a m o u n ts disclosed m ay fre q u e n tly n eed to b e e stim ated .) Ite m I.E.4. is provided to show th e pay m e n t of m ortgage g u a ra n ty in su ra n ce p re m ium s, su ch as fo r FHA or p riv ate m ortgage g u a ra n ty in su re rs, accru in g p rio r to th e first re g u la r paym ent. Ite m I.F . is provided to show th e a m o u n t financed: th e difference betw een ite m I.D. a n d IJE. (§§ 226.8(c) (7 )/226.8(d) (1 )). Ite m I I T h is item is provided to show th e com p o n e n ts o f th e finance charge, su c h a s p re p a id finance charges, a n d c o n tin u in g p re m i u m s fo r m ortgage g u a ra n ty in su ran ce, as w ell a s to show th e to ta l a m o u n t o f th e finance charge (§§ 226.4(a)/2526.8(d) (3 )). Ite m II.A . provides th e o p tio n a l disclosure of th e c o n tra c t ra te o f in te re s t a s a n a d d itio n al ite m w here su c h in te re s t is c o m p u ted b y th e a p p lic atio n o f a sim ple a n n u a l ra te . I t e m III Ite m I I I .A. is provided to show th e a n n u a l percen tag e ra te a s d ete rm in e d In accordance w ith § 226.5(b). Ite m III.B . is provided to show a n y variab le in te re st ra te provisions (§ 226.810). Ite m IV T h is item is provided to show th e repay m e n t term s (§ 226.8(b) (3 )). Ite m V T h is iitem is provided to sho w th e d a te on w hich th e finance charge begins to accrue only if t h a t d a te differs fro m th e d a te o f th e tra n s a c tio n (§ 226.8(b) ( I ) ). Ite m V I T h is item is provided fo r th e disclosure of an y a m o u n t o r m eth o d o f co m p u tin g th e a m o u n t o f a n y d e fa u lt, delinquency, o r sim i la r charges payable in th e e v en t o f la te pay m en ts (§§ 226.4(c)/226.8(b) (4 ) ). Ite m V II T h is item is provided fo r th e disclosure of th e consequences o f p rep ay m en t o f th e m o rt gage o bligation; e ith e r (A) o r (B) sh o u ld toe used, a s applicable. Ite m VILA, is provided fo r th e disclosure o f co n d itio n s o r p e n altie s charged in th e ev en t o f p re p ay m en t o f a lo an o n w hich in te re s t is com puted o n th e u n p a id p rin cip a l b alance (§ 226.8(b) (6 ) ). S h o u ld th e re toe n o p en alty fo r prep ay m en t, a sta te m e n t to t h a t effect _ m ay be su b s titu te d . Ite m VII.B. is provided to id e n tify th e m eth o d o f re b a te o f u n e a rn e d finance charges in th e e v en t o f p rep ay m en t in fu ll of In sta lm e n t o b lig atio n s w hich in clude pre co m puted finance charges. I f n o re b a te will be m ade, a s ta te m e n t to t h a t effect m u s t be in clu d ed (§ 226.8(to) ( 7 )) . Ite m V I I I T h is Item is provided for th e disclosure of in su ra n c e w ritte n in c o n n ectio n w ith th e o b lig a tio n , su c h a s p ro p e rty dam age in su ran ce (to b e disclosed in accordance w ith § 226.4 ( a )'(6 )), c re d it life, a ccid en t, o r d isa b ility In su ran ce (to toe disclosed in accordance w ith § 226.4(a) ( 5 )), a n d vendor’s sin g le in te re st in su ra n c e (to toe disclosed in accordance w ith § 226.404). Ite m I X T h is ite m is provided to show a n y secu rity in te re sts ta k e n in co n n ectio n w ith th e tra n s a c tio n ( | 226.2(z) a n d § 226.8(b) (5 ) ). [FR Doc.75—13260 F iled 5-19-75;8:45 am ] FEDERAL REGISTER, VOL. 40 , NO. 100— THURSDAY, MAY 22, 1975 22459 NOTICES DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Se t t l e m e n t C osts Office of Assistant Secretary for Housing Production and Mortgage Credit— Fed eral Housing Commissioner T he c o n te n t of th is booklet h as been p re pared, prescribed an d approved by th e U.S. D ep artm en t of H ousing a n d U rban Develop m en t, as req u ired by sectio n 5 of th e Real E sta te S e ttle m e n t P rocedures A ct of 1974 (Pub. L. 93-533), effective on Ju n e 20, 1975. T his p u b lic a tio n m ay be re p rin te d . How ever, in no case m ay any change, deletion, or ad d itio n be m ade in its co n te n t. F or sale by th e S u p e rin te n d e n t of D ocu m ents, U.S. G overnm ent P rin tin g Office, W ashington, D.C. 20402. [D ocket No. N-75-311] REAL ESTATE SETTLEMENT COSTS Special Information Booklet N otice is hereby given that HUD has prepared the booklet, “Settlem ent Costs” pursuant to Section 5(a) of the Real Es tate Settlem ent Procedures Act of 1974. Section 5(a) requires HUD to prepare and distribute to lenders who make fed erally related m ortgage loans a special inform ation booklet to better inform per sons borrowing money to finance the purchase of residential real estate con cerning the settlem ent process. The booklet explains the purpose of each cost involved in a settlem ent, reproduces and explains the standard disclosure/settle m ent form required by sections 4 and 6 of the Act, discusses such abuses as unfair practices and unreasonable charges, and explains choices available to homebuy ers in shopping for settlem ent services. Section 5(c) of the Act requires each lender which makes federally related mortgage loans to provide the booklet to each person subm itting an application to borrow money to finance the purchase of residential real estate. The lender is required to provide the booklet at the tim e it receives the application. To insure that each federally related mortgage lender has a sufficient supply of booklets on hand on the effective date of the Act, June 20, 1975, the D epart m ent will provide an initial supply of booklets for lender use at each HUD Area and Insuring Office and expects that the booklets will be available in early June. Lenders may pick up a lim ited supply from these offices but no m ail or tele phone orders can be accommodated. After this initial distribution, additional supplies of the booklet will be on sale through the Government Printing Office and m ust be paid for by the lender. This booklet (1) may be reproduced and distributed by lenders, using a cover of their own design (which may bear the name of the lend er), without further approval by HUD; or (2) lenders may print and distribute booklets approved by the Secretary as to form and content. In the form er case, it is not permissible to make any change, deletion, or addi tion in the content of the booklet as pre pared by HUD. Lenders desiring to take advantage of the latter option should so request in writing and submit proposed booklets for review to the Office of Gen eral Counsel, Departm ent of Housing and Urban Development, Room 2253, 451 7th Street, SW., W ashington, D.C. 20410. A copy of the contents of the booklet which may be reproduced by lenders is set forth as an appendix to this notice. D avid M . de W il d e , A c tin g A s s is ta n t S e c r e ta ry f o r H o u s in g P r o d u c t io n and M o r tg a g e C r e d it, F H A C o m m i s s io n e r . A HTJD GUIDE contents Forew ord Home L oan F in an cin g D isclo su re/S ettlem en t S ta te m e n t A dvance D isclosure U nfair P ractices a n d U nreasonable or U n necessary C harges to Avoid Escrow A ccounts Previous Selling Price D isclosure Ju risd ic tio n of C ourts T ru th in L ending D isclosure FOREWORD Y ou are p lan n in g to b u y a hom e. W hen you do, you w ill probably m ake a dow npay m en t a n d finance th e balan ce of th e p u rch ase price w ith a lo an secured by a m ortgage on your hom e. Before you ta k e possession of your hom e, a closing o r se ttle m e n t w ill occur a t w hich ow nership of th e p ro p e rty will be tra n sfe rre d to you, a n d your oblig atio n to repay th e m ortgage loan w ill becom e effective. T he term s a n d c o n d itio n s of th e lo an —in te re st ra te , m o n th ly p aym ent, a n d th e rep ay m en t period—are specified in th e do cu m en ts signed by you. T hese in clu d e a n o te evidencing th e lo an fo r th e u n p a id pu rch ase price, a m o rt gage placing a lie n o n your hom e, a n d o th er docum ents. In som e S tates, i t is th e cu sto m fo r th e buyer a n d seller to a tte n d th e s e ttle m e n t in person; in o th ers i t is h a n d le d a u to m a tic ally by a n escrow a g en t w hen all p a p ers a n d fu n d s have been deposited w ith him . A t th e closing o r se ttle m e n t, b o th you a n d th e seller w ill have to pay c e rta in charges in cid e n t to tra n sfe rrin g title to re al e sta te a n d o b ta in in g th e m ortgage loan. T hese charges are called “se ttle m e n t costs” or "closing costs”. T his booklet h a s been p rep ared to inform you, th e buyer, a b o u t th e n a tu re a n d costs of th e s e ttle m e n t process. As re q u ire d by law, th is booklet is given to you by a len d in g in s titu tio n a t th e tim e you apply for a m o rt gage loan to finance th e p u rch ase of a o n e- to fo u r-fam ily re sid e n tia l dw elling. A t th is stage, you have selected th e hom e you w an t to buy. Y ou m ay have already reached in form al agreem ent w ith a seller or even signed a sales c o n tra c t a n d m ade a d ep o sit (“e arn e st m oney d eposit”) in d ic a tin g your serious in te n tio n to buy—a deposit w h ic h ' could be fo rfeited sh o u ld you fa il to com plete your purchase. T h is booklet is in te n d e d to a c q u a in t you w ith th e a p p ro p ria te procedures a n d charges for se ttle m e n t services w hich you w ill e n c o u n te r in closing yo u r hom e pu rch ase tran sac tio n . F or answ ers to specific q u e stio n s o r for In fo rm atio n on m ortgage lending a n d se ttle m e n t p ractices in your locality, you m ay w a n t to c o n su lt a S ta te or local consum er affairs agency, a n atto rn e y , a legal a id society, or th e local re al e sta te board. deed of tru s t) w hich you m u st sign, w hich pledges th e hom e as secu rity fo r rep ay m en t of th e loan. I f you fa il to repay th e lo an or com ply w ith th e term s a n d co n d itio n s of th e m ortgage, th e len d er c a n in itia te foreclosure of th e lo an w hich w ould lead to sale of your hom e a t a public a u c tio n to satisfy th e debt. In a hom e m ortgage tran sac tio n , you p ro m ise to repay th e loan and in te re st in m o n th ly in sta llm e n ts a t th e in te re st ra te a n d over th e period of tim e specified in th e m ortgage c o n tra ct. I n th e early years w hen your d e b t is largest, m o st of th e m o n th ly p ay m en t goes for in te re st. T he a m o u n t a p plied to th e o u tsta n d in g d e b t g radually in creases so th a t in th e final years of th e m ortgage m o st of th e p a y m e n t goes to p rin cipal a n d less to in te re st. T h is is know n as a n am ortized m ortgage, a n d m ost m ortgages are w ritte n th is way. I n som e S tates, th e se c u rity in stru m e n t in ste a d of being a m ortgage is a deed of tr u s t u n d e r w hich th e borrow er deeds th e p ro p erty to a tru ste e . N orm ally, th e term s o f a deed of tr u s t are su b sta n tia lly th e sam e as those of a m ortgage. H usband a n d wife o fte n ta k e n title to th e ir hom e as jo in t te n a n ts w ith rig h t of survivor ship. You m ay w ish to seek legal advice on th is a n d o th e r m atters. T he m an n e r in w hich you ta k e title to th e hom e you b u y can have im p o rta n t incom e tax , e sta te p lan n in g , a n d o th e r consequences. d is c l o s u r e / s e t t l e m e n t s t a t e m e n t T he R eal E sta te S e ttle m e n t P rocedures A ct o f 1974 (P ub. L. 93-533) re q u ire s u se of a sta n d a rd fo rm fo r advance disclosure o f s e t tle m e n t costs a n d to record a c tu a l charges in cu rre d a t s e ttle m e n t in a ll m ortgage tr a n s actio n s involving federally re la te d loans. T h e sam e fo rm is used for b o th advance disclosure a n d se ttle m e n t a n d is reproduced on th e follow ing pages to a c q u a in t you w ith it. S e ttle m e n t co st Item s a re n u m b ered to correspond w ith th e accom panying exp lan a tio n o f each ite m . T h e listin g o f th e se item s o n th e fo rm does n o t Im ply t h a t a n y p a r tic u la r charge liste d is or should be m ade in a given geographic area. Even in a given geo grap h ic area, you m ay find t h a t d ifferen t lenders a n d providers o f s e ttle m e n t services vary a s to w h eth er th e y m ake c e rta in charges a n d as to th e a m o u n t o f th e charge. Y ou m ay w ish to “shop a ro u n d ” . Som e s e ttle m e n t c o sts ty p ically a re charged to th e buyer. O th ers u su a lly a re th e resp o n si b ility o f th e seller. A lthough local custom a n d p ractices o fte n d ic ta te w hich a re th e b u y e r’s a n d w hich th e se lle r’s costs, th e re a re n o h a rd a n d fa s t ru les t h a t apply, a n d in m o st cases th e b u y er a n d seller c a n nego tia te a s to w ho w ill pay specific se ttle m e n t charges. Y ou c an also n e g o tia te w ith p ro viders of se ttle m e n t services as to w h eth er each charge w ill be m ade a n d th e a m o u n t. Y ou sh o u ld b e charged on ly fo r services a c tu a lly perform ed, as re q u ire d by se ttle m e n t p ractices In a p a rtic u la r locality. 1. C o n tra ct Sales Price. T h is is th e p rice of th e hom e agreed to in th e sales c o n tra c t betw een b u y er a n d seller. 2. Personal P ro p e rty . Those item s, su ch as carp ets, drapes, o r appliances, w hich th e se ll e r tra n s fe rs w ith th e hom e, m ay be p a id for by th e b u y er a t se ttle m e n t. W hen th e sales c o n tra c t is m ade, you sh o u ld m ake su re th a t ite m s to be tra n sfe rre d a re described. T he sales c o n tra c t sh o u ld s ta te w h eth er su c h ite m s a re In clu d ed in th e sales price. 3. S ettle m en t Charges. T his is th e to ta l a m o u n t o f th e s e ttle m e n t charges to ibe p aid by th e buyer. T hese charges a re item ized on page 2 o f th e form . HOM E LOAN FINANCING 4,9. A d ju stm e n ts o r P ro -ra tio n s. T hese T he hom e p u rchase loan is evidenced by a m o u n ts re p rese n t p ro -ra te d a d ju s tm e n ts of your sig n a tu re on a n o te or bond, a n d th e c e rta in costs, su ch a s real e sta te taxes, u t il lo an (your d e b t) is secured by a m ortgage (or ities, a n d fuel. S uch a d ju s tm e n ts a re o ften FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 NOTICES 22460 mn^<i in o rd e r to p ro -ra te su c h costa In order to ch arg e th e seller fo r th e period h e ow ned th e p ro p e rty (u p to se ttle m e n t) a n d to charge th e b u y er fo r th e perio d a fte r s e ttle m en t. Ite m 4 s ta te s a m o u n ts fo r w hich th e buyer com pensates th e seller. Ite m & sta te s a m o u n ts ’fo r w hich th e seller com pensates th e b uyer. As a n exam ple, w here se ttle m e n t occurs O ctober 1, 1975, a n d th e seller h a s p a id th e re al e sta te tax e s in advance fo r th e e n tire year, a ty p ic a l a d ju s tm e n t w ould be fo r th e b u y er to com pensate th e seller fo r o n e -fo u rth o f th e re al e sta te tax e s fo r 1975, t h a t Is, th e p erio d fro m O ctober 1 th ro u g h D ecem ber 31. T h a t a m o u n t w ould b e show n a t Ite m '4. ' 5. Gross A m o u n t Due fro m Borrow er. T his la th e to ta l a m o u n t o f a ll charges to th e b u y e r in clu d ed in ite m s 1, 2, 3, a n d 4. 6. Deposit o r Earnest Money. T h is is th e a m o u n t o f m oney d eposited by th e b u yer u n d e r th e c o n tra c t o f sale, u su a lly a t th e tim e i t w as signed. 7.. P rin c ip a l A m o u n t o f L o a n (s ) . T h is Is th e a m o u n t o f m ortgage m oney loaned to th e buyer to p u rc h ase h is hom e. 8. E x is tin g L o a n(s) Taken S ubject To. T h is sp ace Is used fo r cases in w hich th e b u y e r is assu m in g or ta k in g title su b je c t to a n existing lo a n o r o th e r lie n on w hich he is expected to m ake th e paym ents. 10. T o ta l A m o u n ts P aid B y o r I n B e h a lf o f Borrow er. T h is a m o u n t is th e su m of item s 6, 7, 8, a n d 9 above w hich will be applied to reduce th e a m o u n t of charges to th e buyer in ite m 5 above. 11. Cash R equired F rom (Payable To) B o r row er. T his is th e to ta l a m o u n t of cash w hich th e b u yer w ill need a t se ttle m e n t (su b tra c t item 10 from ite m 5 ). A t tim e of advance d is closure th is is th e e stim a te d am o u n t. 12. Real Estate B ro ke r’s Sales Compensa tio n . T h is charge com pensates th e real e state broker or brokers fo r services involved in listin g an d selling th e property, a n d is n o r m ally th e seller’s o b lig atio n to pay. T his com m ission o r fee m ay be sp lit am ong m ore th a n one broker if each perform ed services in co nnection w ith th e tra n sa c tio n , b u t no p e r son m ay accept any p o rtio n , s p lit or p e r centage of su c h com m ission or fee o th e r th a n tor services a c tu a lly perform ed. 13. Loan O rig in a tio n Fee. T h is com pensates th e len d e r fo r expenses in cu rre d in o rig in a t ing th e loan, p rep arin g d ocum ents, a n d re la te d work. W hen su ch a fee Is charged, it is u su a lly a p ercentage of th e face a m o u n t of th e m ortgage. In FH A -insured or VAg u a ran tee d m ortgage tra n sa c tio n s involving ex istin g stru c tu re s, th e fee charged th e b o r row er can be no m ore th a n one p e rc e n t of th e m ortgage am o u n t. F or exam ple, if you a re approved fo r a V A -guaranteed lo an of $30,000, th e o rig in a tio n fee charged -to you m ay n o t exceed $300. However, w hen th e len d e r m akes in spections a n d p a rtia l d is b u rse m en ts d u rin g c o n stru c tio n of a new hom e, b o th FHA an d VA p e rm it a h ig h e r o rig in a tio n fee, b u t n o t m ore th a n 2 y2 % fo r FH A -insured loans o r 2% fo r V A -guaranteed loans. T he F arm ers Hom e A d m in istratio n does n o t p e rm it a lo an o rig in a tio n fee. 14. Loan D is c o u n t P oints. D iscounts o t “p o in ts” are a o n e -tim e charge m ade by th e len d er to increase Its yield (th e effective in te re st r e tu rn or incom e) o n th e m ortgage loan. E ach “p o in t” is o ne p e rce n t of th e m o rt gage a m o u n t. I n FHA a n d VA tran sac tio n s, th e buyer m ay n o t be charged a d isc o u n t by th e lender, b u t th e seller m ay v o lu n teer to p ay p o in ts in order to help th e b uyer o b ta in financing. F or exam ple, if a len d er charges 4 p o in ts o n a n FH A -insured loan of $30,000, th is a m o u n ts to a d isc o u n t of $1,200. You, th e buyer, m ay pay only th e lo an o rig in a tio n fee described in n o te 13 if i t Is a VA o r FHA tra n sa c tio n . D iscounts are n o t p e rm itte d on F arm ers Home A d m in istra tio n loans. 15. A ppraisal Fee. T his charge com pensates th e len d er for a p ro p erty ap p raisal m ade by a n in d ep e n d e n t ap p raiser or by a m em ber of th e len d er's staff. 16. C re d it Report. T he b u y e r’s cred it h is to ry is o ften o b tain ed by th e len d er a n d a charge p a id to a cred it b u re a u fo r a sc e rta in ing th e s ta tu s of th e b u y e r’s c red it m ay be collected, u su ally from th e buyer. 17. Lender’s In sp e ctio n Fee. T h is charge covers only in sp ectio n s m ade by personnel of th e len d in g In stitu tio n a t its d iscretio n . P est or o th e r in sp ectio n s m ade by com panies o th er th a n th e len d er are described in n o te 31. 18. M ortgage Insurance A p p lic a tio n Fee. T h is covers th e cost of a n FHA o r VA a p p raisal, w hich in a n FHA loan is in clu d ed in a m ortgage in su ra n ce a p p lic atio n fee. For co n v en tio n al loans it m ay cover a p p licatio n fees w hen charged by p riv ate m ortgage in surers. I n th e case of a n FH A -insured m o rt gage, th e a m o u n t of th is charge is se t by HUD R egulations a n d m ay be charged to th e buyer. T he b uyer In a V A -guaranteed lo an m ay n o t be charged a n ap p raisal fee u n less Identified by nam e in th e re q u e st fo r VA’s appraisal. 19. A ssum ption Fee. I n a case w here th e b uyer assum es th e seller’s existing m ortgage on th e property, th e len d er’s charges for processing th e a ssu m p tio n are e n te red here. 20. P repaid In te re s t. T h is charge covers in te re st w hich w ill accrue from th e d a te of se ttle m e n t to th e b eg inning of th e period covered by your" first m o n th ly pay m en t. For exam ple, if your m ortgage p a y m e n t is due o n th e 1st of each m o n th , b u t se ttle m e n t occurs o n A pril 20, th e p rep aid in te re st a t se ttle m e n t w ill cover th e period fro m A pril 20 to A pril 30 if your first m o n th ly m ortgage p a y m e n t is due on Ju n e 1st. T h u s your J u n e 1 p ay m en t w ill n o t have to in clu d e a n e x tra a m o u n t of in te re st fo r th e p erio d before May 1. " 21. Prepaid M ortgage Insurance P rem ium . T h is Is th e p o rtio n of th e prem iu m prepaid by th e b uyer a t se ttle m e n t for m ortgage in surance. T h is ty p e of in su ra n ce is req u ired w hen FHA or a p riv ate m ortgage In surance com pany covers th e len d er a g ain st loss if th e b uyer fails to m eet th e m ortgage obligation. M ortgage In su ran ce prem ium s are req u ired fo r a ll FH A -insured loans (b u t n o t fo r VA loan g u a ra n te e s), a n d m ay be re q u ire d on a co n v en tio n al loan. T h is type of In su ra n ce sh o u ld n o t be con fused w ith m ortgage life, c re d it life, or d is a b ility in su ran ce designed to pay off a m o rt gage In th e event of physical d isa b ility or d e a th of th e borrow er. S uch in su ra n ce Is available b u t visually n o t re q u ire d by lenders. 22. Prepaid Hazard Insurance P rem ium . T h is is th e p o rtio n o f th e p rem iu m prepaid by th e b uyer a t s e ttle m e n t fo r pu rch ase from a p riv ate com pany of in su ra n ce a g ain st loss d u e to fire, w indstorm , a n d n a tu ra l hazards. T h is coverage m ay be Included In a H om e ow ners Policy w hich in su res a g a in st p o s sible a d d itio n al risks, su c h as personal lia b il ity a n d th e ft. A h a za rd Insurance o r hom eow ner’s policy does n o t p ro te c t you a g a in st loss caused by flooding. I n special flood-prone areas id e n ti fied by HUD, you m u st carry flood in su ran ce on your hom e. S u ch in su ra n ce m ay be p u r chased a t low federally subsidized ra te s in co m m u n ities eligible u n d e r th e N ational Flood In su ra n c e Act. C o n tac t a local h azard in su ra n ce a g en t concerning eligibility in your case. 23. Reserves Deposited w ith Lender. These fu n d s are placed by th e buyer in a n “es crow ” or “im p o u n d ” a cc o u n t m ain ta in e d by th e len d e r to assure a n ad eq u a te a ccu m u la tio n of fu n d s to m eet charges fo r real e sta te taxes a n d h azard in su ra n ce w hen th ey b e com e due; a n d also, If applicable, fo r m o rt gage Insurance, a n n u a l assessm ents, hom e ow ners’ association fees, or flood insurance. (T hese reserves are explained in m ore d e ta il late r.) T hese reserves m ay be h eld In n o n -in te re st b earin g accounts. However, c e rta in S ta te s now re q u ire lenders to pay in te re st on th is m oney, a n d len d ers in o th e r S ta te s m ay be w illing to do th is volu n tarily . 24. S ettlem ent, Closing, or Escrow Fee. T his charge m ay be m ade fo r h a n d lin g a n d su p e r vising th e se ttle m e n t tran sac tio n . T he s e t tle m e n t m ay be conducted by th e lender, a real e sta te broker, a title com pany in some S tates, a n escrow a g en t in som e S tates, o r an a tto rn e y . T he seller a n d b uyer m ay negotiate regarding w ho pays o r w h eth er th e charge is sh ared betw een th em . T he a m o u n t of th e charge m ay be n eg o tiated w ith th e p ro vider of th e service. In a V A -guaranteed loan, th is fee c a n n o t be charged to th e buyer w hen th e buyer Is assessed th e 1% o rig in a tio n fee. 25. T itle Charges. T hese charges cover th e costs of title search a n d ex am in atio n of p u b lic records of previous ow nership a n d sales to e stab lish th e rig h t of th e seller to convey th e p ro p erty to th e buyer. A search a n d ex am in atio n are perform ed to determ ine w h eth er th e seller h a s good title to th e p ro p e rty th a t h e c an tra n s fe r to th e buyer, a n d to disclose any m a tte rs o n record t h a t could adversely affect th e buyer, th e lender, or o th ers w ith a n in te re st in th e property. Ex am ples of th ese problem s are u n p a id m o rt gages, Judgm ent of ta x liens, a pow er line easem ent o r a road rig h t-o f-w ay th a t could lim it use a n d e n jo y m en t of th e real e sta te by th e buyer. I n som e p a rts of th e n a tio n , a title search cu sto m arily tak e s th e form of a n “a b stra c t”, w h ich is a com pilation in clu d in g copies of p e rtin e n t do cu m en ts t h a t provides a con densed h isto ry of p ro p erty ow nership a n d re la te d m atters. I n o th e r places, title searches are perform ed by e x tra c tin g re la ted in fo rm a tio n from th e p u b lic record w ith o u t assem bling a b strac ts. E ith e r way, i t th e n is neces sary fo r a n ex p ert e x am in atio n to be m ade of th e evidence a ccu m u lated in th e search in o rder to d eterm in e s ta tu s of title a s show n by th e p u b lic record. D epending o n local custom , title exam ina tio n s norm ally are m ad e by a tto rn e y s o r title com pany em ployees. T h ro u g h a title search a n d exam ination), la n d t itle problem s of record a re disclosed in advance so th e y can be cleared up, w hen possible, before a tra n s a c tio n is com pleted. 26. N o ta ry Fees. T h is ch arg e m ay be m ade fo r th e services o f a n o tary in a u th e n tic a tin g sig n a tu re s to th e vario u s d o cu m en ts in th e tra n sa c tio n . I n a V A -guaranteed loan, th is fee c a n n o t be c harged to a buyer in th e event th e b u y e r is charged a 1 % o rig in a tio n fee. 27. A tto rn e y ’s Fees. T hese in clu d e charges w hich th e len d e r m ay re q u ire th e b u y er to pay fo r legal services to th e len d er in con n e ctio n w ith th e tr a n s a c tio n .'T h e buyer sh o u ld n o t assum e t h a t h e is rep resen ted by a n a tto rn e y h ire d by th e len d er w ho p re p ares th e d o cu m en ts a n d h a n d le s th e s e ttle m en t. I n a V A -guaranteed loan, th is len d er's a tto rn e y fee c a n n o t b e charged if th e b u yer is charged th e 1% o rig in a tio n fee. T he b u y er a n d seller m ay each re ta in a t to rn ey s to re p re se n t th e m a n d m ay pay th e fees a t th e se ttle m e n t, in w hich case these fees also a p p ea r o n th is p a r t o f th e form . In som e S ta te s, a tto rn e y s provide b a rre la te d title in su ra n ce as p a rt o f th e ir serv ices to th e b u y er fo r tra n s fe r o f title . H ie a tto rn e y ’s fee in th is case m ay in clu d e th e title in su ra n ce prem ium . 28. T itle Insurance. A o n e -tim e p rem iu m m ay be charged a t s e ttle m e n t fo r a policy w hich p ro tec ts th e le n d e r’s in te re s t in th e p ro p erty a g ain st la n d title problem s in clu d ing th o se t h a t m ig h t n o t be disclosed by a title search a n d exam ination. W h eth e r th e b u y er o r seller pays fo r th is varies w ith local custom . FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 NOTICES T he b u y er m u st re q u e st a n d pay fo r a n a d d itio n al ow ner’s policy if h e w a n ts th is p ro te c tio n fo r h is in te re s t in th e p roperty. T here are m any a rea s w here a n ow ner’s p o l icy c an be o b ta in e d a t a m o d est ad d itio n al charge if issued sim u ltan eo u sly w ith a le n d e r’s policy. I n som e areas, th e seller pays fo r th e ow ner’s title in su ra n ce policy. 29. G overnm ent T ransfer Taxes and Charges. T he fees a n d tax e s in th is sectio n are generally levied by S ta te a n d /o r local g overnm ents w hen p ro p erty changes h a n d s or w hen a m ortgage lo an is m ade. Depending* on local custom , th ese charges m ay be paid by th e buyer, seller, o r otherw ise s p lit be tw een th em . ' 30. Survey. T he len d er o r a p a rty to th e 22461 tra n sa c tio n m ay re q u ire a survey show ing th e precise lo catio n of th e h o use a n d lo t lines. 31. Inspections. T his p a rt of th e form re cords charges fo r various in sp ectio n s re q u ired by th e len d e r or a p a rty to th e tra n s action, su c h as th o se for te rm ite a n d o th e r p est in festa tio n . I n a V A -guaranteed loan, th e buyer m ay n o t be charged fo r th e p est inspection. T here m ay also be p re-sale in sp ectio n s for th e b uyer’s b enefit to ev alu ate h eatin g , plum bing, a n d electrical eq u ip m e n t a n d overall s tru c tu ra l soundness. T h e charge for su c h a n in sp ectio n m ay Include a fee fo r in su ran ce or w a rran ty services to back -u p th e inspection. F «rm Appr oved OMB No. 63- R1S 01 ** B. T Y P E O F L O A N : U.S. DEPART ME NT OF HOUSING AND URBAN DEVEL OPM ENT *• CJ FHA 2*(Tj FMHA 4. 11: VA 5. Q“* CONV. DISCLOSURE/SETTLEMENT STATEMENT 6. 8. 3- dj CONV. u n i n s . INS. 7. FIL E NUMBER LOAN N U M B E R M O R T G . INS . C A S E NO. If the Truth-in-Lending Act applies to this transaction, a Truth-in-Lending statement is attached as pate 3 of this form. N O T E : This form is furnished to you prior to settlement to give you information about your settlement c o sts, and again after settlement to show the actual costs you have paid. The present copy of the form is: C. [31 ADVANCE DISCLOSURE OF COSTS. Some items are estimated, and are marked “ (e)” . Some amounts may change if the settlement is held on a date other than the date estimated below. The preparer of this form is not responsible for errors or changes in amounts furnished by others. , H J STATEMENT OF ACTUAL COSTS, Amounts paid to and by the settlement agent are shown. Items marked "(p .o .e.)’’ were paid outside the closing: they are shown here for informational purposes and are not included in totals. E. 4E O F BORR OWE R G. P R O P E R T Y L O CA TI ON SELLER H. SE T T L E M E N T AGENT P L A C E O F S E T T L EM E N T LOAN COMMITMENT ADVANCE DISCLOSURE S E T T L E ME N T O A T E O F PRORATI ONS I F D I F F E R E N T FROM S E T T L E MENT J. 100. SUMMARY O F B O R R O W E R ' S T R A F A C T I O N CROSS AMOUNT DUE FROM BORROWER: 101. Contract sales price 102. Personal property 103. Settlement charges to borrower (from linn tt00. Si'ciinn I.) 104. 105. fT J V 'S N \ O / ^ 120. 200. to to to to to to to 7 ft rv zx 420. m C~i) 220 I | V ff\\ ( XU ' 510. City/town taxes 511. County toxes 512. Assessments 513. 514. 515. (10* BORROWER CASH A T S E T T L E ME N T RE Q UI RE D FROM 0 R P A Y A B L E TO BORROWER: 520. 301. Gross amount due from borrower (from line 120) 302. Less amounts paid by or in behalf of borrower (from line 220 ) 303. CASH O fQ R EQ UI R ED f r o m ; OR P A Y A B L E t o ; BORROWER: \J GROSS AMOUNT D U E TO S ELL ER ------- •— Credits to borrower for items unpaid by seller: T 0 T A L AMOUNTS PA ID BY OR IN B E H A L F 0 ^ - ^ 300. to to to to to to to 504. Existing loan(s) taken subject to 505. 506. 507. 508. 509. S~ . ' 503. Settlement charges to seller ffrom line l400.Srrlinn 1.1 /rh Credits to borrower for items unpaid by seller:\ to to to to to to to ’ NOTE: The following 500 and 600 series sections are not required lo be completed when this form is used lor advance disclosure ol settlem ent c o sts prior to settlem ent. 500. RED UCTION S IN AMOUNT DUE TO S ELLER: 501. Payoff of first mortgage loon 502. Payoff of second mortgage loon AMOUNTS P AI D BY OR IN B E H A L F O F BORROWER: 206. City/town taxes 207. County toxes 208. Assessments 209. 210. 211. 212. S EL LER: 405. City/town taxes 406. County taxes 407. Assessments 408. 409. 410. 411. CROSS AMOUNT DUE FROM BORROWER: 201. Deposit or earnest money 202. Principal amount of new loan(s) 203. Existing loon(s) token subject to 204. 205. SU MMA RY O F S E L L E R S T R A N S A C T I O N Adjustments (or items paid by seller in advance: Adjustments for items paid by seller in advanccA Kfo. City/town taxes 107. County taxes 108. Assessments 109. 110. 111. 112. K. 400. GROSS AMOUNT DUE TO 401. Contract sales price 402. Personal property 403. 404. ' ( to to to to to to TO T A L RED UCTION S IN AMOUNT O UE TO S EL LER: 600. CASH TO S E LL ER FROM S ETTLEMEN T: 601. Gross amount due to seller {from line 420} ) 602. Less total reductions in amount due to 603. ’ ( ) CASH TO S E LL ER FROM S ET TLEM EN T H U D-1 (5-75) FEDERAL REGISTER, VOL. 40 , NO. 100— THURSDAY, MAY 22 , 1975 22462 NOTICES PAtO FROM BORROWER'S FUMOS L . SE TTLEM EN T CHARGES . 7fi0. SALES/BROKER'S COMMISSION k a u J M 'i f c * 701 $ % 4 PAID FROM SELLER'S FUMOS Total commission paid by seller Di.iiian ol eaxisilssiM as follows: m . S lo 703. S 'la 701. 830. ITEMS PAYABLE IN CONNECTION <IITH LOAN. cJ?. , 80J. SO-t. ST/5. SC5. 30r. 80S. Leon Origination fee Loon Discount % Appraisal Fee to Credit Report to Lender's inspection fee Mortqaqe Insuronce application fee to As sumption/refinancing fee ' 8I> *11. 900. ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE. 401. 902. 903. 904. 905. Interest from to Mortgoge insuronce premium for Hozord insuronce premium for IS mo. to yrs. to Vrs. to /dav 1000. RESERVES DEPOSITED WITH LENDER FOR: 1001. Hazord insuronco 1002 .Mortgoge insuronce • 1003. City property toxes 1004. County property taxes 1005. Annuol assessments 100(51007. 1008.. mo. PS mo. fS mo. £S mo. f$ mo. 0$ mo. 0S mo. fiS mo. '£% /mo. /mo. /mo. /m o . / mo. / mo. / mo. / mo. 1100. TITLE CHARGES: 1101. 110?. llb3. ‘ 1104. 1105. 1106. 1107. 1108. 1109. 1510. n il. 1112. 1113. Settlement or closing fee to Abstract or title search to Title exominotion to Title insurance binder to Document preporotion to Notary fees to Attorney's Fees to (inclu d e* a bo ve items iVo..* Title insuronce to (includes a bo ve it’m* !\’o.: Lender's coverage $ Owner's coverage S ) ) UNFAIR PRACTICES AND UNREASONABLE OR UNNECESSARY CHARGES TO AVOID • 12tt). GOVERNM ENT RECORDING AND TRANSFER CHARGES 1201. Recording fees: Deed $ ; Mortgoge S Releases $ 1300. ADDITIONAL SETTLEMENT CHARGES 1301. 13Q2. 1303. 1334. 1305. T he law req u ires th e len d er to give you a copy of th e com pleted advance disclosure sta te m e n t a t th e tim e of loan com m itm ent. In m o st circum stances th is sh o u ld be n o t la te r th a n 12 calen d ar days before th e se ttle m e n t date. N orm ally, th e lo an c o m m itm en t an d advance disclosure occur several weeks p rio r to se ttle m e n t. In th e case o f a long term com m itm ent, su c h as t h a t o b tain e d by a buyer of a new hom e u n d e r co n stru ctio n , disclosure sh o u ld be m ade sh o rtly a fte r sign ing th e c o n tra c t to buy th e house. T ypically, th is m ig h t be in th e ran g e o f 60 to 90 days before se ttle m e n t. If th e exact cost o f any s e ttle m e n t service is n o t know n in tim e to m eet th e deadline, th e len d er m u st provide a good fa ith e stim a te of th e charge. L enders are p ro h ib ite d from ch arg in g a specific fee for th e p re p a ra tio n a n d su b m is sion of disclosure a n d se ttle m e n t c o sts s ta te m en ts or fo r th e In fo rm atio n th e y m u s t p ro vide u n d e r th e T ru th in L ending Act. I f your c ircu m stan ces are su c h t h a t you w an t to se ttle a n d ta k e title to y o u r new hom e before th e len d er can m eet h is 12-day advance disclosure deadline, you m ay sign a w aiver of t h a t req u ire m en t. A dvance d is closure is in te n d e d to p ro te c t y o u r In terests, n o t h a m p e r or delay your p lan s, so you sh o u ld carefu lly consider before signing a w aiver. Even if you agree to waive, HUD R eg u latio n s re q u ire th e len d er to provide th e disclosure sta te m e n t to you a t le a st th ree days p rio r to th e d a te of se ttle m e n t. E xcept in th e case of a waiver, th e lender m u st m eet th e advance disclosure re q u ire m e n t o r be liable to you fo r a c tu a l dam ages o r $500, w hichever is g reater. I f c o u rt a ctio n is necessary to enforce th is lia b ility , th e len d er m ay be ordered to pay c o u rt costs an d your a tto rn e y ’s fees a s se t by th e c o u rt if th e len d er loses th e case. T ou w ould p ay a t to rn ey ’s fees in th e e v en t t h a t you lose th e case. A len d er w ill n o t be h eld lia b le fo r a vio latio n if h e c an show t h a t i t w as n o t In te n tio n a l a n d re su lte d from a b o n a fide error in sp ite of m ain ten a n c e by th e len d e r o f p ro cedures adopted to avoid su c h error. Survey to Pesl inspection lo . WOO. TOTAL SETTLEMENT CHARGES U n i i t e i t>n l i n r ' 103 anJ 503. / nm l K ) KOTE: Under certain circumstances the borrower and seller may be permitted to waive tho 12-day period which must normally occur between advance disclosure and settlement. In the event such a waiver is made, copies o f tho statements o f waiver, c.\eculcc/ ns provided in the regulations ol tho D e trim en t oI Housing and Urban Development. s h a ll be attached to am / made a putt o t this lorm wAti/i tho form is used an a settlem ent statement. HUD-t fS-TS> ADVANCE DISCLOSURE T he S ettlem en t/D isclo su re S ta te m e n t Item izes each se ttle m e n t cost ch arg ed to th e buyer a n d each charged to th e seller. A dvance disclosure serves a tw o-fold p u r pose: (1) To provide n o tice of th e c ash you w ill need a t se ttle m e n t a n d (2) to m ake pos sible “com parison shopping” of se ttle m e n t charges so th a t you c an arran g e te rm s m o st favorable to you. I f you d o n ’t “shop a ro u n d ” you w ill n o t save m oney if th e same, services are offered elsew here fo r less. I t is im p o rta n t t o realize t h a t advance d is closure provides fo r e arlier a n d m ore system a tic In fo rm atio n a b o u t th e costs of th e se t tle m e n t tra n sa c tio n s b u t does n o t affect any c o n tra c tu a l agreem ent w hich m ay already have been m ade betw een b uyer a n d seller. T ry to o b ta in as m u c h of th is in fo rm atio n as possible p rio r to signing a sales c o n tra c t fo r th e house you in te n d to buy. Or, if th e seller is agreeable, you m ay w an t to m ake th e sales c o n tra c t c o n tin g e n t u p o n your a p proval of th e advance disclosure sta te m e n t. Once you have signed, you m ay n o t b e able to rescin d th e c o n tra c t in th e e v en t t h a t you are dissatisfied w ith som e aspect o f th e tra n s a c tio n revealed by disclosure. I t is in your In te re st to c o n d itio n yo u r purchase c o n tra c t on yo u r a b ility to o b ta in a m o rt gage lo an on specified term s. A p rin cip al finding of Congress in th e B eal E state S e ttle m e n t Procedures A ct of 1974 is t h a t consum ers need p ro tec tio n from “ * * * u n necessarily h ig h se ttle m e n t charges caused by c e rta in abusive p ractices th a t have de veloped in som e areas of th e c o u n try .” T he p o te n tia l problem s discussed below m ay n o t be applicable to m o st lo an se ttle m e n ts, an d th e discussion is n o t In ten d ed to d e te r you from buying a hom e. M ost professionals in th e se ttle m e n t service businesses w ill give you good service. N evertheless, you m ay save yourself m oney o r w orry by keeping th e fo l low ing con sid eratio n s in m ind. A. Ille g a l Practices. P ractices specifically p ro h ib ite d by th is A ct fa ll in to tw o c a te gories: 1. Kickbacks. K ickbacks a n d re ferra l of business fo r gain m o st o fte n are tie d to gether, so th e law p ro h ib its anyone fro m giv in g o r tak in g a fee, kickback, o r a n y th in g of value u n d e r a n agreem ent t h a t bu sin ess re la te d to real e sta te se ttle m e n ts w ill be re ferred to a specific person or o rganization. T his re q u ire m en t does n o t, o f course, p re v e n t ag en ts fo r len d ers a n d title com panies, atto rn e y s, o r o th ers actu a lly p erform ing a service in co n nection w ith th e m ortgage lo an or se ttle m e n t tran sac tio n s, from receiv ing com pensation for th e ir work. T he p ro h ib itio n is aim ed p rim a rily a t e lim in a tin g th e k in d of a rran g e m e n t in w hich o n e p a rty agrees to r e tu rn p a rt of his fee in order to o b ta in a volum e of business from th e referrin g p a rty . T he dang er is th a t som e settle m e n t; fees can be Inflated to cover th is ad d itio n al p a rty , re su ltin g in a h ig h er FEDERAL REGISTER, V O L 4 0 , NO. 100— THURSDAY, MAY 22, 1975 22463 NOTICES to ta l cost to you. F or exam ple, a title com pany m ig h t pay a fee to a n o th e r p a rty for bringing i t title in su ran ce business even th o u g h th e o th e r p a rty perform s no w ork a n d provides no service in co n nection w ith issuance of th e title in su ra n ce policy. As a n o th e r exam ple, a law yer m ig h t give a p a rt o f h is fee to a n o th e r p a rty to th e tra n sa c tio n in exchange fo r th e referral of business. I t is also illegal to charge or accep t a fee o r p o rtio n th ere o f o th e r th a n fo r services a ctu a lly perform ed. T here are crim in al p e n altie s of b o th fine a n d im p riso n m en t fo r any vio lation o f th ese provisions o f law . T h ere are also provisions for you to recover th re e tim es th e a m o u n t of th e fee involved or a p o rtio n th ereo f. I n any successful a ctio n to enforce your rig h t, th e c o u rt m ay aw ard you c o u rt costs to g eth er w ith a fee for your a tto rn e y . 2. T itle Companies. A no ther ab use pro h ib ite d by law is any re q u ire m en t by th e hom e seller t h a t title in su ra n ce be p u rch ased from a p a rtic u la r com pany. U nder th e law, sellers m ay n o t require, as a co n d itio n of sale, t h a t title in su ra n ce be p u rch ased by th e b uyer fro m an y p a rtic u la r title com pany. A v io latio n w ould m ake th e seller lia b le to you In a n a m o u n t equal to th re e tim e s all charges m ade fo r th e title Insurance. B. Choices Open to th e Buyer and O ther P oints to Remember. B ecause th e various p a rtie s to th e se ttle m e n t tra n s a c tio n have d ifferen t In tere sts, th e re w ill be m any step s in th e process of buying a hom e w hich call fo r c au tio n o n your p a rt. As a hom e buyer, you have a n u m b er of choices open to you concerning se ttle m e n t costs a n d services. Som e p o in ts to keep in m in d a r e : 1. Understand The Role o f th e Real Estate Broker. A lthough th e real e sta te a g en t or broker u su a lly provides h e lp fu l advice to you o n m an y aspects of hom e buying an d m ay in som e areas supervise Jth e se ttle m e n t, he n o rm ally serves as a g en t of th e seller. W hile th e real e sta te licensing law s of m ost S ta te s re q u ire th a t th e broker tr e a t b o th buyer a n d seller fairly, you sh o u ld n o t ex p ect th e broker to re p rese n t your in te re sts to th e exclusion of th o se of th e seller. T he b ro k er’s basic objectives are to o b ta in a signed c o n tra c t of sale w hich properly ex presses th e agreem ent of th e p a rtie s a n d to com plete th e sale a n d e a rn a com m ission or fee. Before you sign, m ake su re th a t th e sales c o n tra c t correctly expresses your ag reem en t w ith th e seller on su c h Im p o rta n t d e ta ils as m eth o d of paying th e sales price of th e hom e, th e tim e s e t fo r your m ove-in, a n d th e s ta tu s of fix tu res a n d o th e r personal p ro p erty in th e hom e. A broker m ay recom m end t h a t you deal w ith a p a rtic u la r lender, title com pany, a t torney, or provider of se ttle m e n t services. A lthough th is recom m endation m ay be based on th e b ro k er’s u p -to -d a te know ledge of ra te s a n d q u a lity of service, you sh o u ld feel com pletely free to consider alte rn ativ es, com pare ra te s a n d fees, a n d m ake yo u r own decision o n th ese m a tte rs. I t is u p to you to review th e docum ents carefully. A lthough th e broker m ay offer h e lp fu l advice, keep in m in d th a t you are th e one who is spending th e m oney to buy a hom e a n d are e n title d to a fu ll u n d e rsta n d ing of th e costs. T he b ro k er’s p rin cip al in te re st a t se ttle m e n t is to g e t th e tra n sa c tio n closed a n d h is fee or com m ission disbursed. 2. S e ttle m en t attorneys, escrow and closing agents. I n som e p a rts of th e co u n try , s e ttle m en ts are o fte n co n d u cted by a tto rn e y s w ho specialize in real e sta te tran sac tio n s. In o th e r p a rts of th e cou n try , th e se ttle m e n t m ay be conducted by a n escrow or closing a g e n t or by th e len d er or broker. T h eir p rim ary con cern is orderly com pletion of all th e d etails called for in th e sales c o n tra c t a n d in th e m ortgage co m m itm en t. B ecause m ortgage lenders, u n lik e borrow ers, go th ro u g h s e ttle m e n t o ften , th ey o ften will n o t be p re se n t a t th e se ttle m e n t, p re ferrin g to spell o u t in d e ta il in a le tte r of in stru c tio n to th e person c o n d u ctin g th e closing t h a t w hich th ey expect to be done before loan fu n d s can be released. You, th e buyer, w ill n o t h av e a le tte r of In stru ctio n s. You w ill 'be asked a t se ttle m e n t to m ake a n u m b er o f decisions in a rea s w ith w hich you m ay h av e h a d little previous ex perience. Before se ttle m e n t, you sh o u ld ask th e broker, th e se ttle m e n t a tto rn e y , o r a n a tto r ney re ta in e d by you w h a t q u e stio n s w ill p ro b ab ly com e up. W rite th e m dow n so t h a t you m ay have tim e to th in k a b o u t decisions th a t are im p o rta n t to you. S e ttle m e n t a tto rn e y s do n o t m in d answ er in g your questions'—t h a t is a p a r t o f th e ir Job—b u t a t th e sam e tim e th ey m ay n o t in v ite q u estio n s. I f you h av e d o u b ts, ask q u e s tions. D on’t le t anyone ru s h you. T h ere are likely to b e len g th y do cu m en ts to sign a t s e t tle m en t. If you o r your a tto rn e y asks, you c an u su a lly g e t copies o f th e form s In a d vance. 3. Legal representation. If you feel u n fa m iliar o r u n su re w ith real e sta te se ttle m e n ts, an d m any people do, consider h irin g your own a tto rn e y to re p rese n t you. If you h ire a n a t torney, be c e rta in th a t th e re is a cle a r u n d e r sta n d in g in advance a b o u t w h a t services he is to p erfo rm a n d w h a t h is fee will be for th o se services. Som e w ill q u o te a fla t fee, o th e rs a n h o u rly ra te o r o n e based o n a p e r centage o f th e sales price. T he im p o rta n t p o in t is t h a t you sh o u ld know In advance how m u ch you sh o u ld expect to pay fo r h is services. If you do n o t know a n a tto rn e y who is well versed in real e sta te tran sac tio n s, m any local b a r associations m ay be a b le to refer you to one w ho is. 4. Discuss w ith lenders th e ir requirem ents fo r se ttle m e n t services. T h e len d e r’s leg iti m a te b u siness In tere st is in m aking a lo an o n term s w hich w ill provide a good yield w ith little risk. In selecting a len d in g in s titu tio n , ask a b o u t re q u ire m en ts fo r p ro p e rty surveys, appraisals, escrows fo r tax e s a n d insurance, a n d o th e r se ttle m e n t services. Y ou m ay com p a re th e se re q u ire m en ts w ith th o se o f o th e r lenders. Som e len d ers will give you th e discretion to shop am ong d ifferen t providers o f s e ttle m en t services. B ut, m ost len d ers deal re g u larly w ith c e rta in title com panies, atto rn e y s, appraisers, surveyors o r o th ers in w hom th ey have confidence, a n d u su a lly w a n t to arran g e for provision o f all s e ttle m e n t services th ro u g h th ese p a rtie s as a convenience to th e b u y er a n d lender. If you w ish to b a rg ain d i rectly to reduce ra te s for se ttle m e n t services, discuss th is w ith various lenders. R em em ber to com pare also th e m ortgage In te re st ra te s a n d o th e r m ortgage term s q u o ted by d ifferen t lenders. A len d er m ay gain th ro u g h h ig h er m ortgage in te re st over th e rep ay m en t term w h a t it gives up a t th e “fro n t end'” in reducing re q u ire m en ts fo r loan o rg in a tio n fees, d isc o u n t p o in ts a n d o th e r o n e -tim e charges w hich m u st be paid in cash a t se ttle m e n t. O ther fe a tu re s of available loans sh o u ld also b e com pared as you shop. Peel free to select a len d er o th e r th a n th e one recom m ended by th e b ro k er o r seller. I t is e n tirely possible th a t you m ay find fin an c ing w hich is m ore ad v antageous to you. 5. T itle insurance req u ire d by th e lender protects th e lenders. You m ay b u y a separate owner’s t it le insurance p o licy fo r yo u r own pro te ctio n . T itle in su ra n ce is o ften re q u ire d to p ro te c t th e len d er a g ain st loss if a flaw in title is n o t fo u n d by th e title search m ade w hen a hom e is p u rchased. T he len d e r’s title in su ra n ce policy w ill be p a id fo r by you or by th e seller according to local custom or th e sales c o n tra ct. You a n d th e len d er have d ifferent in te r ests in th e p ro p erty you are buying, a n d th e re are m any k in d s of title defects th a t can tro u b le you w ith o u t crea tin g problem s fo r th e lender. Y ou m ay b u y a se p a ra te ow ner’s title in su ra n ce policy fo r your own p ro tec tio n in areas w here th is policy is n o t fu rn ish e d by th e seller as a m a tte r of c u s tom . 6. T ry to m in im ize th e perform ance and cost o f re p e titiv e o r excessive se ttle m e n t re quirem ents. Som e se ttle m e n t costs are beyond your control, su c h as governm ent tra n s fe r charges. O th er Item s m ay be nego tia b le, how ever, su c h as c e rta in services w hich th e len d er req u ires taut w hich you pay for. a. T itle search. T here m ay be no need for a fu ll h isto ric a l title search “back to th e year one” each tim e title to a hom e is tra n s ferred. I f you are b u ying a hom e w hich h a d recen tly changed h a n d s, in q u ire a t title com panies a b o u t a “reissue ra te .” I f th e policy of th e previous ow ner is available, tak e i t to a title In su re r before se ttle m e n t. I t m ay help you o b ta in a “reissue ra te .” G enerally th is ra te , w hen p e rm itte d by S ta te law or re g u la tio n s, allow s a re d u c tio n of th e u su a l charge fo r a new policy if th e previous policy was issued by th e sam e title in su re r o r by a n o th e r re p u ta b le com pany w ith in a re ce n t period. T itle search re q u ire m en ts are som etim es se t by agencies w hich in su re or g u a ra n te e th e loan, or by investors w ho p u rchase m ortgages o rig in a ted by o th e r len d in g in stitu tio n s. T he len d er you deal w ith m ay n o t have discre tio n on e lim in a tin g or red u cin g th ese req u irem en ts. b. Survey. T he survey of th e p ro p e rty m ay be sim plified a n d th e cost reduced if a fu ll p rofessional survey was perform ed recently. A new survey m ay n o t be needed to show th a t no re c e n t changes have occurred w hich a f fe c t th e v a lid ity of th e la s t survey. A s u r veyor m ay be able to avoid th e cost of a re p etitiv e com plete survey of th e p ro p erty if he h a s access to a re c e n t survey w hich he c an “u p d a te .” Here again, th e re q u ire m en ts of Investors w ho buy loans o rig in ated by your len d er m ay lim it th e len d e r’s d iscretio n to n eg o tiate th is p o in t. c. S e ttle m e n t agent. S e ttle m e n t practices vary fro m lo cality to locality, a n d even w ith in th e sam e c o u n ty o r city . In various a rea s se t tle m e n ts a re co n ducted b y th e len d in g in s titu tio n s , title in su ran ce com panies, escrow com panies, re al e sta te brokers, a n d a tto rn e y s fo r th e buyer o r seller. By in v estig atin g a n d com paring p ractices a n d ra te s, you m ay find t h a t th e first suggested se ttle m e n t a g e n t m ay n o t b e th e le a st expensive. Y ou m ig h t save m oney by tak in g th e in itia tiv e in a rran g in g fo r se ttle m e n t a n d selecting th e firm a n d lo catio n w hich b e st m eets your needs. d. Escrows. T he R eal E sta te S e ttle m e n t P ro cedures A ct of 1974 h a s placed lim its o n th e a m o u n t of m oney w hich th e len d e r c an re q u ire you to place i n escrow a t s e ttle m e n t fo r la te r pay m en t o f p ro p erty taxes a n d Insurance. K now y o u r rig h ts u n d e r th is new S ection 10 provision of th e Act, a s explained in th e n e x t C hapter. ESCROW ACCOUNTS Ite m 23 o n th e enclosed sam ple se ttle m e n t s ta te m e n t form covers p aym ents y o u r lender m ay re q u ire you to m ake to a n “escrow,” “reserve,” o r “im p o u n d ” a cc o u n t fo r in su r ance prem ium s, real e sta te taxes, a n d u n p a id assessm ents. M any lenders re q u ire t h a t each m o n th ly p a y m e n t o n th e m ortgage Include a m o u n ts fo r taxes, a n d h a za rd in su ran ce. W hen a p plicable, lenders w ill also collect m ortgage in su ra n ce p rem iu m s a n d a ssessm ents payable to hom eow ner a n d o th e r associations as well a s to special assessm ent d istric ts. T hese FEDERAL REGISTER, VOL. 40 , NO. 100— THURSDAY, MAY 22, T975 22464 NOTICES fu n d s a re s e t aside each m o n th In escrow acco u n ts a n d a re acc u m u la ted to pay th e taxes a n d o th e r b ills w hen th e y a re due. By law , th e a m o u n t you pay In to a n es crow a t se ttle m e n t m ay n o t exceed your sh a re o f tax e s a n d in su ra n ce accrued p rio r to se ttle m e n t, p lu s %2t h o f th e e stim a te d a m o u n t w hich w ill com e d u e for taxes a n d in su ra n ce in th e 1 2 -m o n th period beginning a t se ttle m e n t. I f tax e s o r In su ra n ce costs go u p periodically over th e life o f your m o rt gage, th e len d e r w ill need to collect m ore m oney fo r th e escrow acc o u n ts to cover these Increased costs, re su ltin g in a larg e r m o n th ly h o u sin g p ay m en t fo r you. S hould th e se costs d ecline periodically, th e len d er sh o u ld reduce th e m o n th ly escrow collection accordingly. T h e escrow service provided b y y o u r lender is designed to m ee t ongoing expenses of hom eow nerahip. By sp read in g p aym ents over th e year i t e lim in a tes th e p rospect o f being faced w ith large a n n u a l bills, p e rh ap s a t a n in o p p o rtu n e tim e. O n th e o th e r h a n d , you m ay w a n t to m anage your ow n p ay m en t of taxes a n d /o r Insurance, in stea d o f paying in to a n escrow h e ld by th e lender. D iscuss th is p o in t w hen shopping am ong lenders. Be aw are, how ever, th a t c e rta in escrow acco u n ts are re q u ire d b y F ed eral re g u latio n , a n d in som e S ta te s b y law s affecting S ta te -c h a rte re d savings a n d lo an associations. PREVIOUS SELLING PRICE DISCLOSURE T he len d e r is re q u ire d by law before m ak ing a co m m itm en t to finance a m ortgage on a house, w hich w as com pleted m ore th a n 12 m o n th s p rio r to se ttle m e n t, to confirm th a t th e seller o r h is a g e n t h a s disclosed in w rit ing to th e b u y er th e follow ing in fo rm a tio n : (1) T he n am e a n d address of th e p re se n t ow ner; (2) T he d a te th e p roperty was acq u ired by th e p re se n t ow ner (th e year only o f acq u isi tio n need be given if th e p ro p erty was acq u ired m ore th a n tw o years previously); an d (3) I f th e seller h a s n o t ow ned th e pro p e rty for a t le a st tw o years p rio r to th e d ate of your lo an ap p lic atio n a n d h a s n o t used th e p ro p erty as a place of residence, th e d ate a n d p u rch ase price of th e la s t “ a r m ’B len g th tra n s fe r” of th e p ro p erty , a lis t of su b seq u en t im provem ents o th e r th a n m ain ten a n c e, an d th e cost of th e Im provem ents. T he purpose of th is re q u ire m en t Is to in form you w h e th er th e house is being sold by a n o w n er-o ccu p an t o r by som eone w ho h as acq u ired th e house a n d p rep ared i t fo r re sale. M any investors m ake a livelihood by in v estin g In existing housing, m aking re p a irs a n d Im provem ents, a n d reselling a t a fa ir profit. However, abuses have occurred In w hich only superficial re p airs have been m ade a n d hom es have been sold a t prices greatly in excess of th e ir values. As a buyer, your know ledge o f th e previous selling price m ay h elp you d eterm in e th e p re se n t value of th e property. T he len d e r’s o b lig atio n is considered m et if h e receives a copy of th e w ritte n s ta te m e n t fro m th e seller to you giving th e in fo rm atio n described above. A t t h a t tim e, th e len d er m ay m ake th e m ortgage loan com m itm ent. To back u p y o u r r ig h t to fu ll disclosure concerning existing p roperty, an y person (or persons) w ho know ingly a n d w illingly p ro vides false In fo rm atio n o r fails to com ply w ith disclosure re q u ire m en ts m ay be su b je ct to crim in al p e n a ltie s of fine a n d im p riso n m en t, a n d civil dam ages. JURISDICTION OF COURTS I f you have suffered dam ages th ro u g h vio la tio n s of th e B eal E sta te S e ttle m e n t {Proce d u re s Act of 1974 as described in th e preced ing pages, a c tio n m ay be b ro u g h t In th e U n ited S ta te s D istric t C o u rt for th e d istric t in w hich th e p ro p erty involved is located, or In an y o th e r c o u rt o f co m p eten t ju risd ic tio n , w ith in one year from th e d a te o f th e oc cu rrence of th e violation. T o u m ay also have rig h ts u n d e r o th e r F ederal o r S ta te laws. TRUTH I N LENDING DISCLOSURE A t th e tim e of advance disclosure, you will receive a T ru th in L ending s ta te m e n t a s p a rt of th e s ta n d a rd se ttle m e n t cost disclosure form . T h is T ru th in L ending In fo rm atio n w ill also ap p ear on th e sta n d a rd se ttle m e n t s ta te m e n t given to you u p o n com pletion of th e se ttle m e n t. T he T ru th In Lending; s ta te m e n t discloses th e A nnual P ercen tag e B ate (“APB” ) w hich you w ill pay o n your m o rt gage loan. T h is ra te m ay be h ig h er th a n th e c o n tra c t in te re st ra te q u o ted on y o u r m o rt gage. T his is because th e c o n tra c t ra te in cludes only in te re st, b u t th e APB expresses th e to ta l finance charge in clu d in g c ertain c re d it costs besides In te re st o n th e loan. T h e T ru th in L ending sta te m e n t w ill also disclose an y a d d itio n a l charges fo r "prepay m e n t” should you pay off th e balan ce of th e m ortgage In fu ll before It is due. [FB Doc.75-13261 F iled &-19-75;8:45 am ] FEDERAL REGISTER, V O L 40 , NO. 100— THURSDAY, MAY 22, 1975 Just Released CODE OF FEDERAL REGULATIONS (Revised as of November 1, 1974) Title 49—Transportation (Parts 1200-1299)___ .________ $7.55 l A C u m u l a t i v e c h e c k l i s t o f C F R is s u a n c e s f o r 1 9 7 5 a p p e a r s i n t h e f i r s t is s u e o f t h e F e d e r a l R e g i s t e r e a c h m o n t h u n d e r T i t l e 2] O rder from Superintendent of Documents, United States G overnm ent Printing Office, W ashington, D.C. 20402 t