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FEDER AL RESERVE BANK
O F NEW YORK
June
28, 1976
REAL ESTATE SETTLEMENT PROCEDURES ACT
To the C h ie f E x e c u ti v e O f f ic e r o f Each State Member
Bank in the S e c o n d F e d era l R e s e r v e D istric t:
The Board of Governors of the Federal Reserve System has requested
that each State member bank be provided with a copy of the enclosed pamphlet,
relating to the Real Estate Settlement Procedures Act of 197*+» as amended in
1975 (RESPA), which becomes effective June 30, 1976. The pamphlet contains
the text of the Act, the text of the implementing Regulation X, together with
related rulings, of the Department of Housing and Urban Development (HUD), a
Special Information Booklet issued by HUD, and a copy of the revised Uniform
Settlement Statement form (HUD-1).
The HUD regulation requires lenders to provide each applicant for a
federally related mortgage loan with a copy of the Special Information Booklet.
Rules governing the reproduction and use of the booklet may be found in
Section 3500.6 of the HUD regulation.
The revised Uniform Settlement Statement
form does not have to be used until supplies of the superseded form are depleted.
Any questions regarding these matters should be directed to the Office
of Consumer Affairs and Regulatory Functions, Attention:
RESPA, Department of
Housing and Urban Development, Room 1+100, 1+51 Seventh Street, S.W., Washington,
D.C.
201+10.
P a u l A. V
olcker,
President.
Real Estate
Settlement
Procedures Pet
Statute
Regulations
Special
Information
Booklet
U.S. Department of Housing and Urban Development
- 1 -
THE R E A L E S T A T E S E T T L E M E N T
PR O C E D U R E S A C T OF 1974
AS A MEN DE D IN 1975
2nH ct
88 STAT. 1724
To further the national housing goal of encouraging homeownershlp by reguiatlng certain lending practices and closing and settlement procedures In federally
related mortgage transactions to the end that unnecessary costs and ddScnltles
of purchasing housing are minimised, and for other purposes.
^
enacted by the Senate and House of Representatives of the
united States of America in Congress assembled,
SHOUT T R X X
Sectcow L This Act may be cited as the “Reel Estate Settlement
Procedures A ct of 1974”.
Real Estate
Settlem ent
Procedures
Aet of 1974.
12 USC 2601
n ote.
lo n tK e s am» m r a i
Sac. 2 . (a ) T he Congress finds that significant reforms in the real
settlement process are needed to insure that consumers through
out the Nation are provided with greater and move timely information
on the nature and costs o f the settlement process and are protected
from unnecessarily high settlement charges caused By certain abusive
practices that have developed in some areas o f the country. The Con
gress also finds that it has been over two years gmc* the Secretary of
Housing and Urban Development and the Administrator o f Veterans’
Affairs submitted their joint report to the Congress on “Mortgage
Scttleinent Costs’* and that the time has come for the recommendations
for h ederal legislative action made ra that report to be implemented.
( b) I t v the purpose o f th is A ct to effect ***+»*rt changes in the
settlement process for residential real estate that w ill result—
(* ) i* more effective advance disclosure to h*™* buyers and
sellers o f settlement costs;
(2 ) la the elimination o f kickbacks or referral fees that tend
to increase unnecessarily the costs o f certain settlement services;
(o ; m a reduction in the amounts home buyers are required
to place in escrow accounts established to insure the payment o f
real estate taxes and insurance; and
(ty io significant reform and modernization o f local recotdkeepmg o f land title information.
12 USC 2601.
DOXNXnOWS
Sxc. 3. For purposes ajf this Act—
(I ) the term “federally related mortgage loan” includes any
loan (other than temporary financing such as a
construction loan) which—
a first lien on
indm dual
by/jresidential real property (including
condominiums and cooperatives) designed
principally for the occupancy of from one to four fam uiS;
u n ^ #ofWh?
- \ ° are
r “ insured
•
brby*“any
7 Iender
Ide^
k
T St e? l r “^
, ^counts
which
agencythe
of
the Federai Government, or is made in whole or i n J S t by
G o ^ ^ t ^ o f " ngulAted ** an7 ^ ^ c y of the K dend
any other officer or agency of the &d%Lf*r S®cretai7 or
under 0r “
. hoim ng^r J b ^ d e ^ ^ n c
12 USC 2602.
r
- 2 -
88 STAT. 1725
urogram administered by the Secrotary or a housing or re
lated program administered by any other such officer or
agency; or
(iix) is intended to be sold by the
originating lender to the Federal National Mortgage Association, the Government National Mortgage Asso
ciation,
the Federal Home Loan Mortgage Corporation,
or
21
financial institution from which it is to be pur*
chased by the Federal Home Loan Mortgage Corporation; or
(iv)
is made in whole or in part by any “creditor”, as
denned in section 103(f) of the Consumer Credit Protection
Act (15 GJ3.C. 1 6 0 2 (f)), who makes or invests in residential
real estate loans aggregating.more than $1,000,000 per year;
exce;>t that foe the
purpose o f this Act, the term •creditor’ does not include any
agency or inst rmncntality of any State .
(2) the term “thing of value” includes any payment, advance,
funds, loan, service, or other consideration;
.
(3) the term “settlement services” includes any service provided
in connection with a real estate settlement including, but not lim
ited to, the following: title searches, title examinations, the pro
vision of title certificates, title insurance, services rendered by an
attorney, the preparation of documents, property surveys, the
rendering of credit reports or appraisals, pest and fungus inspec
tions, services, rendered by a real estate agent or broker, and the
handling of the processing, and closing or settlement;
. . .
(4) the term “title company” means any institution which is
qualified to issue title insurance, directly or through its agents,
and also refers to any duly authorized agent o f a tid e company;
(5) the term “person” mcludes individuals, corporations, asso
ciations, partnerships, and trusts; and
(6) the term “Secretary.” means the Secretary of Housing and
Urban Development.
e
- 3 -
UNIFORM SETTLEMENT STATEMENT
12 USC 2603.
Sec. 4 ..CThe Secretary, in consultation with the Administrator of
Veterans^ 'Affairs, the Federal Deposit Insurance Corporation, and
the Federal Home Loan Bank Board, shall develop and prescribe a
standard form for the statement of settlement costs which shall be used
(with such
_
variations as may be necessary to reflect
differences in legal and administrative requirements or practices
in different areas o f the country) as the standard real estate settlement
form in all transactions in the United States which involve federally
related mortgage loans. Such form shall conspicuously and clearly
itemize all charges imposed upon the borrower and all charges imposed
upon the seller in connection with the settlement and shall indicate
whether any title insurance premium included in "Such charges covers
or insures the lender’s interest in the property, the borrower5! interest,
or both.
The Secretary may. hy
regulation, permit the deletion from the form prescribed undec
this section o f items-which are not. under local laws or customs,
applicable in any locality, except that such regulation shall require
that th e numerical code prescribed by the Secretary be retained
m forms to he used in all localities. Nothing in this section mar be
construed to require that that part of the standard form which
relates to the borrower’s transaction he furnished to the seller, or
to require that that part o f the standard form which relates to tin*
seller be furnished to the borrower.
(b )
The form prescribed under this section shall be completed and
made available for inspection by the borrower at or before settlement
by tlie person conducting the settlement, except that (1) (he Secretary
may exempt from the requirements of this section settlements occur
ring m localities where the final settlement statement is not customarily
provided at or before the date of settlement, or settlements where such
requirements are impractical and f2) the Ijorrower may, in accordance
with regulations o f the Secretary, waive his right to have the form
made available a t such time. Upon, the request of the borrower to
mspect the form prescribed under this section during the business day
immediately preceding the day of settlement, the person who will
conduct the settlement shall permit the borrower to inspect those items
which axe known to such person during such preceding day.
STBCXAX, INFORMATION- BOOKLETS
12 USC 2604.
S ec. 5. (a ) Thd Secretary shall prepare and distribute booklets to
Help persons borrowing monev to finance the purchase o f residential
n®ders^ ft<f th*
coats o f real estate settle
ment services. The Secretary shall distribute such booklets to all
lenders which make federally related mortgage loans.
V
(b )
Kach booklet shall be in such form and. detail as the Secretary
shall prescribe and, in addition to such other information as the Sec
retary may provide, shall include in clear and concise language—
(1 ) a description and explanation o f the nature and purpose of
each cost incident to a real estate settlement;
(2) an explanation and sample of the standard real estate set
tlem ent form developed and prescribed under section 4;
(3 ) a description and explanation o f the nature and purpose of
escrow accounts when used in connection w ith loans secured by
residential real estate;
N
(4J an explanation o f the choices available to buyers o f resi
dential real estate in selecting persons to provide necessary serv
ices incident to a real estate settlement; and
(5)
an, explanation o f the unfair practices and unreasonable or
unnecessary charges to be avoided by the prospective buyer with
respect to a real estate settlement.
Such booklets shall take into consideration differences in real estate
settlement procedures winch may exist among the several States and
territories o f the united States and among separate political subdivi
sions within the same State and territory.
r
- 4 -
(c) Each lender shall include with the booklet a good faith esti
mate of the amount or range of charges for specific settlement services
the borrower is likely to incur in connection with the settlement as
prescribed by the Secretary.
(d) Each lender referred to in subsection (a) shall provide the
booklet described in such subsection to each person from whom it
receives or for whom it prepares a written application
to borrow money to finance the purchase of
residential real estate. Such booklet shall be provided at the time of
receipt or preparation of such application.
(e) Booklets.may be printed and distributed by lenders if their
form and content are approved by the Secretary as meeting the require
ments of subsection (b) o f this section.
rsoHXBrnoH against kickbacks and unearned tees
12 CSC 2607*
••-
S ec. 8. (a) No person shall give and no person shall accept any fee,
kickback, or thing of value pursuant to any agreement or understand
ing, oral or. otherwise, that business incident to or a part o f a real estate
settlement service involving a federally related mortgage loan shall
be referred to any person.
(b) N o person shall g iv e and no person shall accept any portion,
split, or percentage o f any charge made or received for the rendering
o f a real estate settlement service in connection with a transaction
involving a federally related mortgage loan other than for services
actually performed.
(c) Nothing in this section shall be construed as prohibiting (1)
the payment of a fee' (A ) to attorneys at law for services actually
rendered or (B ) by a title company to its duly appointed agent for
services actually performed in the issuance of a policy o f title insur
ance or (C ) by a lender to its duly appointed agent for services actually
performed in the making o f a loan,
(2) the payment to any person
o f a bona fide salary-or compensation or other payment for goods or
facilities actually furnished or for services actually performed,
or (3) payments pursuant to cooperative brokerage and
referral arrangements or agreements between real estate agents and
brokers, or (4) such o th er payments or classes of payments or other
transfers as are specified in regulations prescribed by the Secretary,
after consultation with the Attorney General, the Administrator of
Veterans’ Affairs,, the Federal Home Loan Bank Board, the Federal
Deposit Insurance Corporation, the Board of Governors of the Federal
Reserve System, and the Secretary of Agriculture .
. (d) (1) A ny personyqr persons who violate the provisions of this Penal-tits,
section shall be fined fiot more than $10,000 or imprisoned for not
more than one year, or both.
.
(2)
Tn addition to the penalties provided by paragraph (1) ° fth is
subsection, any person or persons who violate the provisions of subsec
tion (a) shall be jointly and severally liable to the person or persons
whose business has been referred in an amount equal to three times
the value or amount o f the fee or thing of value, and any person or
persons who violate the provisions of subsection (b) shall be jointly
and severally liable to the person or persons charged for the settlement
services involved in an amount equal to three times the amount of the
portion, split, or percentage. In any successful action to enforce the
liability under this paragraph, the court may award the court costs
o f the action together with a reasonable attorney's fee as determined
by the court.
T O T * C O M PA N IES
S ec. 9. (a) No seller of property that will be purchased with the 12 use 2508.
assistance o f a federally related mortgage loan shall require directly
or indirectly, as a condition to selling the property, that title insurance
covering the property be purchased b y the buyer from any particular
title company.
t
.
(b)
Any seller who violates the provisions o f subsection (a) shallL i a b i l i t y ,
be liable to the buyer in an amount equal to three times all charges
made for such title insurance.
- 5 -
ESCROW ACCOUNTS
S ec. 10. A lender, in connection with a federally related mortgage
loan, may not require the borrower or prospective borrower—
(1) to deposit in any escrow account which may be established
in connection with such loan for the purpose of assuring payment
o f taxes, insurance premiums, or other charges with respect to the
property, in connection with die settlement, an aggregate sum ( for
such purpose) in excess o f a sum that will be sufficient to pay such
taxes, insurance premiums and. other charges attributable to the
period beginning on the last date on which each such charge would
have been paid under the normal lending practice of the lender
and local custom, provided that the selection of each such date
constitutes prudent lending practice, and ending on the due date
o f its first full installment payment under the mortgage, plus
one-sixth of the estimated total amount of such taxes, insurance
premiums and other charges to be paid on dates, as provided
above, during the ensuing twelve-month period; or
(2) to deposit in any such escrow account in any month begin
ning with the first fa ll installment payment under the mortgage
a sum (for the purpose of assuring payment of taxes, insurance
premiums and other charges with respect to the property) in
excess of the sum o f (A ) one-twelfth of the total amount of the
estimated taxes, insurance premiums and other charges which are
reasonably anticipated to be paid on dates during the ensuing
twelve months which dates are in accordance with the normal
lending practice o f the lender and local custom, provided that the
selection o f each such date constitutes prudent lending practice,
plus (B ) such amount as is necessary to maintain an additional
balance m such escrow account not to exceed one-sixth of the esti
mated total amount of such taxes, insurance premiums and other
charges to be paid on dates, as provided above, during the ensuing
twelve-month period: Provided, however, That in the event the
lender determines there will be or is a deficiency he shall not be
prohibited from requiring additional monthly deposits in such
escrow account to avoid or eliminate such deficiency.
L IM ITA TIO N S AND DISCLOSURES W IT H RESF E C T TO CER TA IN FKDKRALLT
RELATED MORTGAGE LOANS
12 (JSC 1831b.
Report.
Sec. 11. (a) The Federal Deposit Insurance Act is amended by add
ing at the end thereof the following new section :
“ S ec . 25. (a) No insured bank, or mutual savings or cooperative bank
which is not an insured bank, shall make any federally related mort
gage loan to any agent, trustee, nominee, or other person acting in a
fiduciary capacity without the prior condition that tlie identity of the
person receiving the beneficial interest of such loan shall at all times
be revealed to the bank. At the request o f the Corporation, the bank
shall report to the Corporation on the identity of such person and the
nature and amount o f the loan, discount, or other extension of credit.
“ (b) In addition to other available remedies, this section may be
enforced with respect tcfimutual savings and cooperative banks which
are not insured banks invaccordance with section 3 of this Act, and for
such purpose such mutual savings and cooperative banks shall be held
and considered to be State nonmember insured banks and the appro
priate Federal agency with respect to such mutual savings and coop
erative banks shall be the Federal Deposit Insurance Corporation.”
(b) Title IV of the National Housing Act is amended by adding at
the end thereof the following new section:
12 USC I730f.
12 USC 1730f
BOtO.
“S ec. 413. No insured institution shall make any federally related
mortgage loan to any agent, trustee, nominee, or other person acting
in a hduciary capacity without the prior condition that the identity of
the person receiving the beneficial interest of such loan shall at all
times be revealed to the institution. A t the request of the Federal
Home Loan Bank Board, the insured institution shall report to the
Board on the identity of such person and the nature and amount of
the loan.”
(c) The Federal Deposit Insurance Corporation or the Federal
Home Loan Bank Board as appropriate may by regulation exempt
classes or types of transactions from the provisions added by this sec
tion if the Corporation or the Board determines that the purposes of
such provisions would not be advanced materially by their application
to such transactions.
r
- 6 -
PEE FOR PREPARATION OP TRUTH-IN-LENDING AND UNUTORM
settlem ent
12 use
2610*
is use lso i
note.
statem ents
S ec. 12. No fee shall be imposed or charge made upon any other
person (as a part of settlement costs or othewise) by a lender in con
nection with a federally related mortgage loan made by it (or a loan
for the purchase of a mobile home), for or on account of the prepara
tion and submission by such lender of the statement or statements
required (in connection with such loan) by sections 4 and 6 of this
Act or by the Truth in Lending Act.
ESTABLISHMENT OX DEMON*8TRATION BASIS OP I .AND PARCEL
RKCOBOATION SYSTEM
Sec. 13. The Secretary shall establish and place in operation on a
demonstration basis, in representative political subdivisions (selected
by him) in various areas of the United States, a model system or sys
tems for the recordation of land title information in a manner and
form calculated to facilitate and simplify land transfers and mortgage
transactions and reduce the cost thereof, with a view to the possible
development ( utilizing the information and experience gained under
this section) of a nationally uniform system of land parcel recordation.
12 USC 2611
REPORT OP T H E SECRETARY OX NECESSITY POE PORT HER
CONGRESSIONAL ACTION
Sec. 14. (a) The Secretaj-y, after consultation with the Administra Report to
tor of Veterans’ Affairs, the Federal Deposit Insurance Corporation, Congress.
and the Federal Home Loan Bank Board, and after such study, 12 USC 2612.
investigation, and hearings (at which representatives of consumers
groups shall be allowed to testify) as he deems appropriate, shall, not
less than three years nor more tnan five years from tile effective date
o f this Act, report to the Congress on whether, in view of the imple
mentation of the provisions of this Act imposing certain requirements
and prohibiting certain practices in connection with real estate set
tlements, there is any necessity for further legislation in this area.
(b)
I f the Secretary concludes that there is necessity for further R e p o rt t o
legislation, he shall report to the Congress on the specific practices or Congress.
problems that should he the subject of such legislation and the cor
rective measures that need to be taken. In addition, the Secretary shall
include in his report—
- (I) recommendations on the desirability o f requiring lenders
of federally related mortgage loans to bear the costs of particular
real estate settlement services that would otherwise be paid for
by borrowers;
(2) recommendations on whether Federal regulation of the
charges for real estate settlement services in federally related
mortgage transactions is necessary and desirable, and, if he con
cludes tnat such regulation is necessary and desirable, a descrip
tion and analysis of the regulatory scheme he believes Congress
should adopt; and
(3) recommendations on the ways in which the Federal Gov
ernment can assist and encourage local governments to modernize
their methods for the recordation or land title information,
- including the feasibility of providing financial assistance or
incentives to local governments that seek to adopt one of the model
systems developed by the Secretary in accordance, with the provi
sions of section 13 of this Act.
- 7 -
DEMONSTRATION TO DETERMINE FEASIBILITY OF INCLUDING STATEMENTS
OF SETTLEMENT COSTS IN SPECIAL INFORMATION BOOKLETS
S ec. 15. The Secretary shall, on a demonstration basis in selected 12 USC 2S13.
housing market areas, have prepared and included in the special infor
mation booklets required to be furnished under section 5 of this Act,
statements of the range of costs for specific settlement services in such
areas. Not later than June 30, 1976, the Secretary shall transmit to Report to
the Congress a full report on the demonstration conducted under this Congross.
section. Such report shall contain the Secretary’s assessment of the
feasibility of preparing and including settlement cost range state
ments for all housing market areas in the special information booklets
for such areas.
JURISDICTION 01* COURTS
12 use 2614.
S ec. 16. A ny action to recover damages pursuant to the provisions
o f section 6, 8, or 9 may be brought in the United States district court
for the district in which the property involved is located, or in any
other court of competent jurisdiction, within one year from the date
o f the occurrence of the violation.
VALIDITY OF CONTRACTS AND LIENS
12 use 2615.
S ec. 17. Nothing in this A ct shall affect the validity or enforce
ability o f any sale or contract for the sale of real property or any
loan, loan agreement, mortgage, or lien made or arising in connection
with a federally related mortgage loam
RELATION TO STATS LAWS
12 use 2616.
S ec. 18.
Thi3 Act does not annul, alter, or affect, or exempt
any person subject to the provisions o f this Act from complying
, with, the laws oz any State with respect to settlement practices, except
to the extent that those laws are inconsistent with any provision of this
Act, and then only to the extent of the inconsistency. The Secretary
is authorized to determine whether such inconsistencies exist. H ie
Secretary may not determine that any State law is inconsistent with
any provision o f this Act if the Secretary determines that such law
gives greater protection to the consumer. In making theee determina
tions the Secretary shall consult with the appropriate Federal agencies.
AUTHORITY OF TH E SECRETARY
Rules and
S ec 19. (a) The Secretary is authorized to prescribe such rules
regulations.
and regulations, to make such interpretations, and to grant such rea
12 USC 2617.
sonable exemptions for classes of transactions, as may he necessary to
achieve the purposes of this Act.
(b)
No provision of this Act or the laws of any State imposing any
liability shall apply to any. act done or omitted in good faith in con
formity with any rule, feegulation, or interpretation thereof by the
Secretary or the Attorney General, notwithstanding that after such
act or omission has occurred, such rule, regulation, or.interpretation
is amended, rescinded, or determined by judicial or other authority to
be invalid for any reason.
RULES AND REGULATIONS
22702
mia 24— Housing and Urban Development
5HAPTER XX— OFFICE OF ASSISTANT SEC
RETARY FOR CONSUMER AFFAIRS AND
RE 1ULATORY FUNCTIONS, DEPART*
MENT OF HOUSING AND URBAN DE
VELOPMENT
[Docket No. R-76-394]
’ ART 3900— REAL ESTATE SETTLEMENT
PROCEDURES ACT
The Beal Estate Settlement Proceluree Act Amendments otf 1975 (herein
-.he “RESPA Amendments"), signed Into
aw January 2, 1976 (Pub. L. 94-205),
nade significant changes in the Real
Estate Settlement Procedures Act of
1974 (RESPA), (Pub. L. 93-533), 12
CLS.C. 2801, et seq. The RESPA Amendnents repealed the original requirenents of advance disclosure (section 6),
h e disclosure of the previous selling
>rice (section 7) and the Truth-in
tending provisions of section 4. In their
>lace lenders are required to provide
torrowere, a t time of loan application,
rood faith estimates of settlement costs,
’arsons conducting settlement are re
paired to provide borrowers with an op>ortunity to inspect their settlement
tatementa one day prior to settlement.
Che RESPA Amendments authorized
he suspension, until June 30. 1976, of
he RESPA provisions dealing with ad-ance Inspection of the Uniform Settleaent Statement, use of the Special Inormatlon Booklet and the provision for
;ood faith estimates, to allow for orderly
mplementation and public comment on
hese provisions.
On January 9, 1978, regulations were
ssued under this part (41 PR 1672) to
onform Regulation X to the RESPA
amendments. These regulations are now
uperseded by the following Regulation
Ceffective June 30,1976.
On March 29, 1976 (41 PR 13032) the
tepartment issued a notice of proposed
ule-making with respect to the Real
Lstate Settlement Procedures Act. This
roposal would Implement the entire
tESPA program Including certain sup
ended provisions, and would make varlus technical and editorial changes.
Over 240 comments were received and
be Department Is now issuing a final
tile which adopt various changes to the
reposed regulations. These changes are
st forth hereinafter. Most of these
hanges are in response to comment,
owever the Department is making ceriin other modifications at its own Initia
te . Of the technical changes being made
ereby, of principal note Is the recodiflaction of these RESPA regulations uner 24 CFR Chapter XX. In the time
tnce the first RESPA regulations were
ssued. the Department ha« established a
ew Assistant Secretary for Consumer
ffalrs and Regulatory Functions to
horn responsibility for the program has
een delegated. 41 PR 19365. Since parts
-199 are reserved under Subtitle v m
>the use of the Secretary, these RESPA
•filiations should properly now be Insrporated in Chapter XX and are there>re being recodified In that Chapter as
art 3500.
S ummary or RESPA P rovisions
General. While many comments sub
mitted indicated general acceptance of
RESPA requirements, there were numer
ous specific comments directed at Im
proving or deleting particular sections.
Only a few commenters called for the
outright repeal of RESPA on the grounds
that these provisions would not assist
consumers, but would create unnecessary
work for lenders and additional costs to
consumers. Many commenters felt that
lenders should be given considerable flex
ibility in implementing RESPA provi
sions because of the wide variations of
settlement procedures between localities.
The regulations have been amended to
achieve flexibility.
Coverage. Coverage of RESPA and
Regulation X has been restricted to first
mortgage loans secured by 1-4 family
residential properties made by a federally
regulated or insured lender (see $ 3500.5).
Included in the definition of a “federally
related mortgage loan” is the refinancing
of land sales contracts where the pro
ceeds of the loan are used to finance the
acquisition of legal title pursuant to the
land sales contract. Otherwise, If legal
title Is not transferred to the purchaser
upon execution of the contract the trans
action is not covered by the regulations.
Loans eligible* for but not intended to be
sold by the originating lender to the Fed
eral National Mortgage Association
(FNMA), Government National Mort
gage Association (GNMA), or the Fed
eral Home Loan Mortgage Corporation
(FHLMC), or tor a financial institution
from which it Is to be purchased by
FHLMC are exempt. Also exempt are all
construction loans, assumptions, nova
tions,
sales or transfers subject to a
preexisting loan (except as noted in
S 3500.5(d) (4, 5 A 6) of the regulations).
Reliance upon Rule, Regulation, or tn»
terpretation. The Secretary is authorized
by section 19 of RESPA to prescribe such
rules, regulations and Interpretations as
are necessary to achieve the purposes of
RESPA. Any act done or omitted in good
faith in conformity with such rules, regu
lations or interpretations will not result
in liability under the Act or state law.
Rules, regulations or Interpretations have
been defined to include Regulation X,
the Uniform Settlement Statement
(HUD-1) %nd Appendices to Regulation
X A number of comm enters suggested
th at this definition be extended to writ
ten statements from the Secretary, Gen
eral Counsel, and Assistant Secretary for
Consumer Affairs and Regulatory Func
tions. Where a question arises as to the
application of a provision (except for
Section 8 of RESPA and related Issues),
to a specific fact situation, the Assistant
Secretary for Consumer Affairs and Reg
ulatory Functions may issue a written
response. Such response, however, would
not constitute an “Interpretation” pur
suant to Section 19 of RESPA. Where the
situation Is a product of 9tate law or
otherwise likely to recur, the Secretary
may issue a binding interpretative ruling
by appending said ruling to Regulation X
and by publication of the letter of inter
pretation in the F ederal R egister.
Special Information Booklet and Good
Faith Estimates. The proposed regula
tions required the lender to provide the
borrower with a Special Information
Booklet no later than one day after the
lender receives or prepares a written
mortgage loan application on an applica
tion form or forms normally used by th at
lender. A number of commenters indi
cated that it would be extremely difficult
to provide the good faith estimates within
one business day of receipt where the ap
plication is received by an agent who
normally would not provide such esti
mates. The Department has modified the
proposed regulations to meet this con
cern by allowing up to three business
days after loan application. The Intent of
the regulations Is to provide the good
faith estimates as soon as possible.
The proposed regulations of March 29
provided for inclusion in the Special In
formation Booklet of Information where
the lender required use of a particular
provider or three or less providers for a
particular service.
The regulations published for effect
Instead require a statement as part of
the good faith estimates where the
lender requires a particular provider to
be used. The revised requirement only
applies where one provider Is required to
be used by the lender, and only requires
identification of the provider and a state
ment whether the provider has a business
relationship with the lender. There is no
requirement to describe the business re
lationship. Numerous comments were
received objecting to the proposed re
quirement for a statement whether other
providers- would provide the service at a
lower cost. That requirement has been
deleted.
In such cases, the lender Is required
to base the estimate of the charge on
the lender's knowledge of charges im
posed by the selected provider. These re
quirements, which sue contained in Sec
tion 3500.7(b) and (e), are Issued pursu
ant to RESPA Section 5(c). It should be
noted that House Report No. 94-667 re
garding the RESPA amendments stated
a t page 5: “Where the lender will arrange
to have a settlement service provided by
a particular provider, the prospective
borrower should be so informed and the
estimates given should reflect the lend
er's knowledge of the cost of that
servtce”
Form of Good Faith Estimates. Section
5(c) of RESPA requires th a t the lender
provide the borrower with the booklet
and a good faith estimate of the amount
or range for each charge for specific set- ,
tlement services th a t the borrower is
likely to incur in connection with the
settlement. In the March 29th proposed
rules, good faith estimates were required
for a subset of settlement charges. Com
ment was made to the effect that esti
mates for charges computed on the basis
of the actual date of settlement (reserves
and prepaid items) could not be pro
vided. Based on public comments. Regu
lation X was revised to require th at
lenders provide good faith estimates for
all settlement services reported in Sec
tion L of the Uniform Settlement State-
FEDERAl REGISTER, VOL 41, NO. 109— FRIDAY, JUNE 4, 1974
RULES A N D REG ULATIONS
22703
All settlement service charges are to tlement Statement as soon as practicable
ment except item 903 and series 1000 be included in Section L of the HUD-1 after settlement.
(Reserves Deposited with Lemier). With except charges for services which (I) are
Prohibition Against Kickbacks and
respect to item 901 (Prepaid I n t e n t ) not
Unearned Fees. The proposed rules of
required
by
the
Lender
and
(2)
are
902 (Prepaid Mortgage Insurance
for separately outside of settlement. March 29 contained regulations pertain
Premium) the lender is required to state paid
When
the lender requires the borrower ing to kickbacks and unearned fees. Moat •
the maximum amount which can be col- to secure
a settlement service and it is changes in these regulations were limited
lected at settlement. The lenders r«erve paid outside
the charge is to clarifying language. A change from
requirements were not induded ta the to be includedofInsettlement,
Section L and noted as the proposed rules is contained in 9 3500.reauired disclosure because the date or
14(d) which clarifies the Department’s
paid outside of settlement.
settlement and other variables are not a charge
Many comments requested that the Intention that a payment of a thing of
usually within the lender's knowledge a t authority to exhaust supplies of the value pursuant to an agreement or un
Hm« of loan application and represented original HUD-1 be extended to all per derstanding that settlem ent‘will be re
a considerable origination burden.
sons conducting settlement as well as ferred Is a violation of Section, 8. Two
The techniques used to develop the lenders. The regulations have been modi new fact-comment situation^, No. 9 and
good faith estimates for either approach fied to permit thi*. The form has also No. 10, were added to. Appendix B to
have not been specified in theregulations been modified to cover situations where respond to industry practices developed
and are left to the lender. The Depart the lender is not the person conducting partially in response to the Section 8
ment recognizes that there are several settlement. The person conducting the prohibitions.
ways of arriving at good faith estimates settlement Is required to provide the
Distribution of Revised Booklet and
arirj the regulations do not restrict lender with a copy which contains both Form. The Department expects th at
lenders to any specific approach. How buyer and seller Information. The lender lenders will use regular sources of sup
ever, under Section 3500.7 (b), the esti Is required to retain this copy for two plies to secure copies of the Special In
mate of the amount or range of cost must years, and, if a copy Is required by HUD formation Booklet and HUD-L Recog
bear a reasonable relationship to the or another Federal agency, a legible re nizing th at regular sources may not have
borrower's ultimate cost for each settle production of this copy may be used.
these documents before June 30. the De
ment charge.
In enacting the RESPA Amendments, partment intends to provide each lender
Uniform, Settlement Statement (HUD- Congress concluded th at there were cer (supervised by the Federal Home Loan
1) The regulation now permits lenders tain RESPA transactions for which use Bank Board. Federal Reserve Board.
substantial flexibility in reproducing of the Uniform Settlement Statement Federal Deposit Insurance Corporation,
HUD-1 with adjustments to the form to should not be required. The final regu- Comptroller of the Currency, National
allow for variations In settlement serv
exempt from the use of HUD-1, Credit Untan Administration or HUD) a
ices between localities. The regulations RESFA transactions in which the bor copy of the final booklet. This copy will
provide th at where the blank lines on rower Is not required to pay any settle be ttt*h<** to the lender by the appro
HUD-1 are not adequate to take care of m e n t charges or adjustments. Also ex priate supervising agency. Lenders will
local insertions, additional spaces may be empted are transactions in which the be authorized to duplicate copies for dis
added without HUD approval. Also the total amount the borrower Is required to tribution to loan applicants. Lenders who
previous restrictions on distances be pay a t settlement Is a fixed amount and are not supervised by the before men
tween lines and the size of the page have thft borrower Is so Informed a t the time tioned agencies, and who need a copy
been removed. This means th at space or of loan application.
of the Special Information Booklet and
may be added vertically and horiSection 4 of RESPA now requires (1) HUD-1, can submit a request to the
zontally where the-space on the HUD-1
the Uniform Settlement Statement Assistant Secretary for Consumer Affairs
is Inadequate. This will permit, for be completed and delivered a t or before and Regulatory Functions (Includ ing a
wampi» listing pay-offs of prior liens settlement by the person conducting set self-addressed label). A copy of both the
and the time periods Involved in prora tlement and (2) th at on the business day booklet and the form will be sent. The
tions. In addition, the regulations do not before settlement, the borrower, upon re address is Suite 4100, Attention: RESFA,
restrict type size or style and do not re quest, be allowed to inspect such Uniform Department of Housing and Urban De
quire that local insertions appear to a Settlement Statement information as the velopment, 451 7th Street SW„ Wash
different style of type. Finally, it is no
cratriycting settlement has avail ington, D.C. 20410.
A finding of lnappllcabllty of section
longer necessary for information con able. HUD was given the authority to
cerning sellers costs to be included on the exempt irom this provision those set 102(2) (C) of the National Environmen
buyer's copy of HUD-1 and vice versa. tlement transactions occurring in locali tal Policy Act of 1969 has been made with
Numerous comments were received In ties where the Uniform Settlement State respect to this rule, in accordance with
dicating the need for additional space on ment is not customarily provided at or HUD Handbook Section 1300. L A simila r
the form for the inclusion of customary before the date of settlement or where ending of inapplicability, as required by
recitals and information used locally In meeting this requirement is impractlcaL OMB circular A-107, has been made with
real estate settlement. The regulations Numerous comments were received re- respect to potential inflation Impact of
now provide that an additional page may questiag an exemption. The Department the rule. Copies of these findings are
be attached to HUD-1 for this purpose decided not to provide blanket exemp available during regular business hears
or, if space on the form permits, this tions by jurisdiction as proposed in the for public Inspection in the Office of the
information may be added a t the end March 29 proposed rules because this Rules Docket Clerk. Office of the Secre
would result in inequities to borrowers. tory, Room 10141, Department of Hous
of the form.
Several comments Indicated a need for Exemptions tied to the specific types of ing and Urban Development, 451 7th
signature lines other than after line transactions were considered more ap- Street, SW.. Washington, D.C.
1400 of the form. The final regulations propriate. The regulations. 5 3500d0(d).
Accordingly, Subtitle B of Title 24 Is
particular settlement amended by adopting a new P art 3500do not restrict the placing of signature exempt
n n x on the form. A few commented transactions where the borrower (or the Real Estate Settlement Procedures tv
suggested that the HUD-1 not be borrower's agent) does not attend the read aa follows:
changed from Its original format due to settlement or where the person conduct
the cost of modifying their computer ing settlement does not require a meet Sac.
3500.1
Authority, scope and purpose.
programs. The changes reflected In the ing. This is intended to cover the “es 3*009
Definitions.
revision of the form are based on expe crow" type '•kvriwgi and special situations 3000.3 Vo delegation of authority to BUS
rience gained from both manual and where the borrower or borrower's agent
field
computer use of the form. The greater traditionally is not present a t the settle 3300.4 n*n*n*e upon rule, regulation or
flexibility allowed in the final regulations ment. When a transaction qualifies under
interpretationJ»y BUD.
to simplify the design of the form for this exemption, the person conducting 3800.6 Coverage at BZSPA.
38004
Special
Information Booklet a t time
onmyrntin* application should minimize settlement is required to mail to both the
at loan application.
borrower
and
the
seller
the
Uniform
Set
extensive reprogramming.
HDCtAl tKWSTSt, VOC 41, NO. 19*—HJ0AY, J4JNI 4, 1976
RULES AND REGULATIONS
22704
See.
Good Faith Estimates of Settlement
Services.
3500.8
XJsb of Uniform Settlement State
ment Form.
3500.9 Printing and duplication of Uni
form Settlement Statement -.orm.
3500.10 One day advance inspection of Uni
form Settlement Statement; delivery. •
S500.ll Mailing.
3500.13 No fee.
8600.13 ra il Oon to state laws.
5500.14 Trc’ilbltlons against kickbacks and
unearned fees.
Appendix A—Instructions for completing
Uniform Settlement Statement
(HUD 1).
Appendix B—Facts and comments on sec
tion 8 which, provide further clarifi
cation of regulations.
AxrrHORiTT: Real Estate Settlement Proce
dures Act Of 1974, Pub. L. 93-533 (12 U3.C.
3801 et seq.), Real Estate Settlement Proce
dures Act Amendments of 1975 (Pub. L.
94-205).
3500.7
§ 3500.?.
Authority, scope and purpose.
This part, which may be referred to
as Regulation X, comprises the regula
tions issued by the Secretary of Housing
and Urban Development pursuant to the
Real Estate Settlement Procedures Act
Of 197* (Pub. L. 93-533). 12 U.S.C. 2061,
• t seq., as amended by the Real Estate
Settlement Procedures Act Amendments
of 1975 <Pub.‘ L. 94-205) herein
“RESPA”.
| 3500 2 Definitions.
(a) Date of Settlement” means the
date on which the documents creating
the security interest in real property be
come effective as between the borrower
and th j Lender, except th at in the con
version of a construction loan to a per
manent security interest in real property
to finance purchase by a first user. Date
of Settlement shall be the date on which
title is transferred as between seller and
buyer not subject to revocation by seller
or buyer.
(b) “Federally Related Mortgage
Loan” is defined in § 3500.5.
(c) “Lender” means the secured credi
tor or creditors named as such in the
debt obligation and document creating
the lien or other security interest.
(d) “Mortgaged Property" means the
real property covered by the Federally
Related Mortgage Loan, or the coopera
tive UT'it with respect to which stock is
pledged to secure the Federally Related
Mortgage Loan.
(e) “Person” means any individual,
jorporation, partnership, trust, associadon or other entity.
(f) “F>1SPA" means the Real Estate
Settle—ent Procedures Act of 1974 (Pub.
* 93-533). UJ3.C. 2601 et seq.. as
mended by the Real Estate Settlement
Procedures Act Amendments of 1975
Pub. L. 94-205).
(g) “Secretary" means the Secretary
if Housing and Urban Development or
my official delegated the authority of
he Secretary with respect to RESPA.
<h) “State” means any State of the
Jnlted States, the District of Columbia,
he Commonwealth of Puerto Rico, and
any territory or possession of the United
States.
§ 3500.3 No delegation o f authority to
HUD Field Offices.
No authority granted to the Secretary
under RESPA has been delegated to HUD
Regional Offices, HUD Area Offices or
HUD Insuring Offices. Any questions or
suggestions from the public regarding
RESPA should be directed to the Office
of Consumer Affairs and Regulatory
Functions, Attention: RESPA, Depart
ment of Housing and Urban Develop
ment, Room 4100, 451 7th Street, SW.,
Washington, D.C. 20410.
§ 3500.4 Reliance upon rule, regulation
or interpretation by HUD.
(a) Section 19(b) of RESPA provides:
“No provision of this Act or the laws
of any State imposing any liability shall
apply to any act done or omitted in good
faith in conformity with any rule, regu
lation, or interpretation thereof by the
Secretary or the Attorney General, not
withstanding that after such act or
omission has occurred, such rule, regu
lation, or interpretation is amended, re
scinded, or determined by judical or
other authority to be invalid for any
reason.”
(b) For purposes of Section 19(b) of
RESPA only the following constitute a
“rule, regulation, or interpretation
thereof by the Secretary":
(1) The Uniform Settlement State
ment* HUD-1, and HUD instructions set
forth in Appendix A; and
(2) All other provisions. Appendices
and Amendments thereto contained in
this part, but not including any docu
ment referred to in this part except to
the extent such document is set forth in
this part.
(c) A “rule, regulation, or interpreta
tion thereof by the Secretary" for pur
poses of section 19(b) of RESPA shall
not include the Special Information
Booklet prescribed by the Secretary or
any other statement or issuance, whether
oral or written, by an officer or repre
sentative of HUD, letter or memorandum
by the Secretary, General Counsel, any
Assistant Secretary or other officer or
employee of HUD, preamble to a regula
tion or otljer issuance of HUD, report to
Congress^- pleading, affidavit or other
document in litigation, pamphlet, hand
book. guide, telegraphic communication,
explanation. Instructions to forms,
speech or .other material of any nature
which is not specifically included in
paragraph (b) of this section.
8 3500.5
Coverage o f RESPA.
of legal title of the Mortgaged Property.
Execution of an instrument creating a
security interest is not considered to be
a transfer of legal title for purposes of
this part;
(2) The loan is secured by a first lien
or other first security interest covering
real estate, including a fee simple, life
estate, remainder interest, ground lease
or other long-term leasehold estate:
(i) Upon which there is located a
structure designed principally for the
occupancy of from 1 to 4 families; or
(ii) Upon which there is located a
mobile home; or
(iii) Upon which a structure designed
principally for the occupancy of from 1
to 4 families 1s to be constructed using
proceeds of the loan; or
(iv) Upon which there will be placed
a mobile home to be purchased using
proceeds of the loan; or
(v) Which is a condominium unit (or
a first lien covering a cooperative unit)
designed principally for the occupancy
of from 1 to 4 families;
(3) The Mortgaged Property is located
In a State; and
(4) The loan (i) is made by a Lender
meeting the requirements of paragraph
(c), below, or (ii) is made in whole or in
part, or insured, guaranteed, supple
mented, or assisted in any way, by the
Secretary or other officer or agency of
the Federal Government, or (iii) is made
in connection with a housing or urban
development prpgram administered by
the Secretary or other agency of the Fed
eral Government, or (iv) is intended to
be sold by the originating lender to the
Federal National Mortgage Association
(FNMA), the Government National
Mortgage Association (GNMA), or the
Federal Home Loan Mortgage Corpora
tion (FHLMC), or to a financial insti
tution which intends to sell the mortgage
to FHLMC.
(c) A Lender is within paragraph <b)
(4) U) if it is:
(1) A lending institution the deposits
or accounts of which are insured by the
Federal Savings and Loan Corporation
(FSLIC), the Federal Deposit Insurance
Corporation (FDIC) or any other agency
of the Federal Government.
(2) A lending institution which is
regulated by the Federal Home Loan
Bank Board or any other agency of the
Federal Government, or
(3) A “creditor", as defined in section
103(f) of the Consumer Credit Protec
tion Act (15 UJS.C. 1602(f)), who makes
or invests in residential real estate loans
aggregating more than $1,000,000 in
either the calendar year in which the
Date of Settlement of the Federally Re
lated Mortgage Loan In question occurs
or the calendar year prior thereto, ex
cept that the term “creditor" does not
include any agency or instrumentality of
any state. Section 103(f) of the Con
sumer Credit Protection Act defines
“creditor" as follows:
(a) Applicability. RESPA and this
part as applicable to all Federally Re
lated Mortgage Loans.
(b) Definition of Federally Related
Mortgage Loan. "Federally Related
Mortgage Loan" means a loan which Is
not made to finance an exempt transac
tion specified in subsection (d), below,
'*. . . The tarm ‘creditor* refers only to
and which meets all of the following four creditors
who regularly extend, or arrange
requirements:
for the extension of, credit which Is payable
(1)
The proceeds of the loan are usedby agreement in more than four installments
in whole or in part to finance the pur or for which th e payment of a finance
chase by the borrower, or other transfer charge is or may be required, whether in con-
FiDiXAl REGISTER, VOL 41, NO. 109— «IDAY, JUNK 4, 1976
22705
RULES AND REGULATIONS
(b) Printing and duplication. The Sec
retary may from time to time revise the
(d)
Exempt transactions. This partSpecial Information Booklet. The Special
Information Booklet may be printed or
shall not apply to:
(1) A loan to finance the purchase or reproduced in any form, provided that
transfer of a property of 25 or more no change is made, other than as pro
vided under subsection (c) below. The
acres;
(2) A home improvement loan, loan to Special Information Booklet may not be
refinance, or other loan where the pro made a part of a larger document for
ceeds are not used to finance the pur purposes of distribution under RESPA
chase or transfer of legal title to the and this section. Any color, size and qual
ity of paper, type of print, and method
property;
(3) A loan to finance the purchase or of reproduction may be used so long as
transfer of a vacant lot, where no pro the booklet is clearly legible and easily
ceeds of the loan are to be used for the readable.
(c) Permissible changes. No changes
construction of a 1 to 4 family residential
structure or for the purchase of a mobile to, deletions from or additions to the
foreword and text of the Special Infor
home to be-placed on the lot;
(4) An assumption, novation, or sale mation Booklet currently prescribed by
or transfer subject to a pre-existing loan, the Secretary shall be made other than
except th a t the use of or conversion of a those specified below or any others ap
construction loan to a permanent mort proved in writing by toe Secretary.
(1) The cover of the booklet may be
gage loan to finance purchase by the first
in any form and may contain any draw
user:
(5) A construction loan, except where ings, pictures, of artwork, provided th at
the construction loan is used as or con the words “settlement costs'* are used
verted to a permanent loan to finance in the title. Names, addresses and tele
phone numbers of toe Lender or others
purchase by the first user;
(6) A permanent loan the proceeds of and similar Information may appear on
which will be used to finance the con the cover, but no discussion of the m at
struction of a 1 to 4 family structure, ters covered In toe booklet shall appear
where the lot is already owned by the on the cover.
(2) The Special. Information Booklet
borrower or borrowers:
(7) A loan to finance the purchase of may be translated into other languages.
a property where the primary purpose of § 3500.7 Good faith estimates o f settle
the purchase is for resale; or
ment services.
(8) Execution of a land sales contract
(a) Lender to provide Good Faith
or installment land contract where the
Estimates with information booklet at
legal title is not transferred to the pur time
of loan application. The Lender shall
chaser upon execution- However, a loan
to finance the acquisition of title pursu provide the Good Faith Estimates re
ant to a land sales contract is a Fed quired under this section to every person
to whom it must provide a copy of toe
erally Related Mortgage Loan.
Special Information Booklet under
§ 3500.6 Special Information Booklet at S 3500.6 of this part. Time of provision
time of loan application*
is set forth in 3 3500.6(a).
(a)
Lender to provide information (b) Good Faith Estimate. The Lender
booklet H ie Lender shall provide a copy to*n provide a good faith estimate, as a
of the Special Information Booklet cur dollar amount or range, of each charge
rently prescribed by toe Secretary, to for a settlement service which the bor
gether with the Good Faith Estimates rower is likely to incur. Each such good
of closing costs required under Section faith estimate must bear a reasonable
3500.7, to every person from whom toe relationship to the charge a borrower is
Lender receives or for whom it prepares likely to be required to pay at settlement,
a written application on an application and must be based upon experience in
form or forms normally used by the the locality or area in which the Mort
Lender for a Federally Related Mortgage gaged Property is located.
As to 4ach charge with respect to which,
7-rm.n w here more than one individual
applies for a loan, the Lender is in com the Lender requires a particular settle
pliance with this requirement if the ment service provider to be used, the
make its good faith esti
Lender supplies a copy of the Special Lender
Information Booklet to one of the indi mate based upon the Lender's knowledge
viduals applying. The Lender shall supply of the amounts charged by such
the Special Booklet by delivering it or provider.
(c) Settlement Services for which Good
placing it In the mail to the applicant
on toe day toe application is received Faith Estimates are required. The Lender
not la ta 1 than three business days after is required to provide the loan applicant
toe application is received. The Lender with a Good Faith Estimate for each set
charge which will be listed in
«h*n supply the Good Faith Estimates tlement
Section L (except item 903 and series 1000
by delivering or placing the mail or not of Section L) of toe Uniform Settlement
later to an three business days after the Statement which the Lender anticipates
application is received. The Lender shall th at toe borrower will pay a t settlement
complete the Equal Credit Opportunity based upon the Lender's general experi
Notice, located on the inside rear cover ence as to which party normally pay*
of the Special Information Booklet, in each charge in the locality.
(d) Form of Good Faith Estimates.
accordance with Regulation B, 12 CPS
202.4(d) of the Federal Reserve Board. The Lender may provide the loan appllaectlon with loans, sales of property or serv
ices, or otherwise.”
KDIJtAl
KOrani, VOL
41,
NO.
10V—
F11DAY,
runt with the required Good Faith Esti
mates on any form. Including Section L.,
of the Uniform Settlement Statement,
which the Lender determines to use, if
toe following requirements are met:
(1) The form must be clear and con
cise. It shall include the Lender's name.
The form shall set forth in bold type the
following or a substantially equivalent
statement: “This form does not cover all
items you will be required to pay in cash
at settlement, for example, deposit In
escrow for real estate taxes and insur
ance. You may wish to ic quire as to the
amounts of such other Items.” You may
be required to pay other additional
amounts at settlement.
(2) The terminology shall be identical,
so far as practicable, to the terms used
in the Uniform Settlement Statement
(HUD-1) or the terms which will be in
serted in blank spaces in the Uniform
Settlement Statement. Lenders are en
couraged, but are not required, to set
forth the items numbers for each item
which appears in the Uniform Settle
ment Statement (HUD-1).
(3> Additional information relating to
a stated item may be provided. Charges
which may be grouped together pursuant
to the instructions of the Uniform Settle
ment Statement may be grouped in this
disclosure. For example, the amount for
several title charges (listed as lines 11011106 of the Uniform Settlement State
ment) may, in some Jurisdictions, cus
tomarily be included in an attorney's fee
(listed as line 1107).
(e) Description of Lender's requiremeats on selection of providers. Where
the Lender requires th at a particular
provider (or affiliated group of providers,
such as a law firm) be used to provide le
gal services, title examination services or
flflq insurance or to conduct settlement
fw/j requires the borrower to pay all or
a portion of the cost of such services
(regardless of the interests represented,
by the provider), the Lender is required
to include as part of toe Good Faith Es
timate, a statement which clearly desig
nates the corresponding estimated
charges, and states:
(1) Hie name, address and telephone
number of each provider designated by
the Lender, the services which would be
rendered by such provider, and the fact
that Lender's estimate Is based upon the
charges of the designated provider; and
(2) A statement whether or not each
such provider has a business relationship
with the Lender.
(f) As to each Federally Related Mort
gage Loan which is exempt from the use
of the Uniform Settlement Statement by
reason of Section 3500.8(d) of this part,
the lender shall keep an accurate record
for two years of toe itemized list of th e .
settlement services provided, the exact
charge. If any, which is to be imposed a t
settlement, and the subparagraph (Sec
tion 3500.8(d) (1) or (d) (2)) under which
toe exemption is granted. With respect
to a transaction which is exempt under
Section 3500.8(d)(2), th e lender shall
deliver or place in the mail to the bor
rower not later than three business day*
after loan application a statement of
JUNE 4, 1974
22706
RULES AND REGULATIONS
the amount of the fixed charge and a
■tatement of the settlement services' and
other items cpvered by such charge.
1 3500.8 Use o f Uniform
Statement Form.
Settlement
and/or logotype and may rearrange, but
not delete, the other information which
appears in Section A.
. (2) The name, address and other in
formation regarding the Lender and set
tlement agent (person conducting settle
m ent), respectively, may be printed in
Sections F and H.
____
(3) Reproduction of HUD-l must con
form to the terminology, sequence and
numbering of line items as presented in
lines 100-1400 which are not used locally
or in connection with mortgages by the
Lender may be, deleted, except for the
following: Lines 100, 120, 200, 220, 300,
301, 302, 303, 400, 420, 500, 520, 600, 601,
602, 603, 700, 800, 900, 1000, 1100, 1200,
1300, and 1400. The form may be cor
respondingly shortened. The number of
a deleted item shall not be used for a sub
stitute or new Item, but the number of a
blank space on HUD-l may be used for
a substitute or new item.
____
(4) Charges not listed on HUD-l but
which are customary locally or pursuant
to the Lender's practice may be inserted
in blank spaces; or where existing blank
spaces on HUD-l are insufficient, addi
tional lines and spaces may be added and
numbered in sequence with HUD-l
spaces.
(5) The following variations in layout
and format are within the discretion of
persons reproducing HUD-l and do not
require prior HUD approval: size of
pages; tint or color of pages; size and
style of type or print; vertical spacing
between lines or provision for additional
horizontal space on lines (for example,
to provide sufficient space for recording
time periods used in prorations); print
ing of HUD-l contents on separate pages,
on the front and back of a single page,
or on one continuous page; use of multi
copy tear-out sets; printing on rolls for
computer purposes; reorganization of
Sections B through 1 where necessary to
accommodate computer printing; place
ment on the form the HUD number but
not the OMB approval number, neither
of which in any case may be deleted from
the form.
(6) The borrower's information and
the seller's information may be provided
on separate pages.
Room 4100, 451 7th Street, SW., Wash
ington, D.C. 20410, stating the reasons
why the applicant believes such, devia
tion is needed. Prior to receiving such
approval, the prescribed form must be
used.
(a) Use of HUD-l. As required by sec
§ 3500.10 One day advance inspection o f
tion 4 of RESPA, the Uniform Settle
Uniform Settlement Statement; de
ment Statement (HUD-1, set forth in
livery.
Appendix A) shall be used by the person
(a)
Inspection one day prior to settle
conducting settlement in every Federally
ment. Except as provided in paragraph
Related Mortgage Loan settlement trans
(d), upon the request of the borrower,
action whether or not such person is the
the person conducting the settlement
Lender. Persons conducting settlements
shall permit the borrower to inspect the
may exhaust supplies of the original
Uniform Settlement Statement, com
HUD-l which are in stock at the time
pleted to set forth those items which are
these regulations take effect.
known to such person at the time of in
(b) Charges to be stated. The Uniform
spection, during the business day im
Settlement Statement, HUD-l, shall be
mediately preceding the Date of Settle
completed to Itemize all charges to be
ment.
paid by the borrower and the seller in
(b) Delivery. The Uniform Settlement
connection with the settlement, except
Statement shall be delivered or mailed
those charges not imposed upon the bor
to the borrower and the seller or their
rower or seller by the Lender and which
agents at or before settlement, except as
the borrower or seller contract to pay
provided in paragraphs (c) and (d ).
for separately outside of the settlement.
(c) Waiver. The borrower may waive
Charges which are required by the
the right to delivery of the completed
Lender but paid outside of closing shall
Uniform Settlement Statement no later
be included on the statement but marked
than at settlement by executing a writ
“P.O.C.’ , as provided in the general in
ten waiver at or before settlement. In
structions to the form. Lines and col
such case, the completed Uniform Set
umns which relate to the borrower's
tlement Statement shall be mailed or
transaction may be deleted from the
delivered to the borrower and seller as
copy of the form which will be furnished
soon as practicable after settlement.
to the seller and lines and columns which
(d) Exempt transactions. Where the
relate to the seller's transaction may be
borrower or the borrower's agent does
deleted from the copy of the form which
not attend the settlement or where the
will be furnished to the borrower.
person conducting settlement does not
(c) Recordkeeping. The person con
require a meeting of the parties for that
ducting the settlement shall provide the
purpose, the transaction shall be ex
Lender with a copy of each settlement
empt from the requirements of para
statement (both borrower's and seller's
graphs (a) and (b) above, except th at
eopies, where different) required to be
the Uniform Settlement Statement shall
prepared pursuant to section 4 of
be delivered as soon as practicable after
RESPA. The Lender shall retain the set
settlement.
tlement statement for two years after
the date of settlement'unless the Lender
§ 3500.11 Mailing.
lisposes of its interest in the mortgage
The provisions of this part requiring
ind does not service the mortgage. The
or permitting mailing of settlement
Lender may permit its copy of the set
statements or other documents shall be
tlement statement to be delivered to the
deemed to be satisfied by placing the
owner or servicer of the mortgage as a
document in the mail (whether or not re
part of the transfer of the loan file. If
ceived by the addressee) addressed to the
»py of the settlement statement is readdresses stated in the loan application
luired to be submitted to the Secretary
or in other information submitted to or
(7) Signature lines may be added.
>r other Federal agency, a legible re
by Lender at the time of loan
(8) The-form may be translated into obtained
production of the copy retained by the
application, or submitted to or obtained
Lender may be used to meet this any othqjit language.
•equirement.
(9) Ah additional page may be at by the Lender or person conducting set
(d) RESPA Transactions exempt from tached to HUD-l for the purpose of in tlement, except that a revised address
be used where the Lender or such
\he use of the Uniform Settlement State- cluding customary recitals and informa shall
nent. (1) Transactions in which the bor tion used locally in real estate settle other person has been expressly informed
rower Is not required to pay any settle- ments, for example, breakdown of pay in writing of a change of address.
nent charges or adjustments.
off figures; a breakdown of mortgagor's § 3500.12 No fee.
(3)
Transactions in which the bor- total monthly mortgage payments;
provided in section 12 of RESPA, no
*ower is required to pay a fixed amount check disbursements; a statement indi feeAs
be Imposed or charge made upon
'or all charges imposed at settlement and cating receipt of funds; applicable anyshall
other
as a part of settle
h e borrower is informed of the fixed special stipulations between buyer and ment costs person,
or
otherwise,
by a Lender in
unount at the time of loan application.i seller; and the date funds are trans connection with or on account
of the
i 3500.9 Printing and duplication o f ferred. If space permits, such Informa preparation and distribution of the state
tion
may
be
added
at
the
end
of
HUD-l.
Uniform Settlement Statement Form.
(b)
Any other deviation in the formment required by section 4 of RESPA
(a) Permissible changes. The Uniform is only permissible upon receipt of writ (Uniform Settlement Statement) or by
Settlement Statement form, HUD-l. ten approval of the Secretary. A request the Truth in Lending Act.
nay be reproduced with the following to the Secretary for approval may be § 3500.13 Relation to State laws.
lermissible changes and Insertions:
submitted in writing to the Assistant
Section 18 of RESPA provides:
(1) The person reproducing the form Secretary for Consumer Affairs and Reg
This Act does not annul, alter, or affect
oay insert in Section A its business name ulatory Functions, Attention: RESPA, or exempt any person subject to the provi-
FEDERAL REGISTER, VOL 41, NO. 109— FRIDAY, JUNE 4, 1976
RULES AN0 REGULATIONS
22707
(b) Thing of value. "Thing of value” is payment for goods or facilities actually
broadly defined by section 3(2) of furnished or for services actually per
RESPA to include any payment, ad formed.
(3) Payments pursuant to cooperative
vance, fund, loan, sendee, or other con
sideration. Under section 8 of RESFA, a brokerage and referral arrangements or
thing of value may be provided either agreements between real estate agents
directly or Indirectly to the person refer frod brokers.
(4) Normal promotional and educa
ring settlement business and can take
many forms including, but not limited tional activities not directly conditioned
to, monies, things, discounts, salaries, on the referral of business and th at do
^ m m i^in n .^ fees, duplicate payments not involve the defraying of expenses
of a charge, stock, dividends, distribu that otherwise would be incurred by per
tions of partnership profits, credits re sons in a position to refer settlement
A determination by the Secretary th at presenting monies that may be paid at business, such as a reception by a title
free seminars on title matters
such an Inconsistency exists shall be a future date, special bank deposits or company,
after consultation with appropri accounts, hanking terms, special loan or to profeskonals, furnishing property de
and names of record owners
ate Federal agencies, by publication of loan guarantee terms, services of all scriptions
types at special or free rates, and sales without charge to persons such as
a notice in the Fsauux. R xcjbotl
Lenders, real estate brokers or attorneys
or rentals at special prices or rates.
% 3300.14 Prohibition against kickbacks
(c) Agreement or understanding. An or distribution of calendars and other
and unearned fees.
agreement or understanding for. the promotional material of nominal value.
(5) The waiver by a Lender of the
(a)
Statutory prohibitions. Section 8referral of settlement business need not
be verbalized but may be established by requirement th at a borrower pay a pre
of RESFA provides:
payment penalty provided in mortgage
(a) No person shall give and no person a practice, pattern or course of conduct
■h».ii accept any fee, kickback, or thing of pursuant to which the payor and recipi documents, whether or not such waiver
value pursuant to any agreement or under ent of the thing of value understand is conditioned upon receipt by die Lender
standing, oral or otherwise, that business
the payment is in return for the of a loan application from, or the makin g
incident to or a part of a real estate settle referral of business. A payment that is of a loan to, such borrower or a person
ment service involving a federally related mflrfA repeatedly and is connected in any purchasing a property from such bor
mortgage loan shall be referred to any way with the volume or value of the rower. This exemption is established pur
penon.
suant to authority to establish exemp
(b) No person shall give and no person business referred to the payor by the tions from Section 8 of RESPA; and is
^Hnii accept any portion, split, or percentage- recipient is presumptively pursuant to not
applicable by analogy to any cate
of any charge made or received for the ren an agreement or understanding.
dering of a real estate settlement service in
«D Payment of thing of value for gory of cases other than waiver of pre
connection with a transaction Involving a referral of business. Any person who payment penalties.
(g)
Examples of violations under sec
federally related mortgage loan other than gives
any person who receives any
for serrtess actually performed.
tion 8. The following are examples of
fee,
or
thing
of
value
th
at
rep
(o)
Nothing in this section shall be con
violations under section 8 and are ap
strued as prohibiting (1) the payment of a resents compensation for the referral plicable by analogy to other providers
fee (A) to attorneys a t law for servloea actu of business incident to or a part of a of settlement services In addition to
ally rendered or (B) by a title company to real estate settlement service Is in viola
Its duly appointed agent for serrtcee actually tion of section 8 of RESPA. The fact that those specified In the examples:
(1) A title company pays a portion of
performed In the issuance of a policy of title the payment of the thing of value does
Insurance or (C) by a lender to Its duly not result In an increase in the charge the title insurance premium to a person
sppolnted agent for services actually per m«ria for the settlement service by the who performs no services for the title
formed In the
of a loan, (2) the pay
company other than placing an applica
ment to any person of a bona fids salary or payor In the particular transaction Is tion with the title company.
compensation or other payment for goods irrelevant In determining whether the
(2) A title company gives a discount
or facilities actually furnished or for serrtcee. payment is prohibited.
(e) Payment for goods or services ac or allowance for the prompt payment of
actually performed,
or (3) payments pursuant to cooperative tually rendered. The payment and receipt a title insurance premium or other
brokerage and referral arrangements or of a ching of value that bears a reason charge for a settlement service to a real
agreements between real estate agents and able relationship to the value of the estate agent, attorney or lender as a
brokers, or (4) such other payments or goods or services received by the person rebate for the placement of business with
classes of payments or other transfers as are
such title company.
specified in regulations prescribed by the or company making the payment Is not
(3) An attorney gives a portion, of his
Secretary, after consultation with the Attor prohibited by RESFA section 8. To the
ney General, the Administrator of Veterans* -extent the thing of value is in excess of fees to another attorney, a Lender or a
Affairs, the Federal Borne Loan Bank. Board, the reasonable value of the goods pro real estate agent who only referred a
the Federal Deposit Insurance Corporation, vided qr services performed, the excess prospective client to the attorney.
the Board of Governors of the Federal Re is not Tor. services actually rendered and
(4) A title company pays a "commis
serve System, and the Secretary of Agricul may be considered a kickback or refer sion" to a corporation th at Is wholly
ture.
(d) (1) Any person or persons who violate- ral fee proscribed by RESPA section 3. owned by one or more Lenders, even
the provisions of this section shall be fined The value of the referral itself (Le„ the though such corporation performs no
not more than $10,000 or imprisoned for not additional business obtained thereby) is substantial services on behalf of the title
more
one year, or both.
not to be taken into account in deter company.
(2)
In addition to the penalties providedmining whether the payment la Arvprone A—iMsia oc tiowa to* Con y ta rnco
alons of this Act from complying with the
laws of any State with respect to settle
ment practices, except to the extent th a t
those laws are Inconsistent with any proylaion of this Act. and then only to the extent
of the inconsistency. The Secretary la au
thorized to determine whether such Incon
s ta n c ie s exist. The Secretary may not deterth a t any State law is Inconsistent with
any provision of thia Act if the Secretary
determines th a t such law gives greater pro
tection to the consumer. In making these
determinations the Secretary shall consult
w ith th e appropriate Federal agencies.
by paragraph (1) of this subsection, any per
U m r o u t S g r a j a c D r r S tatxscxmt ( H U D - l )
son or persons who violate the provisions of
(1) Exemptions. The following are not
subsection <a) shall be jointly and severally
The following are Instructions for com
liable to the person or persons whose busi proscribed by RESPA section 8:
pleting sections A through L of the Uniform
( 1 ) The payment of a fee (a) to at Settlement Statement HUD-1, required
ness has been referred in an amount equal
to three times the value or amount of the torneys a t law for services actually ren under section 4 of RESPA and celled Regu
fee or thing of value, snd'any person or per dered, or (b) by a title company to its lation X. This form is to be used a* a
sons who violate the provisions of subsection duly appointed agent for services actu imifftpm statement of actual costs asd ad*
(b)
be Jointly and severally liable to ally performed in the Issuance of a policy ju a tae ats to be given to the parties in con
the person or persons charged for the settle of title insurance, or (c) by a Len der to nection with the settlement. The Instruc
ment serrtcee Involved in an amount equal
tions for completion of the form ere
to three times the amount of the portion, its duly appointed agent for services primarily for the benefit of the persona who
family performed In the making of a prepare the statements and need not be
split, or percentage. In any successful action
to enforce the liability under this paragraph, loan.
transm itted to the partlee as an Integral
the court may award the court costs of the
(2) The payment to any person of a part of the form. Refer to Regulation. X
action together with a reasonable attorney's
bona fide salary, compensation or other of the Department of Boosing and Urban Defee as determlnsd by the court.
FCDCSAt WOlSTlt, VOC 41, NO. 10V— «I0A V , JU N i-4, 1474
RULES AND REGULATIONS
velopmsnt (24 e r a Part 3600) to determine if
m e Uniform Settlement Statement is legally
required to be used in a particular mortgage
loan transaction. There la no objection of the
use of th e form in transactions in which its
use is not legally required.
ainm it. XNSXXUCTTDMS
Information and mmounta may be filled
In by typewriter, hand printing, computer
printing, or any other method producing deer
and legible results. Copies of th e form sent
to th e borrower and the seller may be carbon
copies or other clear legible copies. Refer
to Regulation X regarding rules applicable to
printing of the form. An additional page may
be attached to BUD-1 for th e purpose of
including customary recitals and informa
tion uMd locally in real estate settlements,
for example, a breakdown of payoff figures;
a breakdown of mortgagor's total monthly
mortgage payments; check disbursements;
a statement indicatin g receipt of funds;
applicable special stipulations between buyer
and seller; and the date funds are trans
ferred. The reverse side of th e form may
be used Instead at an additional sheet.
Where charges are paid outside of the
settlement (normally by separate check), but
are included in th e requirements of I 3800.8(b), they shall be stated w ith the notation
"P.O.C." (Paid outside dosing) and
not
be Inducted in computing totals, in accord
ance with ! 3500.8(b). charges not imposed
upon th e borrower or seller by th e Lender
and which borrower or seller contract to pay
for separately outside of th e settlement, need,
s o t be entered on HUD-1.
UHX CROC DiSTSDCnoMS
Instructions for completing the Individual
Items on the form follow. Where no instruc
tions are given, the item is thought to be
self-explanatory.
Section A. The Lender, title company,
other firm, or other person iwmiimMng set
tlement and preparing th e form may Insert
Its name and/or logotype in Section A.
Section B. Check appropriate loan type
and complete the remaining items as appli
cable.
Sections D and X. Pin in the names and
current mailing addresses and zip codes of
the borrower and the seller. Where there is
more than one buyer or seller, the name and
address of one la guOetexxt.
Section G. The street address of ths
secured property, should be given. IT there
Is no street address, a brief legal description
or other location of the property should be
Inserted. In ail cases give the zip code at the
property.
Section H. Pill in name, address; and zip
code at settlement agent; address and'.Xlp
code at “place at settlement.’*
V
Section <T. Summary of Borrower's Transac
tion. The borrower may be given a copy at
th e form which does not contain the infor
mation filled in under "Summary at Seller's
Transaction- (Section EC, Series 400, 500, and
600 items).
Lines 104 and 106 are for
amounts owed by the buyer. For example,
the balance in the id le r's reserve
held by the lander. If assigned to the buyer
in a loan assumption case, will be entered
here. These lines will also be used when a
tenant In the property being sold has not yet
paid his rent, which the buyer will collect,
for a period of time prior to the settlement.
The seller win be credited on lines 404-406.
Lines 106 through 112 are for items which
th e seller had paid in advance, and for which
the buyer must therefore reimburse the
seller. Examples of items for which adjust
ments win be made may Include taxes and
■■■assmente paid in advance for an entire
year or other period, when settlement occurs
prior to the expiration of the year or other
period for which they were paid. Additional
examples include flood and hazard insurance
premiums, if the buyer is being substituted
as an Insured under the same policy; mort
gage insurance in loan assumption cases;
planned u n it development or condominium
association assessments paid In advance; fuel
or other supplies on hand, purchased by the
seller, which, the buyer will use when buyer
takes possession of the proper ty; and ground
rent paid in advance.
Line 203 is used for cases in which the
buyer is assuming or taking title subject to
an existing loan or lien on the property.
Lines 204-209 may be used In esses in
which the sellar has takan a trade-in or
other proper ty from th e buyer in part pay
ment for the property being sold. They may
also be used in cases in which a seller
(typically a builder) Is m an n y an “allow
ance'* to th e buyer for carpets or drapes
which the buyer is to purchase on his own.
Such an allowance should also be entered on
lin e s S06 to 509.
Lines 310 through 219 are for items which
have not yet been paid, and which the buyer
is expsetsd to pay, b ut which are attrib u t
able in part to a period of time prior to the
settlement; In jurisdictions in which taxes
are paid late In the tax year, most eases win
show th e proratton of taxes In these lines.
Other examples Include utilities used but
not paid for by the seller, rent collected In
advance by the seQer from a tenant for a
period extending beyond the settlement data;
and interest on loan assumptions.
Line 303 may indicate either the cash re
quired horn the borrower a t settlement (the
usual case in a purchase transaction) or cash
payable to the borrower at settlement (if, for
example, th e buyer's earnest money deposit
exceeded his cash obligations in th e trans
ection). The appropriate box should be
checked.
Section K. Summary of Seller's Trans
action. The seller may be given a copy of the
form which does not contain the informa
tion filled in under -Summary of Borrower's
Transaction" (Section J, Series 100, 200, and
300 items).
Instructions for the use of lines 106-112,
shove, apply also to lines 406 to 412;
Line 601. If the seller's real estate broker
has received and holds an earnest money
deposit which exceeds the commission owed
to him. and if he will tender the excess de
posit directly to the seller, rather th an
through th e settlement agent, the amount of
excess deposit should be entered on line
601.
Line 603 is used If the purchaser is assum
ing or taking title subject to existing liens
which are to be deducted from sales price.
Line 506 through 809 may be used to list
additional Hess which m ust be paid off
through th e settlement to clear title to the
property. They may also be used to indicate
funds to be held by the settlement agent for
KDKIAL RK5I5TI*, VOL 41; NO. 109— FRI0AY; J0NC 4; T976
RULES AND REGULATIONS
the payment of water, fuel, or other utility
which cannot be prorated between the
parties a t settlement because the amounts
used by the seller prior to settlement are
not yet known.
Instructions for the use of lines 510
through 019 are the same as those for lines
210 to 219 above.
Section L. Settlement Charges, For all
Items except those paid to and retained by
the Lender, the
of the person or firm
receiving the payment should be shown. The
ly^inmn which relates to the borrower's
transaction may be deleted from the copy
of . the form which will be furnished to the
toiler o-nri the column which relates to the
seller's transaction may be deleted from the
copy of the form which will be furnished to
the borrower.
T.tir 700 , if the sales commission paid by
the seller Is based on a percentage of the
purchase price, enter the purchase price, the
percentage, and the dollar amount of the
total commission paid by the seller.
T.in— 701-702 are to be used to state the
split of the commission where the person
conducting the settlement disburses por
tions of the commission to two or more
agents.
Line 703. If the broker is retaining a part
of the earnest money deposit to apply to
wards his commission. Include in lines 703
only th a t part of the commission being dis
bursed a t settlement.
T.ine 704 may be used for additional
chargee made rby th e sales agent, or. for a
sales commission charged to the buyer, which
will be disbursed by the settlem ent agenA
Line 801 . Eater the fee charged by the
tjmrfw for nrocesslxut or originating the
loan. If this fee Is computed- as a percentage
of the loan amount, enter the.percentage
In the blank indicated.
Line 802. Enter the loan discount charged
by th e lender, end. If It Is computed sa a
percentage of the loan amount, enter the
percentage in the blank indicated.
Line 803. Enter appraisal fees, If there is
a charge separate from the origination fee.
The VA or FHA appraisal fee Is included
o n line 803,..
. . . . .
Line 80S- is- used only- for Inspections by
the lender or his personnel. Chargee for other
peek or structural inspections, required by
Regulation X to be stated, should be entered
In lines 1301-1300. .
Line 803 should be used for a VA appraisal
fee; FHA application fee (which covers the
cost of appraisal for the agency as well), or
a fee required by a private mortgage ineuri
company.
Line 807 la provided for convenience in us
ing the form for loan assumption transac
tions.
Line 90L If Interest is collected a t settle
ment for a part of a month dr o th er period
between settlement and the dfcte frbm which
interest will be coUaoted w ith th e first reg
ular monthly payment, enter tVi-* amount
here. If such Interest la not collected until
the- first regular monthly payment, no entry
should be made on line 901.
Lines 1000-1008. This series Is used for
amounts collected by the Lender from the
borrower and held in an account for' the
future payment of the obligations listed as
they fall due; In many Jurisdictions- this is
referred to as an "escrow," "impound," or
"trust” account. In addition to the Items
listed, some Lenders may require reserves for
flood Insurance, condominium owners asso
ciation assessments, etc.
Lines 1100-1113. In many Jurisdictions the
«*m» person (for example, an attorney or a
title Insurance company) performs several
of the services listed In this series and makes
a single undifferentiated charge for such
services. In such cases, eater the overall fee
on line 1107 (for attorneys), or line 1108 (for
title companies), and enter on th a t line the
Item numbers of the sendees listed which are
covered In the overall fee. If this Is done, no
amounts should be entered for the individ
ual items which are covered by the overall fee.
u n a lio i. Enter here the fee of the per
son or Arm conducting the settlement, in
some Jurisdictions this Is termed a closing
or escrow fee. If two or more persons or
Arms
charges In connection with the
a m * transaction, enter total chargee In the
appropriate columns, and indicate the break
down of charges on the line after the word
“to."
Lines 1102 and 1103. In soma Jurisdictions
the
person (for example, an attorney)
both searches the title (th at la, performs
the necessary research In the records) and
examines title (that la, makes a determina
tion as to what matters affect title, and pro
vides a title report or opinion). If such a
person charges only one fee for both serv
ices, it should be entered on line 1103. If sep
arate persons perform these tasks, or If sep
arata charges are made for searching and ex
amination, they should be listed separately.
r.ina nog. Enter charges for preparation of
deeds, mortgages, notes, etc. If more than
one person-receives a fee for such work in
th e T-rri* transaction, show the total paid In
the appropriate column and the individual
charges on the line following the word "to."
U n— 1108-1110. Eater the total charge for
title insurance (except for the cost of the
title binder) on line 1108. Enter on lines
1109 and 1110 the individual chargee for the
Lender's
owner's policies. Note that these
chargee are not carried over into the borrow
er's and seller’s columns, since to do eo would
result In a duplication of the amount In line
1108. If a combination Lender's/owner's pol
icy Is available show this amount sa an addi
tional entry on line 1109 and 1110.
r.iw— u n - i l i a . These Unas are for the
entry of other title charges not already Item
ized.
in some Jurisdictions would
trirtind* a fee to a private tax service, a fee
to a county tax colleotor for a tax certificate,
sad a fee to a public title registrar for a
certificate of title under a Torrens Act. Show
the Lender's attorney's fee if any on. lines
1X11—1113.
u r ,— 1303-1300. Enter on these lines any
other settlement charges not referrable to
the categories listed above on the form, which
are required to be stated by Regulation X.
Examples may include structural inspections
or pre-sale Inspection of heating, plumbing,
or electrical equipment. These Inspection
oharges may include a fee for insurance or
warranty coverage.
Line- 1400. Enter the -total settlement
charges paid from borrower's funds and Sau
er's funds. Thsse totals are also entered on
uw— 103 and 502. respectively. In sections
J and K
R O H M lEGlSTI*. VOL 41, NO. 109— R10AY, JUNE 4, 1976
22709
RULES ANO REGULATIONS
2710
Form Approved
OMB NO. 63-R-150{
HUD>1 Ree. 5/70
B. TYPE OF LOAN
I . □ FHA
U. a. DEPARTMENT OF MOUSING AND URBAN DEVELOPMENT
SETTLEMENT STATEMENT
4. □ VA
6. fUa Number:
*. □ FmHA 3. □ C O N V. UNINS.
5. □ CONV. INS.___________________
7. Loan Number:
3. Uoitwa Iaaurance Caaa Number:
& NOT S t This f o r m if fu rn ish e d to g w * y o u a s ta te m e n t o f a ctu a l s e ttle m e n t c o sts.
A m o u n ts p a id t o a n d b y th e s e ttle m e n t a g e n t are
s h o w n . I te m s m a r k e d “ (p -o -c .)” w ere p a id o u ts id e th e clo sin g ; th e y are s h o w n h ere f o r in fo rm a tio n a l p u r p o se s a n d are n o t
in c lu d e d in th e to ta ls .
D .N A M S OF BORROWER:
S. NAME OF SELLER:
0 . PROPERTY LOCATION:
a. SETTLEMENT
F. NAME OF LENDER:
AGENT:
L SETTLEMENT DATE:
PLACE OF SETTLEMENT:
J. SUMMARY OF BORROWER'S TRANSACTION
K. SUMMARY OF SELLER’S TRANSACTION
1 0 0. C R O S S A M O U N T D U E F R O M B O R R O W E R :
101. Cos—sat aaiee price
4 0 0 . C R O S S A M O U N T D U E TO S E L L E R :
401. Cootmct aalea piiee
lOX f a e ie i l peupeelp
40X Paraooal p ip u lT
40X
Settlamest O m n to borrow m <line 14001
IB S .
104.
100.
404.
40S.
Adjustments for items paid by seder in advance
10X City flows tmree
to
Adjustments for item s paid b y seller in adaance
404. City/town tajte*
to
10T. Cosatp tase*
to
100. Aeaeaaaeaate
to'
407. County taiea
404. A ■lum iiitr
10*.
110.
40X
410.
111.
11X
411.
to
to
SIX
120.
420.
C RO SS A M O U N T DUE
FROM BORROW ER
G ROSS AM O U N T DUE
TO S E L L E R
5 0 0 . R E D U C T IO N S IN A M O U N T D U E TO S E L L E R :
SOL. Esaoaa dasoatt (see instructions)
2 Q Q + A M 0 U N T S R A ID B Y OR IN B E H A L F O F B O R R O W E R :
30X PdaaiBal noomrt ot aew
SOX Settlement e h u ra to aeltar (Hne 1400)
000. Zxiaaisc loeo<t> takas aaMeat to
S04. Payoff o f Urn mortaaca loan
WM.
30B.
MO.
SOT.
SOO.
SOS.
SOT.
so * .
300.
500.
Adjustments far items unpaid b y seder
SIX*. City/town Usee
to
Adjustments for items unpaid b y teller
SIX City Nows tanaa
to
S ll. Cosatp tautae
to
S ll . Co— ty tasua
to
MS. Aam a« ante
to
S IX A— assiota
to
SIX
S IX
tie .
S14.
ns.
nx
SIS.
SI 7.
SIT.
ns.
nx
SIX
S IX
SIS.
220.
520.
T O T A L P A ID B Y IF O R
BORROW ER
3 0 0 . C A S H A T S E T T L E M E N T F R O M /T O B O R R O W E R
SOI. Grom amount doe from borrower (line 1201
SOX Lorn a m o u n t* paid by/for borrower (line 220)
303. CASH ( □ FROM ) ( U T O ) BORROW ER
T O T A L R E D U C T I O N .A M O U N T
D U E SELLER
6 0 0 . C A S H A T S E T T L E M E N T T O !F R O M S E L L E R
(
)
•
SOI. Gram amount dne to oiler (line 4 2 0 )
M X Lem reduction* la amount due —Bar (line 620)
603. CASH < □ TO)
I'D
FROM ) SELLER
FEDERAL REGISTER, VOL 41, NO. 109— FRIOAY, JUNE 4, 1976
L
)
r
22711
RULES AND REGULATIONS
-
2-
L. SETTLEMENT
7 0 0 . T O T A L S A L E S !B R O K E R S C O M M IS SIO N ba sed on p a c t $
CHARGES
@
-
D ivision o f C o m m issio n (line 7 0 0 ) as fo llo w s !
..................
A 00. ITE M S PA YABLF. IN C O N N E C T IO N W ITH L O A N
900.
PAID PROM
SELLER’S
FUNDS AT
sm u M n rr
PAID PROM
SORROWER'S
FUNDS AT
SETTLEMENT
ITE M S R E O U IR E D B Y L E N D E R TO BE P A ID IN A D V A N C E
901. Inter*« from
to
904.
905*
--------------------------- 10 0 0 .
1001. Rua4 iamnac*
•*
/d»y
T««n to
......
R E S E R V E S D E P O SIT E D W ITH L E N U t k ~
m em sim **
p a m oat*
1003.
City prepMtr te x ts
mooth* • • ■
p*» month
100ft.
! 004.
IW H IM M II
Booth*#*
nooths • •
aonth* • *
Booth* • •
OBBOOth
pm Booth
P** Booth
pm Booth
1007
:0<M
UOO.
I g n it e
H M ta g
i
p
p
i
T IT L E C H A R G E S
u s s e B s s s s m ts s s i
m
;
$
i
&
t m
m
m
1200. G O V E R N M E N T R E C O R D IN G A N D T R A N S F E R C H A R G E S
iaoi.
R**o*Jla* t— i P—d*
flMott*—»*
1f a h f i l
1900.
1 3 0 0 . A D D IT IO N A L S E T T L E M E N T C H A R G E S
1400. T O T A L S E T T L E M E N T C H A R G E S Ie n te r on lines 1 0 3 . S e c tio n I a n d
502, Section K )
HUD-1 R *r. 5 /7 4 .
FEDERAL
REGISTER, VOL. 41, NO. 104— ttlDAT, JUN* 4, 1976
RULES AND REGULATIONS
12712
B—P a c t s a n d C o m m e n t s o « s e c
W h i c h P so vtde F u r t h e * c l a b o t c a or R e g u l a t io n s
ppzh dxx
t io n 8
t io n
The following llltistrafclons provide addlonal guidance on the meaning and coverage
t Section 8 of RESPA. While particular illus■atlons may refer to particular providers
r settlement services, such illustrations are
ppUcabie by analogy to providers of settle
ment services other than those specifically
lentloned. It should be noted th at other
revisions of Federal or state law may be
ppllcable to the practices and payments dis
used in the following Illustrations.
1. Facts. A, a provider of settlement serv
es, maintain and abnormally large balance
i a non-interest bearing account with B, a
mortgage lender, pursuant to an under
lin in g th at B will refer borrowers of Fed•ally Related Mortgage Loans to A for the
it chase of settlement sevices in connection
lth the settlement of such loans.
Comments. Allowing B to use the deposited
inds at no Interest appears to be a thing
: value given by A to B pursuant to an
peement or understanding that business
icldent to a real estate settlement shall be
>ferred to A In violation of Section 8 of
ESPA. The maintenance of any accounts
asonably needed by A In the normal course
' its business would not be a violation of
ictlon 8.
2. Facts. B, a lender of Federally Related
ortgage Loans, pays A, a real estate agent,
fee of 825 per transaction purportedly for
rvlces performed such as arranging for B's
ipralser to visit the property. The purported
rvlces for which the fee la paid are services
a t real estate agents frequently perform as
mxt of their services and the fee is really lnnded to enable B to compensate A for rerring potential borrowers to B.
Comments. Both A and B are in violation
Section 8 of RESFA, since the fee is being
mid in compensation for the referral of busi
es rather than for legitimate services acally rendered by B on behalf of A.
3. Facts. A, a provider of settlement serv*8, provides settlement services at abnorally low rates or at no charge at all to B,
builder, in connection with a subdivision
lug developed by B. B agrees to refer puxasers of the completed homes in the sub
vision to A for the purchase of settlement
rvlces In connection with the sale of lnvldual lots by B.
Comments. The rendering of services by
to B at little or no charge constitutes a
lng of value given by A to B in return for
e referral of settlement business and both
and B are In violation of Section 8 of
2SFA.
8. Facts. B, a Lender, encourages persons
10 receive Federally Related Mortgage
from it to employ A, an attorney, to
irch title and perform related settlement
*71068 In connection with their transac>n. B and A have an understanding th a t in
return for the referral of this business A will
provide legal services to B or B’s officers or
employees a t abnormally low rates or for no
charge.
Comments. Both A and B are in violation
of Section 8 of RESPA.
5. Facts. A, a provider of settlement serv
ices, pays referral fees to persons who refer
settlement business on commercial real es
tate to A.
Comment*. While commercial transactions
are not covered by RESPA, the payment of
such referral fees would be a violation of
Section 8 if they Involve indirect compensa
tion for the referral of settlem ent business
covered by RESPA.
6. Facts. A, a real estate broker, obtains all
necessary licenses under state law to act as
a title Insurance agent. A refers Individuals
who are purchasing homes In transactions In
which A participates as a broker to B, a
title company, for the purchase of title in
surance services. A fills out a simple form
but performs no other services in connection
with the issuance of the title insurance pol
icy. B pays A a commission for the transac
tion.
Comments. The payment of a commission
by B to A under circumstances where no
substantial services are being provided by A
to B Is a violation of Section 8 of RESFA.
7. Fact*. A, a "mortgage originator" or
“mortgage broker", receives loan applications
and refers borrowers to lenders for a fee.
Comments. If A performs services such as
obtaining credit and appraisal information or
preparing an application for mortgage insur
ance or guarantee which are of value to the
Lender paying the fee, without reference to
the referral value of such services, and the
fees paid bear a reasonable relationship to the
value of such services, the payment of such
a fee would not be in violation of Section 8
of RESPA.
8. Facts. A, a title insurance company, pro
vides among its other services an “Insured
closing Service Letter". Under this letter,
for which no separate or additional charge
is made, the company agrees to provide In
demnity against loes due to certain fraudu
lent or negligent sets of the company's
policy- issuing agents or approved attorneys
in complying with closing instructions and In
conducting the closing of any transaction in
connection with which a policy of title in
surance is to be issued by A.
Comments. Where A has provided such an
Insured Closing Service Letter to a specified
person and. the protection afforded thereby
is effective without regard to whether the
particular case was referred to A by the per
son receiving protection under such letter,
the provision of the letter would not be pur
suant to an/agreement or understanding that
settlement services be referred, and therefore
not in violation of Section 8.
9. Facts. A, a service corporation, is a title
Insurance agent for B, a title Insurance com
pany. The search and examination of title,
In connection with applications for title in
surance policies prepared by A, are performed
by employees of B. Employees of B also make
any determinations as to the insurability of
title. A Issues title insurance policies on be
half of B and receives a commission equal
to the amount paid other title insurance
agents in the community. Including other
agents of B, who perform the title search and
examination as well as prepare and Issue the
title insurance policy.
Comments. While A may be performing
some real service for B, the fact th a t the
amount of the commission received by A Is
equal to the commissions customarily paid
to full-service title Insurance agents who per
form substantially greater and more valuable
services indicates th at the commission paid
by B to A is really intended to compensate A
for the referral of business. The amount by
which the commission exceeds the reason
able value of the services rendered by A to B
would be a referral fee prohibited by Section
8 of RESPA. Section 8 does not prohibit
variations In the amount of commissions that
may be paid, nor does it require th a t the
quantum of services rendered be Identical in
all cases, so long as services significant to the
Issuance of a title Insurance policy are
rendered and the amount of the commission
bears a reasonable relationship to the services
rendered.
10.
Facts. A, a real estate broker, refers
title business to B, a company th at is a
licensed title agent for C, a title Insurance
company. A Is part owner of B. B performs
the title search and examination, makes de
terminations of insurability and Issues a
policy of title Insurance on behalf of C,
for which C pays B & commission. B pays
annual dividends to its owners, including A,
based on the relative amount of business
each of Its owners refers to B.
Comments. While the payments of a com
mission by C to B Is not a violation of Section
8 of RESPA, if the amount of the commis
sion constitutes reasonable compensation
for the services performed by B for C, the
payment of a dividend or the giving of any
other thing of value by B to A th at Is based
on the amount of business referred to B by
A constitutes a violation of Section 8. Simi
larly, If the amount of stock held by A In B
(or, If B were a partnership, the distribution
of partnership profits by B to A) varied In
proportion to the amount of business re
ferred or expected to be referred, or if B
retained any funds for subsequent distribu
tion to A where such funds were generally
in proportion to the amount of business A
referred to B, such arrangements would con
stitute violations of section 8.
C onstance B. Newman ,
Assistant Secretary for Con
sumer Affairs and Regulatory
Functions, U.S. Department
of Housing and Urban Devel
opment.
[FR Doc.76-15864 Filed 6-1-76:9:59 am]
FEDERAL REGISTER, VOL 41, NO. 10?— FRIDAY, JUNE 4, 1976
Title 24— -Housing and Urban Development
CHAPTER XX— OFFICE OF ASSISTANT
SECRETARY FOR CONSUMER AFFAIRS
AND REGULATORY FUNCTIONS, DE
PARTMENT OF HOUSING AND URBAN
DEVELOPMENT
[Docket No. R-78-394]
PART 3500— REAL ESTATE SETTLEMENT
PROCEDURES ACT
Corrections
In P art m of the F ederal R egister
for Friday, June 4, 1976, appearing on
pages 22702-22712, the following correc
tions should be made:
§ 3S00.6
[Amended]
1. Page 22705, 5 3500.6(a) is corrected
by inserting in the third sentence the
word “Information" after the word “Spe
cial”, and by inserting the word “but”
after the word “received”: by inserting
the words “them in” after the word
“placing”, and deleting the word “or”
after the word “mail” in the fourth sen
tence; and by deleting in the last sen
tence the period after the word “Board”
and adding the words “unless provided
elsewhere.”
§ 3500.7
[Amended]
2. Page 22705, § 3500.7(d) (1) delete
the quotation mark after the word
“items” and add a quotation mark after
the phrase “amounts at settlement".
§ 3500.9
[Amended]
3. Page 22706, section 3500.9(a) (3) is
corrected by inserting in the first sen
tence a period after the words “lines
100-1400” and inserting the phrase
“However, blank lines or. items listed
in lines 100-1400” before the word
•“which”.4. Page 22706, Section 3500.9(a) (5) Is
corrected by inserting the word “of"
after the word “foim” in the last
sentence.
5. On page 22709, the paragraph deal
ing with lines 1111-1113 is corrected by
deleting the last sentence and adding
the following, “Show the attorney's fees
for legal representation on lines 1111—
1113.”
6. On page 22712, add the following
phrase: '“Effective date: June 30, 1975”
before jjie
w» signature block.
Effective June 8, 1976.
Constance B. Newman,
Assistant Secretary tor Con
sumer Affairs and Regulatory
Functions.
[FB Doc.76-17093 Filed 6-10-76:8:48 am]
NOTICES
SETTLEMENT COSTS
A EUD Guide
U .S . Departm ent o f Housing and Urban Developm ent
June 1976
PIDIXAL REGISTER, VOL 41, NO. 113— THURSDAY, JUNI 10, 1974
23621
r
NOTICES
22622
TABLE OF CONTENTS
INTRODUCTION
PART I
WHAT HAPPENS AND WHEN
SHOPPING FOR SERVICES
Role of the Broker
Negotiating a Sales Contract
Selecting an Attorney
Selecting a Lender
Selecting a Settlement Agent
Securing Title Services
HOMEBUYER* S RIGHTS
Information Booklet
Good Faith Estimates
Lender Designation of Settlement
Service Providers
Disclosure of Settlement Costs One Day Before Closing
and Delivery
Escrow Closings
Truth-in— Lending
Protection Against Unfair Practices
The Right to File Complaints
HOMEBUYER*S OBLIGATIONS
Repayment of Loan
Maintenance of Home
PART II
UNIFORM SETTLEMENT STATEMENT
Settlement Costs worksheet
SPECIFIC SETTLEMENT SERVICES
COMPARING LENDER COSTS
CALCULATING THE BORROWER* S TRANSACTIONS
RESERVE ACCOUNTS
ADJUSTMENTS BETWEEN BUYER AND SELLER
APPENDIX
Appendix A - Bibliography
FEDEJLU RXGiSTEX, VOL
41,
NO,
113— THURSDAY.
JUNE
10, 1974
NOTICES
23623
1
SETTLE-lENr COSTS
INTBODUCnai
For many people, buying a heme is the single most significant financial step
a lifetim e. The Real Estate Settlement Procedures Act (RESPA), a Federal
atute, helps to protect you at this step.
Settlement is the formal process by which ownership o f real property passes
am se lle r to buyer. I t is the end o f the home buying process, the time when
tie to the property is transferred from the. se lle r to the buyer.
RESPA covers most residential mortgage loans used to finance the purchase o f
* to four family properties, such as a house, a condominium or cooperative apartlt u nit, a lo t with a mobile heme, or a lo t on which you w ill build a house or
ice a mobile home using the proceeds o f the loan.
RESPA was not d e sire d to set the prices o f settlement services. Instead, i t
jvides you with information to take the mystery out o f the settlement- process, so
it you can shop for settlement services and make informed decisions.
TViis information booklet was prepared as provided in RESPA by the O ffice o f
isumer A ffairs and Regulatory Functions o f the U.S. Department o f Housing and
>an Development.
Part Che o f th is booklet describes the settlement process and nature o f
irges and suggests questions you might ask o f lenders, attorneys and others to
r ify what services they w ill provide you for the charges quoted. I t also
.tains information on your rights and remedies available under RESPA,, and alerts
t
ULlLdiX
JLXlcgdJ* pXcwLXUM •
Part Ttao o f th is booklet is an item-by-item, explanation o f settlement services
. costs, with sample forms and worksheets that w ill help you in making cost canisons. Remember that terminology varies by lo c a lity so that terminology used
e may not exactly match that used in your area. For example, settlement is
etimes called closing and settlement charges are frequently referred to as clo scosts•
r HAPPENS AND WHEN
Suppose you have ju st found a home you would lik e to buy. In a typical
oation, when you reach an agreement with the se lle r on the price, you then sign a
i s contract. The terms o f the sales contract can be negotiated to your ben efit,
the booklet explains belcw.
FEDCRAl REGISTER, VOL 41. NO. 113—-THURSOAY, JUNE 10. 1976
23624
NOTICES
2
Next you w ill probably seek a mortgage to finance the purchase. This
booklet suggests questions you should raise as you shop for a lender.
Uhenyou f i l e your application for a loan, the lender is required by
p£2PA to provide a good faith estimate o f the costs o f settlement services
and a copy o f th is booklet. The lender has three business days, a fter written
loan application, to mail these materials to you.
Between loan application time and settlement, you usually have a chance to
shop for settlement services, to ensure that you w ill obtain good value for your
F inally, one business day before settlement, i f you so request, the person
conducting the settlement must allow you an opportunity to see a Uniform. Settle
ment Statement that shows whatever figures are available at that time for s e ttle
ment charges you w ill be required to pay. At settlement, the completed Uniform
Settlement Statement w ill be given to you.
Note: In sense parts o f the country where there is no actual settlement
meeting, or in cases where neither you nor your authorized agent attends the
closing neetin g, the person conducting settlement has the obligation to deliver
the Uhiform Settlement Stat ement to you by m ail.
There is no standard settlement process followed in a l l lo c a litie s ; there
fore, what you experience, involving many o f the same services, w ill probably
vary from the description in th is booklet.
SHOPPING FOR SERVICES
When settlement arrives, you are ccranitted to the purchase o f the property
and may have made a p artial payment, sometimes called earnest money, to the #
se lle r or h is agent. Services may have been performed for which you are obligated
to pay. Unless a s e lle r fa ils to perform a le g a lly binding premise or has acted in
a frSUvipnt fashion, you are normally obligated to complete your part o f the
contract and pay settlement costs. Thus the time to decide the terms o f sale,
questions,and establish fa ir fees is not at time o f settlement, but ea rlier,
v h tm you nogni-late with the s e lle r and providers o f settlement services. By the
time o f settlement, any changes*in settlement costs and purchase terms may be
d iffic u lt to negotiate.
. . .
,
,
.
You can also negotiate with the se lle r o f the house about who pays various
fi.tti.ren f- fees and other charges. There are generally no fixed rules about which
party pays whirh fees, although in many cases this is largely controlled by local
CUStaDta n 2 the many factors that determine the amount you w ill pay fo r s e ttla e n t
costs se e th e location o f your new base, the type o f sales contract you negotiate,
fh. flr-rgng« Tvinta marfe with the real estate broker, the lender you select, ana your
decisions -in selecting the various firms that provide required settlement services.
HBI1AL UOISTU, VOi. 41, NO. 113— THUMOAf, JUN* 10, 197*
NOTICES
23625
3
: the chosen house is located In a "sp ecia l flood hazard area,” identified as
ich by HUD cn a flood insurance map, the lender may require you to purchase
Lood insurance pursuant to Federal law (See page 2 $ . Information on flood
isurance a v a ila b ility , lim its o f coverage and copies o f maps can be obtained
irough the National Flood Insurers Association servicing m mpany fo r your
a te or by ca l li ng HUD t o ll free numbers 800-424-8872 or 73.
>le o f the Broker
Although real estate brokers provide helpful advice on many aspects o f
me buying, and may in seme areas supervise the settlement, they normally serve
e interests o f the s e lle r , not the buyer. The broker’ s b ^ s ic T b je S v e i s l T
toin a signed contract o f sale which properly expresses the agreement o f the
r tie s , and to complete the sa le. However, as state licensing laws require that
e broker be fa ir in h is dealings with a l l parties to the transaction, you
ould fe e l free to point th is out to the broker i f you fe e l you are being
eated unfairly.
'
A broker may recommend that you deal with a particular lender, t i t le
ipanyv attorney, or other provider o f settlement services. Ask brokers why
ay recanuend a particular campaiiy or firm in preference to others. Advise them
at while you welcome their suggestions (and, indeed, they probably have good
ita c ts), you reserve the righ t to pick your own providers o f services.
gotiating a Sales Contract
I f you have obtained th is booklet before you have signed a sales contract
di the se lle r o f the property, here are sane inportant points to consider
yarding that contract.
Ihe sales agreement you and the se lle r sign can expressly state which
e l ement costs you w ill pay and which w ill be paid .by the se lle r although
3e may be negotiable up to time o f settlement. Buyers can and do negotiate with
•lers as to which party is to pay fo r sped fie settlement costs. The success
such negotiations depends upon factors such as how eager the se lle r is to s e ll
l you are to buy, the quality o f the house i t s e l f , how long the house has been
the market, whether other potential buyers are interested, and bow w illin g you
i to negotiate fo r lower costs. I f the contract is silen t on these costs, they
! s t i l l open to negotiation.
There is no standard sales contract which you are required to sign. You are
itle d to make any modifications or additions in any standard form contract to
ch the se lle r w ill agree. You should consider including the following clauses:
• The se lle r provides t i t l e , free and clear o f a l l lien s and encumbrances
apt those which you sp ecifica lly agree to in frfo**
FSOIRAL REGISTER, VOL 41, NO. 113— THURSDAY, JUNE 10, 1976
23626
NOTICES
4
contract or approve when the results of the title search are
reported to you.
You may negotiate as to who will pay for the
title search service to determine whether the title is "clear."
. A refund of your deposit (earnest money) be made by the
seller or escrow agent, and cancellation of the sale if yo u are unable
to secure from a lending institution a first mortgage or deed-of-trust
loan with am amount, interest rate, and length of term, as set forth
in the contract, within a stated time period.
• A certificate be provided at time of settlement, stating that
the house
is free from termites o r ‘termite damage.
. A certificate that the plumbing, heating, electrical systems and
appliances are in working order, and that the house is structurally
sound.
Negotiate who pays for any necessary inspections.
There is no
uniform custom in most areas.
Many buyers prefer to pay for these
inspections because they want to know that the inspector is conducting
the service for them, not for the seller.
(You can also purchase a
warranty to back up the inspection, if y o u wish.)
• A n agreement be reached on how taxes, water and sewer charges,
premiums on existing transferable insurance policies, utility bills,
interest on mortgages, and rent (if there are tenants) are to be
divided between buyer and seller as of the date of the settlement.
Before you sign the sales contract, make sure that it correctly
expresses your agreement with the seller on such important details as
-the sales price of the home, method of payment, the time set for
your taking possession, what fixtures, appliances, and personal
property are to be sold with the home, and the other items described
above.
The above list is not complete, but does illustrate the importance
of,the sales agreement and its terms.
Before you sign a sales contract
you may want to ask an attorney to review the proposed agreement
and determine if it protects .your interests for once signed, the
contract is binding on you and the seller.
If-you do not know of an
attorney you may wish to consult the local bar association referral
service or neighborhood legal service office.
Selecting an Attorney
If you seek the aid of an attorney, first ask what services will
be performed for what fee.
If the fee seems too high, shop for another
lawyer.
Does the attorney have substantial experience in real estate?
nORA L KGIS7H, VOL 41, NO. 113— TOWBOAT. JUN1 10, 1970
NOTICES
23627
5
Che U. S . Supreme C ourt has s a id th a t i t i s i l l e g a l fo r bar a s s o c ia
tio n s to f i x minimum fe e sch ed u le s f o r a tto r n e y s , so do n ot be b a sh fu l
ibout d is c u s s in g and shopping fo r le g a l fe e s you can a f f o r d .
Your
itto r n e y w i l l u n d erstan d .
Q u estio n s you may w ish to ask th e a tto rn e y in clu d e s
What i s
die charge fo r rea d in g documents and g iv in g a d v ice con cern in g them?
*or b ein g p r e se n t a t se ttle m e n t? W ill th e a tto rn e y re p re se n t any
>ther p a rty in th e tr a n s a c tio n in a d d itio n to you?
In some areas
itto rn e y s a c t as c lo s in g ag en ts h an d lin g th e m echanical a sp e c ts o f
h e s e ttle m e n t.
A law yer who does t h i s may n o t f u l l y re p re se n t
ou r in t e r e s t s s in c e as c lo s in g a g e n t, he would be re p re se n tin g the
e l l e r and o th e r in t e r e s t s as w e ll.
e le c t in g a Lender
Your c h o ic e o f le n d e r w i l l in flu e n c e n o t o n ly your se ttle m e n t
o s t s , b u t a ls o th e m onthly c o s t o f you r m ortgage lo a n .
Lending in s t it u t i o n s re q u ire c e r ta in s e ttle m e n t s e r v ic e s ,
uch as a new su rvey o r t i t l e in su ra n c e , o r th ey may charge you fo r
th e r s e t t le m e n t -r e la te d s e r v ic e s , such a s th e a p p r a is a l o r c r e d it
e p o r t.
You may f in d , in shopping fo r a le n d e r , th a t o th e r i n s t i u tio n s may n o t have such req u irem en ts.
P art Two o f t h is b o o k le t
ro v id e s a d e s c r ip tio n s o f th e v a rio u s k in d s o f s e r v ic e s th a t may be
sq u ired and fe e s th a t may be charged to y o u .
You w i l l a ls o fin d a
Drksheet in P art Two, which you can u se to compare requirem ents
ad c o s t e stim a te s from d if fe r e n t le n d e r s .
Many le n d in g in s t it u t i o n s d e a l r e g u la r ly w ith c e r ta in t i t l e
xn p an ies, a tto r n e y s , a p p r a is e r s , su r v e y o r s, and o th e rs in whom they
ive c o n fid e n c e .
They may want to arran ge fo r s e ttle m e n t s e r v ic e s
p be p rov id ed through th e se p a r t i e s .
T h is b o o k le t d is c u s s e s your
Lghts in such a s it u a t io n under th e s e c tio n below on Hom ebuyer's
Lghts •
I f you choose a le n d in g i n s t it u t i o n which a llo w s you a
c h o ic e o f se ttle m e n t s e r v ic e p r o v id e r s , you sh ou ld
shop and compare among the p ro v id e rs in your a r e a , to
fin d th e b e s t s e r v ic e fo r th e b e s t p r ic e .
Where th e
le n d e r d e sig n a te s th e use o f p a r t ic u la r fir m s , check
w ith o th e r firm s to se e i f th e le n d e r 's s ta te d charges
a re c o m p e titiv e .
Q u estio n s you may want to ask th e le n d e r sh ou ld in c lu d e t h e s e :
•Are you re q u ire d to ca rry l i f e o r d i s a b i l i t y in su ra n ce?
s t you o b ta in i t from a p a r t ic u la r company?
(You may p r e fe r no
surance o r may w ish t o o b ta in i t a t a b e t t e r premium r a te e lse w h e r e .)
FEDIRAl IK IS T n . VOL 41, NO. 113— THUtSOAT, JUNI 10. 1970
23628
NOTICES
6
• Is there a late payment charge? How much? How late may
your payment be before the charge is imposed? You should be aware
that late payments may harm your credit rating.
. If you wish to pay off the loan in advance of maturity (for
example, if you move and sell the h o u s e ) , must you pay a prepayment
penalty?
How much?
If so, for how long a period will it apply?
. Will the lender release you from personal liability if your
loan is assumed by someone else when you sell your house?
. If you sell the house and the buyer assumes your loan, will
the lender have the right to charge an assumption fee, raise the
rate of interest, or require payment in full of the mortgage?
. If you have a financial emergency, will the terms of the
loan include a future advances clause, permitting you to borrow
additional money on the mortgage after you have paid off part of
the original loan?
. Will you be required to pay monies into a special reserve
(escrow o r impound) account to cover taxes or insurance?
If so, how
large a deposit will be required at the closing of the sale? The
amount of reserve deposits required is limited under RHSPA.
Some
recent state laws have required that these accounts bear interest
for the benefit of the borrower (buyer). If reserve requirements
can be waived, you w i l l .be responsible for paying the particular
charges for taxes or insurance directly to the tax collector or
insurance company.
Further information is in "Reserve Accounts
in Part Two of this booklet.
. In looking for the best mortgage to fit your particular
financial needs, you may wish to check the terns and requirements
of a private conventional loan versus a loan insured through the
Federal Housing Administration or Farmers Home Administration or
guaranteed by the Veterans Administration.
The FHA, VA, and Farmers
Home Administration loans involve Federal ceilings on permissible
charges for some settlement services, which may be of interest to
you.
Ask lenders about these programs.
Another source of infor
mation about the federally insured or guaranteed programs is from
public documents some of which are listed in the bibliography of
this booklet.
. If-you are dealing with the lender who holds the existing
m o r t g a g e , you might be able to take over the prior loan, in a trans
action called "assumption".
Assumption usually saves money in
settlement costs if the interest rate on the prior loan is lower
than that being asked in the market.
In times of inflation in the
housing market, a higher downpayment might be required than if you
had obtained-a new loan.
You may want to ask the seller whether he
would be willing to "take back" a second mortgage to finance part of
the difference between the assumed loan and the sales price.
R&CtAl 1SG1ST11, VOL 41, NO. 113— THURSDAY, JUKI 10f 1974
NOTICES
23629
7
Selecting a Settlement Agent
Settlement practices vary from locality to locality, and even
rithin the same county or city.
In various areas settlements are
:onducted by lending institutions, title insurance companies,
escrow companies, real estate brokers, and attorneys for the buyer
>r seller.
By investigating and comparing practices, and rates,
'ou may find that the first suggested settlement agent may not be
die least expensive.
You might save money by taking the initiative
.n arranging for settlement and selecting the firm and location
rhich meets your needs.
►ecuring Title Services
A title search may take the form of an abstract, a compilation
*f pertinent legal documents which provides a condensed history of
h e property ownership and related matters.
In many areas title
earches are performed by extracting information from the public
ecord without assembling abstracts*
In either situation, an expert
xamination is necessary to determine the status of title and this
s normally made by attorneys or title company employees.
In areas
here both title insurance companies and attorneys perform these
nd other settlement services, compare fees for services (such as
itle certification, document preparation, notary fee, closing fee,
tc.), provided by each to determine the better source for these
ervices.
. .
*
In many jurisdictions a few days or weeks prior to settlement
he title insurance company will issue a binder (sometimes called a
ommitment to Insure) or preliminary report, a summary of findings
ased on the search or abstract.
It is usually sent to the lender
or use until the title insurance policy is issued after the settlem
ent* The binder lists all the defects in and liens against the
itle identified by the search.
You should arrange to have a copy
ent to you (or to an attorney who represents you) so that yo u can
aise an objection if there are matters affecting the title which
ou did not agree to accept when you signed the contract of sale.
$
reoeSAl RIGJSTE*, VOL 41, NO. 113— THURSDAY, JUNE 10, 1976
2363d
NOTICES
8
Title insurance is often required to protect the lender against
loss if a flaw in title is not found by the title search made when
the house is purchased. You may also get an owner's title policy to
protect yourself.
In some states, attorneys provide bar-related title
insurance as part of their services in examining title and providing
a title opinion. In these states the attorney's fee may include the
title insurance premium, although the total title-related charges in
the transaction should be taken into account in determining whether
you will realize any savings.
Bear in mind that a title insurance policy issued only to the
lender does not protect you. Similarly, the policy issued to a
prior owner, such as the person from whom you are buying the house,
does not protect you. To protect yourself from loss because of a
mistake made by the title searcher, or because of a legal defect of
a type which does not appear on the public records, you will need an
owner's policy. Such a mistake rarely occurs but, when it does, it
can be financially devastating to the uninsured.
If you buy an owner's
policy it is usually much less expensive if purchased simultaneously
with a lender's policy.
To reduce title insurance costs, be sure to compare rates
among various title insurance companies, and ask what services and
limitations on coverage are provided by each policy so that you
can decide whether a higher rate is consistent with your needs.
Depending upon practice in your jurisdiction, there may be no
need for a full historical title search each time title to a home
is transferred.
If you are buying a home which has changed hands within
the last several years, inquire at the title company that issued the
previous title insurance policy about a "reissue rate," which would
be a lower charge than for a new policy.
If the title insurance policy
of the previous owner is available, take it to the title insurer or
lawyer whom you have selected to do your search.
To mark the boundaries of the property as set out in the title,
lenders may require a survey. A homebuyer may be able to avoid the
cost of a repetitive complete.survey of the property if he can locate
the surveyor who previously purveyed the project which he can update.
However, the requirements of "investors who buy loans originated by
your lender may limit the lender's discretion to negotiate this point.
Check with the lender or title company on this.
HOMEBUYER'S RIGHTS
Information Booklet
When you submit or the lender prepares your written application for
loan, the lender is legally required, under RESPA to give you a copy
of this booklet.
a
n S i U l RfGISTER, VOL 41, HO. 113— THURSDAY, JUNf 10, 1974
NOTICES
23631
9
l the lender does not give it to you in person on the day of your loan
>plication, he must put it in the mail to you no later than three
isiness days after your application is filed.
>od Faith Estimates
When you file your application for a loan, the lender must also,
ider the terms of RESPA, provide you with good faith estimates of
ittlement services charges you will likely incur.
If he does not give
; to you, he has three business days in which to put it in the mail.
See Part Two of this booklet for a full item-by-item discussion
: settlement services. On the form entitled "Settlement Statement,"
>u will find Section L, which lists possible settlement services and
arges you will encounter.
The lender is required to give you his good faith estimate, based
on his experience in the locality in which the property is located,
r each settlement charge in Section L that he anticipates you willy, except for paid- in advance hazard insurance premium (line 903) and
serves deposited with the lender (all Section 1000 items). The
timate may be stated as either a dollar amount or range for each
arge. Where the lender designates the use of a particular firm, the
nder must make its good faith estimate based upon the lender's kncwdge of the amounts charged by the firm. The form used for this good
ith estimate must be concise and clear, and the estimates must bear
reasonable relationship to the costs you will likely incur. If the
nder provides you good faith estimates in the form of ranges, ask the
nder what the total settlement costs will most likely be. While the
nder is not obligated to provide this information under RESPA, it is
portant for you to know as you evaluate the different mortgage packss being offered you.
Lenders were not required to give good faith estimates for
serves deposited with them or for the prepaid hazard insurance premium
cause these charges require information not normally known to the
ider at time of loan application. It is important for you to make
sse calculations because they.,oan represent a sizeable cash payment
i may have to make at settlement. Calculation of the reserve items
presented later in this booklet under "Reserve Accounts” Ask the
ider what his policies are in terms of reserve accounts, for what
ims the lender requires reserves and for what period of time. You
f want to ask the lender to run through a hypothetical calculation for
l based upon the date you will most likely close, on the house.
Other
sumptions may be necessary, for example, the assessed value of the
>perty for determining property taxes. The lender can probably be more
ROKXAl RIGISTEX, VOL 41, NO. 113— THURSDAY, JUNE 10, 1976
| 23632
i
Nonas
10
specific on hazard insurance premiums, particularly for those coverages
which a lender requires.
Once you have obtained these estimates from the lender be aware
that they are only estimates.
The final costs may not be the same.
Estimates are subject to changing market conditions, and fees may change.
Changes in the date of settlement may result in changes in escrow and
proration requirements.
In certain cases, it may not be possible for
the lender to anticipate exactly the pricing policies of settlements firms.
Moreover, your own careful choice of settlement firms might result in
lower costs, just as hasty decisions might result in higher costs.
Remember that the lender's estimate is not a guarantee.
Lender Designation of Settlement Service Providers
Some lending institutions follow the practice of designating
specific settlement service providers to be used for legal services,
title examination services, title insurance, or the conduct of
settlement.
Where this occurs the lender, under RESPA, is required to provide
you as part of the good faith estimates a statement in which the lender
sets forth:
(1) The name, address and telephone number of each provider he
has designated.
This must include a statement of the specific services
each designated firm is to provide for you, as well as an estimate
of the amount the lender anticipates you will have to pay for the
service, based on the lender's experience as to what the designated
provider usually charges.
If the services or charges are not clear to
you, ask further questions.
(2) Whether each designated firm has a business relationship
with the lender.
While designated firms often provide the services needed, a
conflict of interest may exist.
Take for example the situation where
the provider must choose between your interests and those of the lender.
Where legal services are involved, it is wise to employ your own
attorney to ensure that your interests are properly protected.
It is wise for you to contact other firms to determine whether their
costs are competitive and their services are comparable.
Disclosure of Settlement Costs One Day Before Closing and Delivery
One business day before settlement, you have the right to inspect
the form, called the Uniform Settlement Statement, on which are
itemized the services provided to you and fees charged to you.
RfifRAL IfQUTSX, VOL 41, NO. 113— THURSDAY, JUNI 10, 1976
NOTICES
23833
11
Phis form (developed by the U.S. Department of Housing and Urban
)evelopment) is filled out by the person who will conduct the
settlement meeting. Be sure you have the name, address, and telephone
lumber of the settlement agent- if you wish to inspect this form or
,f .you have any questions.
The settlement agent may not have all costs available the day
>efore closing, but is obligated to show you, upon request, what is
ivailable.
The Uniform Settlement Statement must be delivered or mailed
.0 you. (while another statement goes to the seller) at or before
ettlement.
If, however, you waive your right to delivery of the
ompleted statement at settlement, it will then be mailed at the
arliest practicable date.
In parts of the country where the settlement agent does not
equire a meeting, or in cases where you or your agent do not
ttend the settlement, the statement will be mailed as soon as
racticable after settlement and no advance inspection is required.
The Uniform Settlement Statement is not used in situations where:
11 there are no settlement fees charged to the buyer (because the
slier has assumed all settlement-related expenses), o r (2) the total
nount the borrower is required to pay for all charges imposed at
sttlement is determined by a fixed amount and the borrower is
iformed of this fixed amount at the time of loan application.
1 the latter case, the lender is required to provide the borrower,
Lthin three business days of application, an itemized list of services
sndered.
scrow Closing
'
Settlement practices differ from state to state.
In some parts
: the country, settlement may be conducted by an escrow agent, which
ly be a lender, real estate agent, title company representative,
itorney, or an escrow company. After entering into a contract of sale,
te parties sign an escrow agreement which requires them to deposit
>ecified documents and funds \$ith the agent.
Unlike other types of
osing, the parties do not meet around a table to sign and exchange
•cuments. The agent may request a title report and policy; draft
deed or other documents? obtain rent statements; pay off existing
:!■
ans; adjust taxes, rents, and insurance between the buyer and
'
H e r ? compute interest on loans? and acquire hazard insurance. All
is may be authorized in the escrow agreement.
If all the papers and
'
nies are deposited with the agent within the agreed time, the estrow
"closed” .
The escrow agent then records the appropriate documents and gives
ch party the documents and money each is entitled to receive, including
e completed Uniform Settlement Statement.
If one party has failed to
lfill his agreement, the escrow is not closed and legal complications
/ follow.
FIOIRAL MGISTIX, VOL 41, NO. 113— THURSDAY, JUNE 10, 1976
NOTICES
23634
12
Truth-in-Lending
The lender is required to provide you a TrutH-in-Lending
statement by the time o f ’loan consummation which disclosed the annual
percentage rate or effective interest rate which you will pay on
your mortgage loan.
This rate may be higher than the contract interest
rate because the latter includes only interest, while the annual
percentage rate includes discount points, fees, and financing charges
and certain other charges besides on the loan.
The Truth-in-Lending
statement will also disclose any additional charges for prepayment
should you pay off the remaining balance of the mortgage before it is
due.
Lenders are not required to provide you a Truth-in-Lending
disclosure at the time of loan application, when the good faith
estimate of settlement costs and this informational booklet are given
to you.
However, since the annual percentage rate the lender will
be charging you is an important item of information which you can use
as you shop for services, you may want to request its disclosure
at time of loan application.
Protection Against Unfair Practices
A principal finding of Congress in the Real Estate Settlement
Procedures Act of 1974 is that consumers need protection from
"...unnecessarily high settlement charges caused by certain abusive
practices that have developed in some areas of the country."
The
potential problems discussed below may not be applicable to most
loan settlements, and the discussion is not intended to deter you
from buying a home.
Most professionals in the settlement business
will give you good service.
Nevertheless, you may save yourself
money and worry by keeping the following considerations in minds
Kickbacks.
Kickbacks and referrals of business for gain are ^
c>Iten tied together.
The. law prohibits anyone from giving
or taking a fee, kickback, or anything of value under an
agreement that business&vill be referred to a specific
person or organization.
It is also illegal to charge or
accept a fee or part of a fee where no service has. actually
been performed.
This requirment does not prevent agents for
lenders and title companies, attorneys, or others actually
performing a service in connection with the mortgage loan
or settlement transaction, from receiving compensation for
their work.
It also does not prohibit payments pursuant
to cooperative brokerage, such as a multiple listing service,
and referral arrangements or agreements between real estate
agents and brokers.
The prohibition is aimed primarily at eliminating the kind of
arrangement in which one party agrees to return part of his
FfDCXAL XfGISTO, VOL 41, NO. 113— THU*50AY, JUNS 10, 1976
NOTICES
23635
13
fee in order to obtain business from the referring party. The
danger is that some settlement fees can be inflated to cover
payments ta this additional party, resulting in a higher total
cost to you. There are criminal penalties of both fine and
imprisonment for any violation of these provisions of law. There
are also provisions for you to recover three times the amount of
the kickback, rebate, or referral fee involved, through a private
lawsuit.
In any successful action to enforce your right, the
court may award you court costs together with a fee for your
attorney.
Title Companies. Under the law, the seller may not require, as
a condition of sale, that title insurance be purchased by the
buyer from any particular title company. A violation of this
will make the seller liable to you in an amount equal to three
times all charges made for the title insurance.
Fair Credit Reporting. There are credit reporting agencies
around the nation which are in the business of compiling credit
reports on citizens, covering data such as how you pay your
bills, if you have been sued, arrested, filed for bankruptcy, etc..
In addition, this file may include your neighbors' and friends'
views of your character, general reputation, or manner of living.
This latter information is referred to as an "investigative
'consumer report."
The Fair Credit Reporting Act does not give you the right to
inspect or physically handle your actual report at the credit
reporting agency, nor to receive an exact copy of the report.
But you are entitled to a summary of the report, showing the
nature, substance, and sources of the information it contains.
If the terms of your financing have been adversely affected by
a credit report, you have the right to inspect the summary of
that report free of charge (there may otherwise be a small fee).
The accuracy of the report can also be challenged, and corrections
required to be made. For more detailed.information on your
credit report rights, contact the Federal Trade Commission
(FTC) in Washington, D. <$♦ or the nearest FTC regional
office. The FTC Buyer1s Guide N o . 7 : Fair Credit Reporting
Act is a good summary of this Act.
e Right to File Complaints
As with any consumer problems, the place to start if you have
complaint is back at the source of the problem (the lender, settlent agent, broker, etc.).
If that initial effort brings no
tisfaction and you think you have suffered damages through violations
the Real Estate Settlement Procedures Act of 1974, as amended, you
y be entitled to bring a civil action in the U.S. District Court for
e District in which the property involved is located, or in any
FWIXAl MCISTO, VOL 41, NO. 113— THURSDAY, JUNE 10, 1976
NOTICES
23636
14
other court of competent jurisdiction. This is a matter best
determined by your lawyer. Any suit you file under RESPA must be
brought within one year from the date of the occurrence of the alleged
violation. You may have legal remedies under other State or Federal
laws in addition to RESPA.
You should note that RESPA provides for specific legal sanctions
only under the provisions which prohibit kickbacks and unearned
fees, and which prohibit the seller from requiring the buyer to use
a particular title insurer. If you feel you should recover damages
for violations of any provision of RESPA, you should consult
your lawyer.
Most settlement service providers, particularly lenders, are
supervised by some governmental agency at the local, State and/or
Federal level. Others are subject to the control of self-policing
associations.
If you feel a provider of settlement services has
violated RESPA, you can address your complaint to the agency or
association which has supervisory responsibility over the provider.
The supervisory agency for the lending institution is provided on
the back cover of this-booklet. If thelender has given you this
information elsewhere, he is not required to provide it here. For the names
of agencies supervising other providers, you will have to check with
local and State consumer agencies. You are also encouraged to forward
a copy of complaints regarding RESPA violations to the HUD Office of
Consumer Affairs and Regulatory Functions, which has the primary
responsibility for administering the RESPA;program. Your complaints
can lay the foundation for future legislative or administrative
actions.
Send copies of complaints, and inquiries, to:
Assistant Secretary for Consumer Affairs and
Regulatory Functions
Attention: RESPA Office
U.S, Department of Housing and Urban Development
451 7th Street, s.W.
Room 4100
Washington, D.C. 20410
!• -
nOCXAL HC1S7M, VCL 41. NO. 113— THURSDAY, JUNI 10, 1976
NOTICES
23637
15
HE H O MEBUYER1S OBLIGATIONS
(REPAYMENT O P LOAN AN D MAINTENANCE
OP HOME)
At settlement you will sign papers legally obligating you to
ay the mortgage loan financing the purchase of y o u r home.
You
ust pay according to the terms of the loan - interest rate, amount
nd due date of each monthly payment, repayment period - specified
a the documents signed by you.
You will probably sign at settleant a note or bond which is your promise to repay the loan for the
ipaid balance of the purchase price.
You will also sign a mortgage
r deed of trust which pledges your home as security for repayment
£ the loan.
Failure to make monthly mortgage payments on time may lead to
late payment charge, if provided for in the documents.
If y ou
sfault on the loan by missing payments altogether and do not
ike them up with in a period of time usually set by State law, the
>cuments also specify certain actions which the lender m a y take to
icover the amount owed.
Ultimately, after required notice to you,
default could lead to foreclosure and sale of the bp™* w h i c h
c u r e s your loan.
You should also be careful to maintain y o u r home in a proper
ate of repair, both for yo u r own satisfaction and comfort as the
cupant and because the home is security for y o u r loan.
The mortgage
deed of trust may in fact specifically obligate yo u to keep the
operty in good repair and not allow deterioration^
Read the documents carefully at o r before settlement, and be
are of your obligations as a homeowner.
'«•.
v
PART TWO
This part of the booklet provides an item-by-item discussion
possible settlement services that may be required and for which
1 may -be charged. It also provides a sample of the Uniform
:tlement Statement form, and worksheets which you ma y find handy
: comparing costs from different service providers.
FHMRAi ISGSna, VOL. 4tr MO. TV*--THUtSPAT, JUNE
197$
NOTICES
23638
16
8T7D-1
Form Approved
OMB KU. 63-a-lSO t
Rev. S /7 •
B.
TY PE
O.
3. DEPARTMENT
OF HOUSING AND URBAN DEVELOPMENT
OF
LOAN
3. □ Fbua
1. □ ra a
4. O V A
3. Pile Number:
a.
□
c o n v
.
u n i n s
.
6. n C O N V . IN S.
7. Loan Number:
SETTLEM ENT STATEM ENT
3. Moxtcac* Inainn«» C u t Number:
c. motit
T h u f a r m a fu r n is h e d t o g iv e y o u a s t a t e m e n t o f a c tu a l s e t t l e m e n t c o s ts . A m o u n t s p a id t o a n d b y th e s e t t l e m e n t a g e n t a re
I te m s m a r k e d 'Vp.o.cJ” w e r e p a i d o u ts id e th e c lo s in g ; t h e y a r e s h o w n h e r e f o r in f o r m a tio n a l p u r p o s e s a n d a r e n o t
in e lu d e d ist th e to ta ls .
shown.
O.
NAME
E. NAMEo r
OF BORROWER]
3. SETTLEMENT
G. PROPERTY LOCATION]
r. NAME OF LENDER:
SELLER]
AGZNT j
L SETTLEMENT DATE:
PLACEO f SETTLEMENT:
J. SUMMARY o r BO RROW ER'S TRA N SA CTIO N
100. G R O S S A M O U N T D U E F R O M B O R R O W E R :
103. Petinnsl propu rr
K. SUMMARY OR SELLER'S TRANSACTION
to o . C R O S S A M O U N T D U E T O S E L L E R :
401. C ontact tales pnea
403. Personal property
103. iM k a w a i cnaxga* to b o n o e u (tine 140 0 )
403.
404.
406.
A dju stm en ts fe r item s paid b y teller u\ advance
A d ju stm en ts fa r item s pa id b y seller in askance
lO O . Q tr /to w o t u n
404. City/town t a n a
to
107. C o w y t u n
407. County taxes
to
403. Assessments
to
40*.
410.
4IX
413.
120.
C R O SS A M O U N T OUE
FROM BORROW ER
420.
GROSS AM O U N T DUE
TO SE LLE R
5 0 0 . R E D U C T I O N S IN A M O U N T D U E T O S E L L E R :
2 0 0 . A M O U N T S P A I D B Y O R IN B E H A L F O F B O R R O W E R :
7 0 1 . Oepuett or n r a n l m oony
s o t. Excess deposit (see instructions 1
103, fta d B O uaooiit o l new lo m ti)
503. Settlement chart** to teller (lin e 14001
303. t o a n o i o u H . / t n « ■aPled to
503. ExisOne loan! •I taken suWect to
22b.
300.
22b.
504. Payoff o f first mortxaxe loan
506. Payoff o f second t a o d f u t loan
........................ - .........
507.
50*.
SO*.
A dju stm en t i for item s u n paid b v seller
A d ju stm en ts fo r item s u n paid b r seller
311*. City/tow n t u n
510. City/town taxes
u»
3 11. County t u n
5 1 L County taxes
to
S IX A s* ■ H in ts
to
S IX
114
S IX
S IX
S17.
S IX
330.
S IX
22a
520.
T O T A L R A I D B Y IF O R
BORROW ER
3 0 0 . C A S H A T S E T T L E M E N T F R O M /T O B O R R O W E R
rHmt
)2l»
303. Lena amount* pan* b y/for t o m a n Hint 21101
303. CASH (
Q
FROM )
( |\T 0 )
BORROW ER
T O T A L R E D U C T IO N A M O U N T
D U E SELLER
6o0. CASH
1V S E T T L E M E N T T O /F R U W S E L L E R
SOX Gross a m o u n t doe to teller tlin e 4 2V )
SOX Less (eduction* (n amount due seller (on e 52 0 )
6 0 3 . Q iS H f Q T O K U
EROM
) SELLER
HEDflAL HEGISTE1. VOL. 41, NO. 113— THURSDAY, JUNE 10. 1976
(
)
NOTICES
L
•
S E T T L E M E N T
700. TOTAL SALES/liliOKr.R 'SCOMMISSION based on
Division of Commission (line 700) as follows:
701
7 $
70
. S
23639
p n re* $
C H A R G E S
(»
%«
P M. m
F U N D S
to
O X
A T
S E T T L E M E N T
to
X
RROy
P A ID
B O R R O W E R 'S
F R O M
S E L L E R 'S
F U N D S
A T
S n T U U E M
T
C o a m u n o s p a id a t S e ttle m e n t
800. ITEMS PA YABLE IN CONNECTION WITH LOAN
S O I.
L o an O rifiju d o a
SO X
L o a n D is c o u n t
%
%
to
r« a
SO S.
A s D n iu l F aa
SO S.
C re d it R e p o r t
SO S.
L e n d e r* ! I n s p e c tio n
80
07
A je u m o tio n
S .
B
to
F aa
M o rt« i« a In s u ra n c e A p p lic a tio n
.
F aa
to
F aa
SO S.
809
.
S IX
811
.
900. ITEMS REOUIRED BY LENDER TO BE PAID IN ADVANCE
901
In te re s t
SO X
M o r tis e s l u u n a e t P re m iu m
.
tram
p$
to
S O S . H a z a rd In s u ra n c e P re m iu m
to*
fo r
H ty
n o a ttu
'
to
re a rs to
90
S .
y e a n to
1000. RESERVES DEPOSIT'liyWtTH LL\‘DER
1001
100
100
1004
.
H az ard I n w n a w
m o a th e
X
M o rta a a a in s u r a n c e
X
C ity p r o p e r ty ta x e s
.
lO O S ,
B o o th s
-
•
•
S
S
n a u f e i S I
C o u n ty p ro p e rty ta x e s
m o n th s
A n n u a l n ie e rn ia iic s
m o n th s
1006
1007
1008
.
— *a-
.
m o n th s
.
m o o th a
• S
« >
OS
•
•
p ar
--------------------------------------------------------------------------
—
pac m m » h
p e r m
o u t
.V e V
.%V e W e V e V .V .V e V . •/,
p er a o o tfi
p a r m o o ts
p a : m o n th
S
p a r m o n th
S
p a r m o u th
1100. TITLE CHARGES
1101
110
110
1104
U O X
D o c u m e n t p re p a ra tio n
to
N o ta ry
to
.
S e ttle m e n t o r d e d o t fa a
to
X
A b s tra c t o r title s e a rc h
to
X
T ills e x a m in a tio n
to
T itle in s u r a n c e b in d e r
to
.
110
1107
X
.
fees
A tto r n e y * ! te a s
to
(includesabove items numbers;
1108
.
110
1118
1111
111
111
X
)
T itle in s u ra n c e
to
L e n d e r 's c o v e r s ( a
9
O w n er* ! c o v e ra g e
s
.
!,:'>;<*;*!v!*>;v/;*x*>’x*!*!*x
~
X
■“
X
"
—
"
1200. GOVERNMENT RECORDING AND TRANSFER CHARGES'
'
1300. ADDITIONAL SETTLEMENT CHARCtS
1
SO X
F e e t In e n a c tio n
to
''
HUD-l R*e. »/?*
H0C1AL t c o i s m . VOL 41. NO. 113— THURSDAY. JUNE to .
1 « 7&
NOTICES
23640
ia
SETT LEM EN T C O STS WORK SH E E T (Use this worksheet to com pare the charges o f various lenders and providers o f settlement services.
PROVIDER
1
PROVIDER
3
PROVIDER
2
800. ITEMS PA YABLE IN CONNECTION WITH LOAN:
3 0 1 . L oan O r itis itio o F ee
%
302. L o an D iscount
to
to
803. A ppraisal F«o
8 0 4 . C m d it R e p o rt
809. L an d er's Inspection f e e
8 0 0 . M e i t m r Insurance A pplication F ee
to
807. A ssum ption Fee
808.
809.
810.
811.
900. ITEMS REQUIRED B Y LENDER TO BE PAID IN ADVANCE:
901. In te re st fro m
to
9 8
902. U o ttiM * Insurance F n n i u n te a
pax day
raootha to
903. H azard Insurance Prem ium f o r
years to
904.
years t o
|
|
905.
1000. RESERVES DEPOSITED WITH LENDER:
1001. H azard Insurance
m ontiis 9 S
par m o n th
1 002. Mortgage Insurance
m onths 9 3
per m o n th
p ar m onth
1003. City p ro p erty ta x e s
m onths • 8
1004. C ounty p ro p erty taxes
m onths 9 3
per m o n th
1005. A nnual assessm ents
m onths 9 8
par m onth
1008.
m o n th s 9 3
per m o n th
1007.
m o n th s 9 3
pax m o n th
1008.
mow th e 9 8
p ar m o n th
1100. TITLE CHARGES:
1101. S ettlem en t o r d o sing fee
to
1102. A b stract o r title search
to
1103. T itle exam ination
to
1104. T itle insurance b in d er
to
1105. D ocum ent p rep aration
to
1106. N otary fees
to
1107. A tto rn ey ’s i e e s
.
to
(includes above items numbers;)
1108. T itle insurance
to
(includes above items numbers;)
13 09. L eader's corerage
f
1110. O w serS eorerage
8
ff- '
l ll le
1112.
1113.
1200. GOVERNMENT RECORDING AND TRANSFER CHARGES:
1201. R ecording fees; Deed 3
; Releases 3
t Mortgage 3
1202. C tty /eo u aty taxi stam pat D eed 3
(Mortgage 3
1203. S tate tax/stam pes
;M ortgage 8
P eed 8
1204.
1205.
1300. ADDITIONAL SETTLEMENT CHARGES:
1301. S u rrey
to
1302. Test inspection
to
1303.
1304.
1305.
1400. TOTAL SETTLEMENT CHARCES...........................................................
l
[
FfD M A l RECISTW, V O t 41, NO. 113— THURSDAY, JUNE 10, 1974
NOTICES
23641
19
Sections A through I of the Uniform Settlement Statement
contain information concerning the loan and parties to the settle
ment.
Sections J and K contain a summary of all funds transferred
between the b u y e r , seller, lender, and providers of settlement
services.
The bottom line in the left-hand column shows the net
cash to be paid by the borrower, while the bottom line in the righthand column shows the cash due the seller.
Section L is a list of settlement services that may be
required and for which you may be charged.
Blank lines are
provided for any additional settlement services.
You would add up the costs entered on the lines of
Section L, and carry them forward to Sections J and K, in
order to arrive at the net cash figures on the bottom lines of
the left and right columns.
Uses of This Form
(1)
Settlement services comparisons.
As you shop for
settlement services, you can use the Settlement Costs Worksheet
as a handy.guide, noting on it the different services required
by different lenders and the different fees quoted by different
service providers.
(2)
Disclosure of actual settlement costs.
A copy of
this form, or one with*similar*terminology, sequence and numbering
of line items, must be filled ou t 1by the person conducting the
settlement meeting.
Your right to inspect the form one business
day before settlement was discussed earlier in this booklet.
The
form will be completely filled in at the settlement meeting.
SPECIFIC SETTLEMENT SERVICES
The following defines £nd discusses each specific settlement
service.
The numbers correspond to the items listed in Section L
of the Uniform Settlement Statement form.
700.
SALES/BROKER'S COMMISSION
This is the total dollar
amount of sales commission,
usually paid by the seller.
Fees
are usually a percentage of the
selling price of the house, and
are intended to compensate brokers
nDUAL MG15TC1, VOL 41, NO. 113— THUBSDAr, JUNB 10. 1976
r
NOTICES
23642
20
or salesmen for their services.
Custom and/or the negotiated
agreement between the seller
and the broker determine the
amount of the commission.
701 702.
Division of
^mrniisToTT"
-----------
If several brokers or salesmen work together to sell the
house, the commission may be split
among them.
If they are paid
from funds collected for settle
ment, this is shown on
lines 701-702.
703
Commission Paid at
Settlement
-----------
__
Sometimes the broker will
retain the earnest money deposit to
apply towards his commission.
In this case, line 703 will
show only the remainder of the
commission which will be paid
at settlement.
800 ,
ITEMS PAYABLE IN
CONNECTION WITH LOAN
^
u
’
These are the fees which
lenders charge to process, approve
and make the mortgage loan.
801 „
Loan Origination
--------- --------
%
802
.
Loan Discount
1 '■
This fee covers the lender 's
administrative costs in processing
the loan.
Often expressed as a
percentage of the l o a n , the fee
will vary among lenders and from
locality to locality.
Generally
... the buyer pays the fee unless another
$
arrangement has been made with the
seller and written into the sales
contract.
Often called “points, “ a loan
discount is a one-time charge used
to adjust the yield on the loan to
what market conditions demand.
It
is used to offset constraints placed
on the yield by state or federal
regulations.
Each "point" is equal to
FEDERAL MCISTEI, VOL 47, NO. 7 7 3— THURSDAY, JUNE 70, 7976
NOTICES
23843
21
one percent of the mortgage amount.
For example, if a lender charges
four points on a $30,000 loan this
amounts to a charge of $1,200.
803.
Appraisal Fee
This charge, which may vary
significantly from transaction to
transaction, pays for a statement
of property value for the lender,
made by an independent appraiser or
by a member of the lender's staff.
The lender needs to know if the value
of the property is sufficient to
secure the loan if you fail to repay
the loan according to the provision"
of your mortgage contract, and the
lender must foreclose and take
title to the house.
The appraiser
inspects the house and the neighbor
hood, and considers sales prices of
comparable houses and other factors
in determining the value.
The
appraisal report may contain photos
and other information of value to
you.
It will provide the factual data
upon which the appraiser based the
appraised value.
Ask the lender
for a copy of the appraisal report
or review the original.
The appraisal fee may be paid
by either the buyer or the seller,
as agreed in the sales contract.
In
-some cases this fee is included in
the Mortgage Insurance Appli
cation Fee.
See line 806.
804,
Credit Report Fee
This fee covers the cost of
the credit report, which shows
how you have handled other credit
transactions.
The lender uses
- this report in conjunction with
information'you submitted with
the application regarding your
income, outstanding bills, and
employment, to determine whether
FEDERAL REGISTER, VOL 41, NO. 113-—THURSDAY, JUNE 10, 1976
r
NOTICES
23644
22
you are an acceptable credit risk
and to help determine how much
money to lend you.
Where you encounter credit
reporting problems you have pro
tections under the Fair Credit
laws as summarized under "Homeb u y e r ’s Rights" in this booklet.
805.
Lender1s Inspection
Fee
806.
Mortgage Insurance
Application Fee
807.
Assumption Fee
This fee is charged for process
ing papers for cases in which the buyer
takes over payments on the prior
loan of the seller.
900.
ITEMS REQUIRED BY LENDER
TO BE PAID IN ADVANCE
.
You may be required to prepay
certain items, such as interest,
mortgage insurance premium and
hazard insurance premium, at the
time of settlement.
This charge covers inspections,
often of newly constructed housing,
made by personnel of the lending
institution or an outside inspector.
(Pest or other inspections made by
companies other than the lender
are discussed in connection with
line 1302).
This fee covers processing the
application for private mortgage
insurance which may be required on
certain loans. It may cover both the
apptaisal and application fee.
*
901.
Interest
---------
.
Lenders usually require that
borrowers pay at settlement the
interest that accrues on the mortgage
from the date of settlement to the
beginning of the period covered by
the first monthly payment.
For
example, suppose your settlement takes
place on April 16, and your first
FESE8AI RCG1STEI, VOL 41, NO. 113— THUISOAY, JUN€ 10, 1976
23645
NOTICES
23
regular monthly payment will be due
June 1, to cover interest charges
for the month of May.
On the settle
ment date, the lender will collect
interest for the period from April 16
to May 1.
If you borrowed $30,000 at
9% interest, the interest item would
be $112.50.
This amount will be
entered on line 901.
902.
Mortgage Insurance
Premium
*
903.
Hazard Insurance
"Premium
%
:
Mortgage insurance protects
the lender from loss due to payment
default by the home owner.
The
lender may require you to pay your
first premium in advance, on the day
of settlement.
The premium may cover
a specific number of months or a year
in advance.
With this insurance
protection, the lender is willing to
make a larger loan, thus reducing
your downpayment requirements.
This
type of insurance should not be'
confused with mortgage life, credit
life, or disability insurance designed
to pay off a mortgage in the event of
.physical disability or death of the
borrower.
This premium prepayment is for
insurance protection for you and
the lender against loss due to
fire, windstorm, and natural
hazards.
This coverage may be
' included in a Homeowners Policy
. which, insures against additional
risks which may include personal
liability and theft.
Lenders
. often require payment of the first
year's premium at settlement.
A hazard insurance or homeowner's policy may not protect you
against loss caused by flooding.
In special flood-prone areas iden
tified by HUD, you may be required
FCDKXAl RfGlSTR, VOL 41, NO. 113— THURSDAY, JUNI 10, 1474
r
NOTICES
23646
24
by federal law to carry flood
insurance on your home.
Such
insurance may be purchased at low
federally subsidized rates in par
ticipating communities under the
National Flood Insurance Act.
1000.
RESERVES DEPOSITED
WITH LENDERS
Reserves (sometimes called
•escrow" or "impound" accounts)
are funds held in an account by
the lender to assure future pay
ment for such recurring items as
real estate taxes and hazard
insurance.
Yo u will probably have to pay
am initial amount for each of these
items to start the reserve account
at the time of settlement.
A
portion of your regular monthly
.payments will be added to the
reserve account.
RESPA places
limitations on the amount of reserve
funds which may be required by the
lender.
Read "Reserve Accounts" in
this booklet for reserve calculation
procedures.
Do not hesitate to ask
the lender to explain any variance
between, your own calculations and
the figure presented to you.
1001
Hazard Insurance
"
1002
Mortcraqe Insurance
”
” "
1003
1004.
Citv/Countv
Property Taxes
The lender determines the
amount of money that must be placed
in the reserve in order to pay the
next insurance premium when due •
irThe lender may require that
* part of the total annual premium be
placed in the reserve account at
settlement.
The portion to be
received in reserve may be negotiable.
The lender may require a regular
monthly payment to the reserve
account for property taxes.
ROCKAl tBWSTW, VOl_ 41, NO. 113— 7HUKOAY, JUKI 10, 1970
NOTICES
23647
25
L005.
Annual Assessments
This reserve item covers assess
ments that m ay be imposed by sub
divisions or municipalities for
special improvements (such as side
walks, sewers or paving) or fees
{such as homeowners association f e es)•
.100.
TITLE CHARGES
Title charges may cover a
variety of services performed
by the lender or others for handling
and supervising the settlement
transaction and services related
thereto.
The specific charges
discussed in connection with
lines 1101 through 1109 are those
most frequently incurred at settle
ment.
Due to the great diversity
in practice from area to area, your
particular settlement may not
, include all these items or may
include others not listed.
Ask
your settlement agent to explain
how these fees relate to services
performed on your behalf.
An extended
discussion is presented in "Securing
Title Services” earlier in this
booklet.
L01.
Settlement or
Closing* Fee
This fee is paid to the settle
ment agent.
Responsibility for
payment of this fee should be
negotiated between the seller and
buyer, at the time the sales contract
is signed.
.02-1104. Abstract or
These charges cover the costs
"Title Search, Title^Examinar- of the search and examination of
tion, Title Insurance Binder records of previous ownership,
transfers, etc., to determine
whether the seller can convey clear
title to the property, and to
disclose any matters on record
that could adversely affect the
FEOtiUl XtGISTfl, VOL 41, NO. 113— THURSDAY, JUNK 10, 1976
NOTICES
23648
26
buyer or the lender.
Examples of
title problems are unpaid mortgages,
judgment or tax liens, conveyances
of mineral rights, leases, and
power line easements or road rightof-ways that could limit use and
enjoyment of the real estate.
In
some areas, a title insurance binder
is called a commitment to insure.
1105.
Document Preparation
1106.
Notary Fee
1107.
A t t o r n e y ’s Fees
There may be a separate
document fee that covers prepara
tion of final legal p a p e r s , such as
a mortgage, deed of trust, note, or
deed.
You should check to see that
these services, if charged for, are
not also covered under some other
service fees, ask the settlement
agent.
•/
£■
This fee is charged for the
cost of having a licensed person
affix his or her name and seal to
various documents authenticating
the execution of these documents
by the parties.
You may be required to pay for
legal services provided to the
lender in connection with the
settlement, such as examination
of the title binder or sales con
tract.
Occasionally this fee can
be shared with the seller, if so
stipulated in the sales contract.
If a lawy e r ’s involvement is required
by the lender, the fee will appear
on this part of the form.
The buyer
and seller may each retain an
attorney to check the various
documents and to represent them at
all stages of the transaction
including settlement.
Where this
service is not required and is paid
for outside of closing, the person
conducting settlement is not
obligated to record the fee on the
settlement form.
FEDERAL REGISTER, VOL 41, NO. 115— THURSDAY, JUNE 10, 1976
NOTICES
23649
27
1108.
1109.
L110.
Insurance
Lender’s Title
Insurance
"
Owner's Title
Insurance
The total cost of owner*s and
lender*s title insurance is shown
here.
The borrower may pay all,
a part or none of this cost de
pending on the terms of the sales
contract or local custom.
A one-time premium may be
charged at settlement for a lender's
title policy which protects the
lender against loss due to problems
or defects in connection with the
title.
The insurance is usually
written for the amount of the
mortgage loan and covers losses due
to defects or problems not identified
by title search and examination.
In
most areas this is customarily paid
; by the borrower unless the seller
agrees in the sales contract to pay
part or all of it.
This charge is for owner's title
insurance protection and protects
you against losses due to title
defects.
In some areas it is
customary for the seller to provide
the buyer with an owner's policy and
for the seller to pay for this policy.
In other a r e a s , if the buyer desires
an owner's policy he must pay for it.
200.
GOVERNMENT RECORDING
AND TRANSFER CHARGES
...
These fees may be paid either by
f borrower or s e l l e r , depending upon
your contract when you buy the house
or accept the loan commitment.
The
borrower usually pays the fees for
legally recording the new deed and
mortgage (item 1201).
These fees,
collected when property changes hands
or when a mortgage loan is made, may
be quite large and are set by state
and/or local governments.
City,
county and/or state tax stamps may
have to be purchased as well (item
1 2 0 1 and 1203).
FSOCTAL REGISTER, V O L 41, NO. 113— THURSDAY, JUNE ID, 197D
NOTICES
23650
23
1300.
ADDITIONAL SETTLEMENT
CHARGES
1301.
Survey
The lender or the title insur
ance company may require that a
surveyor conduct a property survey
to determine the exact location of
the house and the lot line, as well
as easements and rights of way.
This is a protection to the buyer
as well.
Usually the buyer pays
the s u r v e y o r s fees, but sometimes
this may be handled by the seller.
1302.
Pest and Other
Inspections
This fee is to cover inspec
tions for termite or other pest in
festation of the house.
This may
be important if the sales contract
included a promise by the seller
to transfer the property free from
pests or pest-caused damage.
Be
sure that the inspection shows that
the property complies with the
sales contract before you complete
the settlement.
If it does not you
may wish to require a bond or other
financial assurance that the work
will be completed.
This fee can be
paid either by the borrower or
seller depending upon the terms of
the sales contract.
Lenders vary
in their requirements as to such
an inspection.
Fees for other inspections,
such as for structural soundness,
are entered on line 1303.
1400.
TOTAL SETTLEMENT
CHARGES
All the fees in the borrower*s
column entitled "Paid from Borrower's
Funds at Settlement” are totaled here
and transferred to line 103 of
Section J, "Settlement charges to
borrower"
in the Summary of
Borrower's Transaction on page 1
F fO llA L IfC IS T M , V O L 41, NO. 113— TWUMOAV, JU N I 10, 1976
NOTICES
23651
Uniform Settlement Statement.
All the settlement fees paid by the
seller are transferred to line 502
of Section K, Summary of Seller's
T ra n sa ctio n on page i o f the---------Uniform Settlement Statement.
PARING LENDER COSTS
If a lender is.willing to reduce his fees for such items
origination, discount points and other one-time settlemay gain ifc back if he
d n e l effect
a higher M o r t g a g e
tkumb « hich y°« can use to calculate the
ssr-
ge by o ne-eighth(1 / 8 )Sof o n e c e n t . ^ V r i a c l o r ^ 6 ±atere“t
IFtoSJd
° f aP ^ ° * ^ t e l y 15 years! if you
t o « at
It that
that time,
t ^ » d the 5
r°pertT
for only to
five
and pay off
Loan
factor
increases
1 / 4Years
.
diffll between^lenders ^ 6
Consid*F only those charges
s“PP°se you wish to borrow $30,000.
mah e _t h e _loan at 8.5 percent interest, but charces
rll thlt
f e e ' a $150.00 application fee, and
■x A v* 1 1 maVs
r i t ^
lee lf lloo.
"7 ^ '
f°r tatl* W O r k ' selected by the
ender B will make the loan at 9 percent interest
.1
ich case?
-Lawyer s fee.
percent origination fee
50 application fee
00 lawyer's fee
Total
"
D “
“
n
a
s m
.
v o c
hut h ae
mZS. c^ i i “ * » l l c . t l o n
What are the actual charges
2 percent of loan amount
0.5 percent of loan amount
t percent of loan amount
3.5 percent of loan amount
ho .
u
j
-
t h u m
m
y
,
um
.
0
.
23852
NOTICES
30
rate from Lender A is the quoted or "contract" interest rate,
8,5 percent plus ,44 percent (3.5 times 1/8), or a total of
8*94 percent interest.
Since Lender B has offered a nine percent
interest rate, Lender A has made a more attractive offer.
Of
course, it is more attractive only if you have sufficient cash to
pay Lender A's one-time charges and still cover your downpayment,
moving expenses, and other settlement costs.
This is simply a
method to compare diverse costs on an equal basis.
In the above
illustration, Lender A does not receive the $300 lawyer fee.
The calculation is sensitive to your assumption about the
period of time you plan to own the house before paying off the
mortgage.
As indicated above, the factor increases to 1/4 if you
expect to pay off the mortgage in five years.
Applying this new
factor to the above illustration, the effective interest rate for
Lender A would be 8.5 percent plus .87 (3.5 x 1/4) for a total of
9.37 percent interest.
Lender A ’s offer is no longer more
attractive than Lender B*s which was 9.0 percent.
In doing these calculations you should also be careful as to
which one time fees you place into the calculation.
For example,
if Lender B in the above illustration did not include in his charge
a legal fee but told you chat you had to secure legal services in
order to obtain the loan from him, you would have to add to Lender B*
interest rate the legal fee that you had to incur.
You can use this method to compare the effective interest rates
of any number of lenders as y o u shop for a loan.
If the lenders
have provided Truth-in-Lending disclosures, these are even a better
comparative tool.
You should question lenders carefully to make sure
you have learned of all the charges they intend to make.
The good
faith estimate you receive when you make a loan application is a
good checklist for this information, but it is not precise.
Thus,
you should ask the lender how the charges and fees are computed.
f
n S IX A i MG1S7IX, V O L 41, MO. 113— THU*50AT, JUNE 10, 1976
NOTICES
23653
CALCULATING THE BORROWER'S TRANSACTIONS
A Sample Worksheet
.
£age is ? sample worksheet for a family purchasincr
£££*.Si'S S t S
aS i i “£ 1 S L ”
Settlement
Statement.)
The
$1000 f i g u r e do' m
lre^Ul
ustrative
The amount may be hioh^r in en>m«
meteiy
ixiustrative.
transactions / a £ d ?ower for l?£eref
“ * f°r SOme types of
A---------- jiS U M M A R Y O r BO R R O W E R ^ T R A N S A r n r iM
10<K C R O S S A M O U N T D U E F R O M B O R R O W S . ------- “---------------
----- |/ w .
1
W1 . C o o tra ct aalee p ri^ ,
~
~
~
—
^ » n n n
n.o
l O i S e ttle m e n t chargee to b orrow er fling 14001
104.
'
-------------------- -------------------------------- ---------- L . n n n
—
ng
io a .
---------------------------- -
1®®* C ity <to w n ta v ea
1 0T - C o u n ty ta x e s
—
'
t«
---------- L
F
in .
(Q
»
m p
I
rvf 7
"
"
n
. n
t n
~
112.
120.
- m
- >5
-------------^ _ ^ g g n H f )
g a l
<9
5n„
f|
_______ 3 - 2 . qj
-------------------------- --------------
‘
~
------------
C R O SS A M O U N T DUE
FRO M BORROW ER
3 6 , 2 3 2 . 5 0
- 2- 00' AA* V 1 M T S P A ID B Y OR IN BEH A I F D F B O R R n W F Q .
2 0 1 . O eooalt or earn est -- --------
1
---------------------------
s o t , fr to r ip a l im o a n t Qf n e w t
2 0 3 . E x i t i n g Io«n/«> t ,f c ~ .
----------------------- :—
20*.
208.
~
200.
"
207.
"
208
7*'
"...
'
"
”
----- ------------- ------- -
"
'
208.
-------------- ------------------- --
—
------- --- ---------------
Adjustments far items unpaid by seller
311*. C tty /to w n ta x e s
to
~
i
f i r
1 -1
21*.
21&]
'
"
'
218.
'
217.
218.
i
f
’" f
:_ 2 Q _ il6 0 (^ /
'o ^ s ia s u .
^
rv
a
3 0 0 . o n
______s o - o o l
------------------------------------- -----------------'
-------------------- ----- ------------------------------------- ---------------------- -- .
-------- 1-------------- 1------------------- —
-■
--------------------------------------------->------------
~~
219.
-----------------
t o t a l p a id b y / f o r
borrow er
'—
--------- — 1 OIL1 1 Lc-M LN t r R Q M /T Q
301. G row a m o u n t d u e from b orrow er fU r^ n O I
, 3 5 0 . OOj
BOR J 1 0 W E R
T
j
302. Lemo a o e e t , p a * b y /fo r he----------- /7— W T i---------- ---
303. CASH (
g
F R O M ) ( l iT Q ) B O R R O W E R
m " Al K a m n - V0L « ■ *>• i i j - m u B O A r . JUN. ,o . „ 74
NOTICES
23654
32
Your Fin ancial Worksheet
Once you have decided which providers you wish to use for
your settlement services and have selected the lender who will
make your loan, you can calculate the total estimated cash you
will need to complete the purchase.
The form below, which is
a part of the Uniform Settlement Statement, can be used as a
worksheet for this purpose.
J.
SUMMARY OF BORROWER'S TRANSACTION
100. CROSS AMOUNT DUE FROM BORROWER:
101. Contract calcs pries
103. Personal property
.
108. Settlem ent charges to borrower (tine 1400)
104.
105.
Adjustments fer items paid by seller inadvance
108. City/town taxes
to
107. County taxes
to
108. Assessments
to
100.
110.
111.
111.
120.
GROSS AMOUNT DUE
FROMBORROWER
200. AMOUNTS PAID BY OR IN BEHALF OF BORROWER:
201. Deposit or earnest money
202. Principal am ount of new foanfc)
208. Existing loen<») taken subieet to
24ML
200.
208.
207.
208.
209.
Adjustments for items unpaid by seller
210, City/town taxes r; ■
to
211. County taxes
>
to
212. Assessments
to
218.
214.
215.
218.
217.
218.
21&
220.
TOTAL PAID B Y IFOR
BORROWER
300. CASH A T SETTLEMENT FROM/TO BORROWER
801. Gioae amount due from borrower (tine 120)
802. Lem amounts paid by/for borrower (line 220)
(
303. CASH ( □ FROM) ( 0
7 * 0 )
)
BORROWER
ROCtAL REGISTER Y O U -4 1 , NO. 113— THURSDAY, JUNE 10, 1976
NOTICES
22855
33
DO.
GROSS AMOUNT DUE
FROM BORROWER
Page 1 of the Uniform Settle
ment Statement summarizes all
actual costs and adjustments for
the borrower and seller, including
total settlement fees and charges
found on line 1400 of Section L.
1.
Contract Sales Price
This is the price of the home
agreed to in the sales contract
between the buyer and seller.
2.
Personal Property
If. at the time the sales
contract was made, you and the
seller agreed that some items were
to be.transferred with.the house,
the price of those items is entered
here.
If it was agreed to include
these items in the price of the
home, their cost will be part of
the sales price recorded on line 1 0 1 .
Personal property could include items
such as carpets, drapes, stove,
refrigerator, etc.
!•
Settlement Charges
to Borrower
-105.
Additional
Costs
The total charges detailed in
Section L and totaled on line 1400,
are recorded here.
This figure
includes all of the items pay
able in connection with the loan,
items required by the lender to
be paid in advance, reserves
deposited with the lender, title
charges, government recording
and transfer charges, and any
{•additional related charges*
This space is for listing any
additional amounts owed the seller,
such as reserve funds if the buyer
is assuming the seller's loan.
This may not be applicable to ^our
settlement.
FEDERAL REGISTER, VOL 41, NO. 113— THURSDAY. JUNE 10. 1976
NOTICES
23856
34
106-112.
Adjustments
120.
GROSS AMOUNT DUE
200.
AMOUNTS PAID BY OR ON
BEHALF OF BORROWER
201.
Deposit or Earnest
Money
202-
203 •
Principal Amount of
New Loan
Existing Loan(s)
210-219.
220.
Adjustments
TOTAL AMOUNTS PAID
BY/FOR BORROWER
These include taxes, front
footage charges, insurance, rent,
fuel and other items that the seller
has previously paid for covering a
period which runs beyond the settle
ment date.
The costs are usually
divided on a proportional basis
with the seller being reimbursed
for charges accruing after the date
of transfer of title.
This is the total of lines 101
through 1 1 2 .
This is the amount which you
paid against the sales price
when the sales contract was
signed.
It is credited to the
purchase.
This is the amount of the new
mortgage which you will repay
to the lender in the future.
If you are taking over the
seller's mortgage(s) instead of
obtaining a new loan or paying all
cash, the amount still owed on
those prior loans will be shown
here.
This includes taxes or assess
ments which become due after settle
ment, but which the seller pays
because they cover a period of time
prior to settlement.
See "Reserve
Accounts" for a further discussion
of these matters.
This is the sum of lines 201
through 219.
FEDERAL RESIST!*, VOL 41, NO. 113— THURSDAY, JUN* 10, 1976
NOTICES
23657
35
300.
CASH AT SETTLEMENT
FROM/TO BUYER
Remaining are the summary
lines which are 301-303 for the
borrower (and 601-603 for the
seller).
Subtracting line 302
(gross amount paid by or for the
borrower) from line 301 (gross
amount due from the borrower)
results in the net cash the borrower
must pay at settlement.
RESERVE ACCOUNTS
In most instances, a monthly mortgage payment is made up
>f a payment on the principal amount of the mortgage debt which
reduces the balance due on the loan, an interest payment which
Ls the charge for use of the borrowed funds, and a reserve paylent (also known as an escrow or impound payment) which represents
ipproximately*one-twelfth of the estimated annual insurance
premiums, property taxes, assessments and o t ^ c recurring charges.
When settlement occurs yo u may need to make an initial
leposit into the reserve account; otherwise, your regular monthly
leposits to it will not accumulate enough to pay the taxes,
.nsurance or other charges when they fall due.
Under RESPA, the
taximum amount the lender can require borrowers or prospective
>orrowers to deposit into a reserve account at settlement is a
:otal gross amount not to exceed the sum of:
(a)' an amount that
rould have been sufficient to pay taxes, insurance premiums,
'r other charges which would have been paid-under normal lending
•ractices, and ending on the due date of the first full monthly
iortgage installment payment;“ plus ‘(b)- an additional amount not in
xcess of one-sixth (2 months) of the estimated total amount of
axes, insurance premiums and other charges to be paid on the dates
ndicated above during any twelve month period to follow.
An illustration will help clarify this calculation.
Assume
he following set of facts on a loan, and that taxes are paid at
he end of the period against which taxes are assessed.
V
Example: Settlement date
April 30, 1977
Due Date of first
mortgage loan repay
ment
June 1, 1977
Taxes due yearly
$360.00
Monthly tax accrual
J? 30.00
Due date for taxes
December 1st for the
calendar year
FEDERAL REGISTER, VOL 41, NO. 113— THURSDAY, JUNE 10, 1970
NOTICES
23658
36
The reserve amount for category (a) is $180.00.
This repre
sents the amount of taxes accruing between December 1, 1976 (the
last tax due date) and May 30, 1977 ($30.00 x 6 months).
Reserve
amounts chargeable under category (b) could be up to two months
advance payment times $30.0U or a total of $60.00.
Therefore,
total reserve deposits for taxes at settlement would be a maximum
of $240.00.
Changing the due date for taxes and/or the first
mortgage payment results in a different reserve amount for the
same illustration.
The same procedure is used to determine the maximum amounts
that can be collected by the lender for insurance premiums or
other charges.
You need to know the charges and due dates in
order to compute the amounts.
Once you begin your monthly mortgage payments, you can
not be required to pay more than one-twelfth of the annual taxes
and other charges each month, unless a larger payment is
necessary to make up for a deficit in your account or to maintain
the cushion of the one-sixth of annual charges mentioned in
(b) above.
A deficit may be caused, for example, if your taxes
or insurance premiums are raised.
You should note that the above monthly mortgage payments
reserve limitations apply to all RESPA covered mortgage loans
whether they were originated before or after the implementation
of RESPA.
ADJUSTMENTS BETWEEN BOYER AND SELLER
The previous section dealt with setting up and maintaining
your reserve account with the lender.
At settlement it is also
usually necessary to make an adjustment between buyer and seller
for property taxes and other charges.
This is an entirely
separate matter from the -initial deposit which the borrower makes
into the new reserve account.
The adjustments between buyer and seller are shown in
Sections J and K of the Uniform Settlement Statement.
In
the example given in the foregoing section, the taxes, which
are payable annually, had not yet been paid when the settle
ment occurs on April 30.
The homebuyer will have to pay a
whole year's taxes on the following December 1.
However, the
seller lived in the house for the first four months of the year.
Thus, four-twelfths of the year's taxes are to be paid by the
seller.
Accordingly, lines 208 and 503 on the Uniform
RSeKAfc
VOL 41. NO.- 113^-THURSOAY, JUN6 10, 1 W
NOTICES
23659
37
Settlement Statement would read as follows:
County taxes
1/1/77 to 4/30/77
$120.00
The buyer would be given credit for this amount in the
settlement and the seller would have to pay this amount or
count it as a deduction from sums payable to the seller.
In some areas taxes are paid at the beginning of the tax
able year.
If, in our example, the taxes were paid by the
seller on January 1, 1977 for the following tax year ending
December 31, 1977, the buyer will, have to compensate
the seller for the taxes paid by
the seller for
those months that the buyer will be in possession of the
property (April 30-Deceraber 31).
This adjustment will be shown
on lines 107 and 407 of the Uniform Settlement Statement.
With
settlement occurring on April 30, those lines will read as follows:
County taxes 4/30/77 to 12/31/77
$240.00
This amount would be credited to the seller in the settlement.
Similar adjustments are made for insurance (if the policy
is being kept in effect), special assessments, fuel and other
utilities, although the billing periods for these may not
always be on an annual basis.
Be sure you work out these
prorations with the seller prior to settlement.
It is wise
for you to notify utility companies of the change in ownership
and ask for a special reading on the day of settlement, with
the bill for pre-settlement charges to be mailed to the seller
at his new address.
This will eliminate much confusion that
can result if you are billed for utilities which cover the time
when the seller owned the unit.
f>*■
rv
R O M M REGISTER VOL 41, NO. 113— THURSDAY, JUNE 10, 1976
V
NOTICES
23660
APPENDIX A
.
CONSUMER LITERATURE ON HOME PURCHASING, MAINTENANCE, PROTECTION,
AND OTHER TOPICS
U. S. Department of Housing and Urban Development
Appraisals
Questions and Answers on FHA Home Property
Appraisals
HUD-38-F
Condominiums
Financing Condominium Housing
HUD/FHA Non-Assisted Program for
Condominium Housing
HUD-77-F
Questions About Condominiums
HUD/FHA Comparison of Condominium and
Cooperative Housing
HUD— 365-F
HUD-321-F
HUD-227-F
Cooperatives
Letfs Consider Cooperatives
HUD/FHA Program for Unsubsidized Coop'
erative Housing
HUD-17-F
HUD-256-F
Home Mortgage Insurance
Home Mortgage Insurance
Programs for Home Mortgage Insurance
HUD-43-F
HUD-97-F
Home Ownership
The Home Buying Serviceman*.
HUD's Home Ownership Subsidy Program
HUD-121-F
HUD-419-HPMC
Miscellaneous
£
Protecting Your Home Against Theft
Termites
Be An Energy Miser in Your Home
HUD-315-F
HUD— 323-F
HUD-324-PA
Mobile Homes
Buying and Financing a Mobile Home
Mobile Home Financing Through HUD
HUD-24 3-F
HUD-265-F
General Interest
Wise Home Buying
Should You Buy or Rent a Home
FEDERAL REGISTER, V O L 41, N O. 113— THURSDAY, JUNE 10, 1976
HUD-267-F
HUD-328-F
NOTICES
23661
39
Protecting Your Housing Investment
Home Owners Glossary of Building Terms
Home Buyers Vocabulary
Your Housing Rights
Contact:
HUD-346-PA
H U D - 369-F
HUD-383-HM
HUD-177-EO
U.S. Department of Housing & Urban Development, 451 Seventh
Street, S.W., Washington, D.C.
20410, Room B-258 or
HUD Regional Area and Insuring Offices throughout
the country.
U.S. Veterans Administration
Pointers for the Veteran Homeowner
Questions and Answers on Guaranteed and Direct Loans for Veterans
To the Home-Buyer Veteran
Contact:
Your Nearest VA Regional Office
U.S. Department of Agriculture
•r
*"*■
Selecting and Financing a Home
Contact:
Office of Communications,
Washington, D.C.
20250
U.S. Department of Agriculture
U.S. Department of Labor
Rent or Buy?
Contact:
(No. 17 8D)
Consumer Information Center,
Pueblo, Colorado
81009
General Services Administration
Consumer Information:
Contact:
A Catalog of Selected Federal Publications
Consumer Information Center,
Pueblo, Colorado
81009
Equal Credit Opportunity Notice
The lender may provide the applicant the Equal Credit Opportunity
Notice on this page. (Federal Reserve Board Regulation B, 12 CFR 202.4(d))
The Equal Credit Opportunity Act, 15 U.S.C. 1691 et. seq., prohibits
discrimination against credit applicants on the basis of sex and
marital^status.
Beginning March 23, 1977, the Act extends this
protection to race, color, religion, national origin, age, whether all
or part of the applicant's income is derived from any public assistance
program, or if the applicant has in good faith exercised any right under-*
the Consumer Credit Protection Act.
The applicant should note that the
lender must either provide the notice here, on an application form, or
on some other separate sheet of paper.
This notice provides the name
of the lender's supervising agency.
[7B Doc.75-18775 Filed 6-7-76; 10:33 am}
FEDERAL REGISTER, V O L 41, NO. 113— THURSDAY, JUNE 10, 1976
HUD-433-CARF
June 1976
@FedFRASER