|
[Main Tabs]
[Table of Contents - 6500]
[Index]
[Previous Page]
[Next Page]
[Search]
6500 - FDIC Consumer Protection
Appendix A to Part 3500--Instructions for Completing HUD--1 and
HUD--1A Settlement Statements; Sample HUD--1 and HUD--1A Statements
The following are instructions for completing sections A through L
of the HUD--1 settlement statement, required under section 4 of RESPA
and Regulation X of the Department of Housing and Urban Development (24
CFR Part 3500). This form is to be used as a statement of actual
charges and adjustments to be given to the parties in connection with
the settlement. The instructions for completion of the HUD--1 are
primarily for the benefit of the settlement agents who prepare the
statements and need not be transmitted to the parties as an integral
part of the HUD--1. There is no objection to the use of the HUD--1 in
transactions in which its use is not legally required. Refer to the
definitions section of Regulation X for specific definitions of many of
the terms which are used in these instructions.
General Instructions
Information and amounts may be filled in by typewriter, hand
printing, computer printing, or any other method producing clear and
legible results. Refer to Regulation X regarding rules applicable to
reproduction of the HUD--1. An additional page(s) may be attached to
the HUD--1 for the purpose of including customary recitals and
information used locally in
{{6-30-05 p.7027}}settlements, for example, a
breakdown of payoff figures; a breakdown of the Borrower's total
monthly mortgage payments; check disbursements; a statement indicating
receipt of funds; applicable special stipulations between Borrower and
Seller, and the date funds are transferred.
The settlement agent shall complete the HUD--1 to itemize all
charges imposed upon the Borrower and the Seller by the Lender and all
sales commissions, whether to be paid at settlement or outside of
settlement, and any other charges which either the Borrower or the
Seller will pay for at settlement. Charges to be paid outside of
settlement, including cases where a non-settlement agent (i.e.,
attorneys, title companies, escrow agents, real estate agents or
brokers) holds the Borrower's deposit against the sales price (earnest
money) and applies the entire deposit towards the charge for the
settlement service it is rendering, shall be included on the HUD--1 but
marked "P.O.C." for "Paid Outside of Closing" (settlement)
and shall not be included in computing totals. P.O.C. items should not
be placed in the Borrower or Seller columns, but rather on the
appropriate line next to the columns.
Blank lines are provided in section L for any additional settlement
charges. Blank lines are also provided for additional insertions in
sections J and K. The names of the recipients of the settlement charges
in section L and the names of the recipients of adjustments described
in section J or K should be included on the blank lines.
Lines and columns in section J which relate to the Borrower's
transaction may be left blank on the copy of the HUD--1 which will be
furnished to the Seller. Lines and columns in section K which relate to
the Seller's transaction may be left blank on the copy of the HUD--1
which will be furnished to the Borrower.
Line Item Instructions
Instructions for completing the individual items on the HUD--1
follow.
Section A. This section requires no entry of information.
Section B. Check appropriate loan type and complete the remaining
items as applicable.
Section C. This section provides a notice regarding settlement costs
and requires no additional entry of information.
Sections D and E. Fill in the names and current mailing addresses
and zip codes of the Borrower and the Seller. Where there is more than
one Borrower or Seller, the name and address of each one is required.
Use a supplementary page if needed to list multiple Borrowers or
Sellers.
Section F. Fill in the name, current mailing address and zip code of
the Lender.
Section G. The street address of the property being sold should be
given. If there is no street address, a brief legal description or
other location of the property should be inserted. In all cases give
the zip code of the property.
Section H. Fill in name, address, and zip code of settlement agent;
address and zip code of "place of settlement."
Section I. Date of settlement.
Section J. Summary of Borrower's Transaction. Line 101 is for the
gross sales price of the property being sold, excluding the price of
any items of tangible personal property if Borrower and Seller have
agreed to a separate price for such items.
Line 102 is for the gross sales price of any items of tangible
personal property excluded from Line 101. Personal property could
include such items as carpets, drapes, stoves, refrigerators, etc. What
constitutes personal property varies from state to state. Manufactured
homes are not considered personal property for this purpose.
Line 103 is used to record the total charges to Borrower detailed in
section L and totaled on Line 1400.
Lines 104 and 105 are for additional amounts owed by the Borrower or
items paid by the Seller prior to settlement but reimbursed by the
Borrower at settlement. For example, the balance in the Seller's
reserve account held in connection with an existing loan, if assigned
to the Borrower in a loan assumption case, will be entered here. These
lines will also be used when a tenant in the property being sold has
not yet paid the rent, which the Borrower will collect, for a period of
time prior to the settlement. The lines will also be
{{6-30-05 p.7028}}used to indicate the treatment
for any tenant security deposit. The Seller will be credited on Lines
404--405.
Lines 106 through 112 are for items which the Seller had paid in
advance, and for which the Borrower must therefore reimburse the
Seller. Examples of items for which adjustments will be made may
include taxes and assessments paid in advance for an entire year or
other period, when settlement occurs prior to the expiration of the
year or other period for which they were paid. Additional examples
include flood and hazard insurance premiums, if the Borrower is
being substituted as an insured under the same policy; mortgage
insurance in loan assumption cases; planned unit development or
condominium association assessments paid in advance; fuel or other
supplies on hand, purchased by the Seller, which the Borrower will use
when Borrower takes possession of the property; and ground rent paid in
advance.
Line 120 is for the total of Lines 101 through 112.
Line 201 is for any amount paid against the sales price prior to
settlement.
Line 202 is for the amount of the new loan made by the Lender or
first user loan (a loan to finance construction of a new structure or
purchase of manufactured home where the structure was constructed for
sale or the manufactured home was purchased for purposes of resale and
the loan is used as or converted to a loan to finance purchase by the
first user). For other loans covered by Regulation X which finance
construction of a new structure or purchase of a manufactured home,
list the sales price of the land on Line 104, the construction cost or
purchase price of manufactured home on Line 105 (Line 101 would be left
blank in this instance) and amount of the loan on Line 202. The
remainder of the form should be completed taking into account
adjustments and charges related to the temporary financing and
permanent financing and which are known as the date of settlement.
Line 203 is used for cases in which the Borrower is assuming or
taking title subject to an existing loan or lien on the property.
Lines 204--209 are used for other items paid by or on behalf of the
Borrower. Examples include cases in which the Seller has taken a
trade-in or other property from the Borrower in part payment for the
property being sold. They may also be used in cases in which a Seller
(typically a builder) is making an "allowance" to the Borrower
for carpets or drapes which the Borrower is to purchase separately.
Lines 204--209 can also be used to indicate any Seller financing
arrangements or other new loan not listed in Line 202. For example, if
the Seller takes a note from the Borrower for part of the sales price,
insert the principal amount of the note with a brief explanation on
Lines 204--209.
Lines 210 through 219 are for items which have not yet been paid,
and which the Borrower is expected to pay, but which are attributable
in part to a period of time prior to the settlement. In jurisdictions
in which taxes are paid late in the tax year, most cases will show the
proration of taxes in these lines. Other examples include utilities
used but not paid for by the Seller, rent collected in advance by the
Seller from a tenant for a period extending beyond the settlement date,
and interest on loan assumptions.
Line 220 is for the total of Lines 201 through 219.
Lines 301 and 302 are summary lines for the Borrower. Enter total in
Line 120 on Line 301. Enter total in Line 220 on Line 302.
Line 303 may indicate either the cash required from the Borrower at
settlement (the usual case in a purchase transaction) or cash payable
to the Borrower at settlement (if, for example, the Borrower's deposit
against the sales price (earnest money) exceeded the Borrower's cash
obligations in the transaction). Subtract Line 302 from Line 301 and
enter the amount of cash due to or from the Borrower at settlement on
Line 303. The appropriate box should be checked.
Section K. Summary of Seller's Transaction. Instructions for the use
of Lines 101 and 102 and 104--112 above, apply also to Lines 401--412.
Line 420 is for the total of Lines 401 through 412.
Line 501 is used if the Seller's real estate broker or other party
who is not the settlement agent has received and holds the deposit
against the sales price (earnest money) which exceeds the fee or
commission owed to that party, and if that party will render the
excess
{{6-30-05 p.7029}}deposit directly to the
Seller, rather than through the settlement agent, the amount of excess
deposit should be entered on Line 501 and the amount of the total
deposit (including commissions) should be entered on Line 201.
Line 502 is used to record the total charges to the Seller detailed
in Section L and totaled on Line 1400.
Line 503 is used if the Borrower is assuming or taking title subject
to existing liens which are to be deducted from sales price.
Lines 504 and 505 are used for the amounts (including any accrued
interest) of any first and/or second loans which will be paid as part
of the settlement.
Line 506 is used for deposits paid by the Borrower to the Seller or
other party who is not the settlement agent. Enter the amount of the
deposit in Line 201 on Line 506 unless Line 501 is used or the party
who is not the settlement agent transfers all or part of the deposit to
the settlement agent in which case the settlement agent will note in
parentheses on Line 507 the amount of the deposit which is being
disbursed as proceeds and enter in column for Line 506 the amount
retained by the above described party for settlement services. If the
settlement agent holds the deposit insert a note in Line 507 which
indicates that the deposit is being disbursed as proceeds.
Lines 506 through 509 may be used to list additional liens which
must be paid off through the settlement to clear title to the property.
Other payoffs of Seller obligations should be shown on Lines 506--509
(but not on Lines 1303--1305). They may also be used to indicate funds
to be held by the settlement agent for the payment of water, fuel, or
other utility bills which cannot be prorated between the parties at
settlement because the amounts used by the Seller prior to settlement
are not yet known. Subsequent disclosure of the actual amount of these
postsettlement items to be paid from settlement funds is optional. Any
amounts entered on Lines 204--209 including Seller financing
arrangements should also be entered on Lines 506--509.
Instructions for the use of Lines 510 through 519 are the same as
those for Lines 210 to 219 above.
Line 520 is for the total of Lines 501 through 519.
Lines 601 and 602 are summary lines for the Seller. Enter total in
Line 420 on Line 610. Enter total in Line 520 on Line 602.
Line 603 may indicate either the cash required to be paid to the
Seller at settlement (the usual case in a purchase transaction) or cash
payable by the Seller at settlement. Subtract Line 602 from Line 601
and enter the amount of cash due to or from the Seller at settlement on
Line 603. The appropriate box should be checked.
Section L. Settlement Charges.
For all items except for those paid to and retained by the Lender,
the name of the person or firm ultimately receiving the payment should
be shown. In the case of "no cost" or "no point" loans, the
charge to be paid by the lender to an affiliated or independent service
provider should be shown as P.O.C. (Paid Outside of Closing) and should
not be used in computing totals. Such charges also include indirect
payments or back-funded payments to mortgage brokers that arise from
the settlement transaction. When use, "P.O.C" should be placed in
the appropriate lines next to the identified item, not in the columns
themselves.
Line 700 is used to enter the sales commission charged by the sales
agent or broker. If the sales commission is based on a percentage of
the price, enter the sales price, the percentage, and the dollar amount
of the total commission paid by the Seller.
Lines 701--702 are to be used to state the split of the commission
where the settlement agent disburses portions of the commission to two
or more sales agents or brokers.
Line 703 is used to enter the amount of sales commission disbursed
at settlement. If the sales agent or broker is retaining a part of the
deposit against the sales price (earnest money) to apply towards the
sales agent's or broker's commission, include in Line 703 only that
part of the commission being disbursed at settlement and insert a note
on Line 704 indicating the amount the sales agent or broker is
retaining as a "P.O.C." item.
Line 704 may be used for additional charges made by the sales agent
or broker, or for a sales commission charged to the Borrower, which
will be disbursed by the settlement agent.
{{6-30-05 p.7030}}
Line 801 is used to record the fee charged by the Lender for
processing 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 is used to record the loan discount or "points"
charged by the Lender, and, if it is computed as a percentage of the
loan amount, enter the percentage in the blank indicated.
Line 803 is used for appraisal fees if there is a separate charge
for the appraisal. Appraisal fees for HUD and VA loans are also
included on Line 803.
Line 804 is used for the cost of the credit report if there is a
charge separate from the origination fee.
Line 805 is used only for inspections by the Lender or the Lender's
agents. Charges for other pest or structural inspections required to be
stated by these instructions should be entered in Lines 1301--1305.
Line 806 should be used for an application fee required by a private
mortgage insurance company.
Line 807 is provided for convenience in using the form for loan
assumption transactions.
Lines 808--811 are used to list additional items payable in
connection with the loan including a CLO Access fee, a mortgage broker
fee, fees for real estate property taxes or other real property
charges.
Lines 901--905. This series is used to record the items which the
Lender requires (but which are not necessarily paid to the lender,
i.e., FHA mortgage insurance premium) to be paid at the time
of settlement, other than reserves collected by the Lender and recorded
in 1000 series.
Line 901 is used if interest is collected at settlement for a part
of a month or other period between settlement and the date from which
interest will be collected with the first regular monthly payment.
Enter that amount here and include the per diem charges. If such
interest is not collected until the first regular monthly payment, no
entry should be made on Line 901.
Line 902 is used for all mortgage insurance premiums due and payable
at settlement, except reserves collected by the Lender and recorded in
the 1000 series. A lump sum mortgage insurance premium paid at
settlement should be inserted on Line 902, with a note that indicates
that the premium is for the life of the loan.
Line 903 is used for hazard insurance premiums which the Lender
requires to be paid at the time of settlement except reserves collected
by the Lender and recorded in the 1000 series.
Lines 904 and 905 are used to list additional items required by the
Lender (except for reserves collected by the Lender and recorded in the
1000 series) including flood insurance, mortgage life insurance, credit
life insurance and disability insurance premiums. These lines are also
used to list amounts paid at settlement for insurance not required by
the Lender.
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. Include the time period
(number of months) and the monthly assessment. In many jurisdictions
this is referred to as an "escrow", "impound", or
"trust" account. In addition to the items listed, some Lenders
may require reserves for flood insurance, condominium owners'
association assessments, etc.
After itemizing individual deposits in the 1000 series using
single-item accounting, the servicer shall make an adjustment based on
an aggregate accounting. This adjustment equals the difference between
the deposit required under aggregate accounting and the sum of the
deposits required under single-item accounting. The computation steps
for both accounting methods are set out in § 3500.17(d). The
adjustment will always be either a negative number or zero (-0-). The
settlement agent shall enter the aggregate adjustment amount on a final
line in the 1000 series of the HUD--1 or HUD--1A statement.
During the phase-in period, as defined in § 3500.17(b), an
alternative procedure is available. If a servicer has not yet conducted
the escrow account analysis to determine the aggregate accounting
starting balance, the settlement agent may initially calculate the 1000
series deposits for the HUD--1 and HUD--1A settlement statement using
single-item analysis
{{6-30-05 p.7031}}with a one-month cushion
(unless the mortgage loan documents indicate a smaller amount). In the
escrow account analysis conducted within 45 days of settlement, the
servicer shall adjust the escrow account to reflect the aggregate
accounting balance.
Lines 1100--1113. This series covers title charges and charges by
attorneys. The title charges include a variety of services performed by
title companies or others and includes fees directly related to the
transfer of title (title examination, title search, document
preparation) and fees for title insurance. The legal charges include
fees for Lender's, Seller's or Buyer's attorney, or the attorney
preparing title work. The series also includes any fees for settlement
or closing agents and notaries. In many jurisdictions the same person
(for example, an attorney or a title insurance company) performs
several of the services listed in this series and makes a single
overall charge for such services. In such cases, enter the overall fee
on Line 1107 (for attorneys), or Line 1108 (for title companies), and
enter on that line the item numbers of the services listed which are
covered in the overall fee. If this is done, no individual amounts need
be entered into the borrower's and seller's columns for the individual
items which are covered by the overall fee. In transactions involving
more than one attorney, one attorney's fees should appear on Line 1107
and the other attorney's fees should be on Line 1111, 1112 or 1113. If
an attorney is representing a buyer, seller, or lender and is also
acting as a title agent, indicate on line 1107 which services are
covered by the attorney fee and on line 1113 which services are covered
by the insurance commission.
Line 1101 is used for the settlement agent's fee.
Lines 1102 and 1103 are used for the fees for the abstract or title
search and title examination. In some jurisdictions the same person
both searches the title (that is, performs the necessary research in
the records) and examines title (that is, makes a determination as to
what matters affect title, and provides a title report or opinion). If
such a person charges only one fee for both services, it should be
entered on Line 1103 unless the person performing these tasks is an
attorney or a title company in which case the fees should be entered as
described in the general directions for Lines 1100--1113. If separate
persons perform these tasks, or if separate charges are made for
searching and examination, they should be listed separately.
Line 1104 is used for the title insurance binder which is also known
as a commitment to insure.
Line 1105 is used for charges for preparation of deeds, mortgages,
notes, etc. If more than one person receives a fee for such work in the
same transaction, show the total paid in the appropriate column and the
individual charges on the line following the word "to."
Line 1106 is used for the fee charged by a notary public for
authenticating the execution of settlement documents.
Line 1107 is used to disclose the attorney's fees for the
transaction. The instructions are discussed in the general directions
for Lines 1100--1113. This line should include any charges by an
attorney to represent a buyer, seller or lender in the real estate
transaction.
Lines 1108--1110 are used for information regarding title insurance.
Enter 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
charges for the Lender's and owner's policies. Note that these charges
are not carried over into the Borrower's and Seller's columns, since to
do so would result in a duplication of the amount in Line 1108. If a
combination Lender's/owner's policy is purchased, show this amount as
an additional entry on Lines 1109 and 1110.
Lines 1111--1113 are for the entry of other title charges not
already itemized. Examples in some jurisdictions would include a fee to
a private tax service, a fee to a county tax collector for a tax
certificate, or a fee to a public title registrar for a certificate of
title in a Torrens Act transaction. Line 1113 should be used to
disclose services that are covered by the commission of an attorney
acting as a title agent when Line 1107 is already being used to
disclose the fees and services of the attorney in representing the
buyer, seller, or lender in the real estate transaction.
{{6-30-05 p.7032}}
Lines 1201--1205 are used for government recording and transfer
charges. Recording and transfer charges should be itemized. Additional
recording or transfer charges should be listed on Lines 1204 and 1205.
Lines 1301 and 1302, or any other available blank line in the 1300
series, are used for fees for survey, pest inspection, radon
inspection, lead-based paint inspection, or other similar inspections.
Lines 1303--1305 are used for any other settlement charges not
referable to the categories listed above on the HUD--1, which are
required to be stated by these instructions. Examples may include
structural inspections or pre-sale inspection of heating, plumbing, or
electrical equipment. These inspection charges may include a fee for
insurance or warranty coverage.
Line 1400 is for the total settlement charges paid from Borrower's
funds and Seller's funds. These totals are also entered on Lines 103
and 502, respectively, in sections J and K.
(Approved by the Office of Management and Budget under control number
2502--0285.)
Line Item Instructions for Completing HUD–1A
Note: HUD--1A is an optional form that may be used for
refinancing and subordinate lien federally related mortgage loans, as
well as for any other one-party transaction that does not involve the
transfer of title to residential real property. The HUD--1 form may
also be used for such transactions, by utilizing the borrower's side of
the HUD--1 and following the relevant parts of the instructions as set
forth above. The use of either the HUD--1 or HUD--1A is not mandatory
for open-end lines of credit (home-equity plans), as long as the
provisions of Regulation Z are followed.
Background
The HUD--1A settlement statement is to be used as a statement of
actual charges and adjustments to be given to the borrower at
settlement, as defined in this part. The instructions for completion of
the HUD--1A are for the benefit of the settlement agent who prepares
the statement; the instructions are not a part of the statement and
need not be transmitted to the borrower. There is no objection to using
the HUD--1A in transactions in which it is not required, and its use in
open-end lines of credit transactions (home-equity plans) is
encouraged. It may not be used as a substitute for a HUD--1 in any
transaction in which there is a transfer of title and a first lien is
taken as security.
Refer to the "definitions" section of Regulation X for
specific definitions of terms used in these instructions.
General Instructions
Information and amounts may be filled in by typewriter, hand
printing, computer printing, or any other method producing clear and
legible results. Refer to
§ 3500.9 regarding rules
for reproduction of the HUD--1A. Additional pages may be attached to
the HUD--1A for the inclusion of customary recitals and information
used locally for settlements or if there are insufficient lines on the
HUD--1A.
The settlement agent shall complete the HUD--1A to itemize all
charges imposed upon the borrower by the lender, whether to be paid at
settlement or outside of settlement, and any other charges that the
borrower will pay for at settlement. In the case of "no cost" or
"no point" loans, these charges include any payments the lender
will make to affiliated or independent settlement service providers
relating to this settlement. These charges shall be included on the
HUD--1A, but marked "P.O.C." for "paid outside of closing,"
and shall not be used in computing totals. Such charges also include
indirect payments or back-funded payments to mortgage brokers that
arise from the settlement transaction. When used, "P.O.C." should
be placed in the appropriate lines next to the identified item, not in
the columns themselves.
Blank lines are provided in Section L for any additional settlement
charges. Blank lines are also provided in Section M for recipients of
all or portions of the loan proceeds. The names of the recipients of
the settlement charges in Section L and the names of the recipients of
the loan proceeds in Section M should be set forth on the blank
lines.
{{6-30-05 p.7033}}
Line Item Instructions
The identification information at the top of the HUD--1A should be
completed as follows:
The borrower's name and address is entered in the space provided. If
the property securing the loan is different from the borrower's
address, the address or other location information on the property
should be entered in the space provided. The loan number is the
lender's identification number for the loan. The settlement date is the
date of settlement in accordance with
§ 3500.2, not the end of
any applicable rescission period. The name and address of the lender
should be entered in the space provided.
Section L. Settlement Charges. This section of the HUD--1A is
similar to Section L of the HUD--1, with minor changes or omissions,
including deletion of lines 700 through 704, relating to real estate
broker commissions. The instructions for Section L in the HUD--1,
should be followed insofar as possible. Inapplicable charges should be
ignored, as should any instructions regarding seller items.
Line 1400 in the HUD--1A is for the total settlement charges charged
to the borrower. Enter this total on line 1602 as well. This total
should include Section L amounts from additional pages, if any are
attached to this HUD--1A.
Section M. Disbursement to Others. This section is used to list
payees, other than the borrower, of all or portions of the loan
proceeds (including the lender, if the loan is paying off a prior loan
made by the same lender), when the payee will be paid directly out of
the settlement proceeds. It is not used to list payees of settlement
charges, nor to list funds disbursed directly to the borrower, even if
the lender knows the borrower's intended use of the funds.
For example, in a refinancing transaction, the loan proceeds are
used to pay off an existing loan. The name of the lender for the loan
being paid off and the pay-off balance would be entered in Section M.
In a home improvement transaction when the proceeds are to be paid to
the home improvement contractor, the name of the contractor and the
amount paid to the contractor would be entered in Section M. In a
consolidation loan, or when part of the loan proceeds is used to pay
off other creditors, the name of each creditor and the amount paid to
that creditor would be entered in Section M. If the proceeds are to be
given directly to the borrower and the borrower will use the proceeds
to pay off existing obligations, this would not be reflected in Section
M.
Section N. Net Settlement. Line 1600 normally sets forth the
principal amount of the loan as it appears on the related note for this
loan. In the event this form is used for an open-ended home equity line
whose approved amount is greater than the initial amount advanced at
settlement, the amount shown on Line 1600 will be the loan amount
advanced at settlement. Line 1601 is used for all settlement charges
that are both included in the totals for lines 1400 and 1602 and are
not financed as part of the principal amount of the loan. This is the
amount normally received by the lender from the borrower at settlement,
which would occur when some or all of the settlement charges were paid
in cash by the borrower at settlement, instead of being financed as
part of the principal amount of the loan. Failure to include any such
amount in line 1601 will result in an error in the amount calculated on
line 1604. P.O.C. amounts should not be included in line 1601.
Line 1602 is the total amount from line 1400.
Line 1603 is the total amount from line 1520.
Line 1604 is the amount disbursed to the borrower. This is
determined by adding together the amounts for lines 1600 and 1601, and
then subtracting any amounts listed on lines 1602 and 1603.
{{6-30-05 p.7034}}
Form HUD-1 -- Settlement Statement (pdf)
(89Kb, PDF file - PDF help or hard copy)
{{6-30-05 p.7035}}
{{6-30-05 p.7036}}
Form HUD-1A -- Settlement Statement (pdf)
(50Kb, PDF file - PDF help or hard copy)
{{6-30-05 p.7037}}
{{6-30-05 p.7038}}
[Codified to 24 C.F.R. Part 3500, Appendix A] (Approved by
the Office of Management and Budget under control number 2502-0265)
[Appendix A amended at 57 Fed. Reg. 56856, December 1, 1992,
effective December 2, 1992; 59 Fed. Reg. 6515, February 10, 1994,
effective August 9, 1994; 59 Fed. Reg. 53908, October 26, 1994,
effective April 24, 1995; 60 Fed. Reg. 8816, February 15, 1995; 60 Fed.
Reg. 24735, May 9, 1995, effective May 24, 1995; 61 Fed. Reg. 13251,
March 26, 1996, effective April 25, 1996; 63 Fed. Reg. 3237, January
21, 1998, effective February 20, 1998]
Appendix B to Part 3500—Illustration of Requirements of RESPA
The following illustrations provide additional guidance on the
meaning and coverage of the provisions of RESPA. Other provisions of
federal or state law may also be applicable to the practices and
payments discussed in the following illustrations.
1. Facts: A, a provider of settlement services,
provides settlement services at abnormally low rates or at no charge at
all to B, a builder, in connection with a subdivision being developed
by B. B agrees to refer purchasers of the completed homes in the
subdivision to A for the purchase of settlement services in connection
with the sale of individual lots by B.
Comments: The rendering of services by A to B at little
or no charge constitutes a thing of value given by A to B in return for
the referral of settlement services business and both A and B are in
violation of section 8 of RESPA.
2. Facts: B, a lender, encourages persons who receive
federally-related mortgage loans from it to employ A, an attorney, to
perform title searches and related settlement services in connection
with their transaction. B and A have an understanding that in return
for the referral of this business A provides legal services to B or B's
officers or employees at abnormally low rates or for no charge.
Comments: Both A and B are in violation of section 8 of
RESPA. Similarly, if an attorney gives a portion of his or her fees to
another attorney, a lender, a real estate broker or any other provider
of settlement services, who had referred prospective clients to the
attorney, section 8 would be violated by both persons.
3. Facts: A, a real estate broker, obtains all
necessary licenses under state law to act as a title insurance agent. A
refers individuals who are purchasing homes in transactions in which A
participates as a broker to B, an unaffiliated title company, for the
purchase of title insurance services. A performs minimal, if any, title
services in connection with the issuance of the title insurance policy
(such as placing an application with the title company). B pays A a
commission (or A retains a portion of the title insurance premium) for
the transactions or alternatively B receives a portion of the premium
paid directly from the purchaser.
Comments. The payment of a commission or portion of the
title insurance premium by B to A, or receipt of a portion of the
payment for title insurance under circumstances where no substantial
services are being performed by A is a violation of section 8 of RESPA.
It makes no difference whether the payment comes from B or the
purchaser. The amount of the payment must bear a reasonable
relationship to the services rendered. Here A really is being
compensated for a referral of business to B.
4. Facts: A is an attorney who, as a part of his
legal representation of clients in residential real estate
transactions, orders and reviews title insurance policies for his
clients. A enters into a contract with B, a title company, to be an
agent of B under a program set up by B. Under the agreement, A agrees
to prepare and forward title insurance applications to B, to re-examine
the preliminary title commitment for accuracy and if he chooses to
attempt to clear exceptions to the title policy before closing, A
agrees to assume liability for waiving certain exceptions to title, but
never exercises this authority. B performs the necessary title search
and examination work, determines insurability of title, prepares
documents containing substantive information in title commitments,
handles closings for A's
{{6-30-05 p.7039}}clients and issues title
policies. A receives a fee from his client for legal services and an
additional fee for his title agent "services" from the client's
title insurance premium to B.
Comments: A and B are violating
section 8 of RESPA. Here, A's
clients are being double billed because the work A performs as a
"title agent" is that which he already performs for his client in
his capacity as an attorney. For A to receive a separate payment as a
title agent, A must perform necessary core title work and may not
contract out the work. To receive additional compensation as a title
agent for this transaction, A must provide his client with core title
agent services for which he assumes liability, and which includes, at a
minimum, the evaluation of the title search to determine insurability
of the title, and the issuance of a title commitment where customary,
the clearance of underwriting objections, and the actual issuance of
the policy or policies on behalf of the title company. A may not be
compensated for the mere re-examination of work performed by B. Here, A
is not performing these services and may not be compensated as a title
agent under section 8(c)(1)(B). Referral fees or splits of fees may not
be disguised as title agent commissions when the core title agent work
is not performed. Further, because B created the program and gave A the
opportunity to collect fees (a thing of value) in exchange for the
referral of settlement service business, it has violated section 8 of
RESPA.
5. Facts: A, a "mortgage originator," receives
loan applications, funds the loans with its own money or with a
wholesale line of credit for which A is liable, and closes the loans in
A's own name. Subsequently, B, a mortgage lender, purchases the loans
and compensates A for the value of the loans, as well as for any
mortgage servicing rights.
Comments: Compensation for the sale of a mortgage loan
and servicing rights constitutes a secondary market transaction, rather
than a referral fee, and is beyond the scope of section 8 of RESPA. For
purposes of section 8, in determining whether a bona fide
transfer of the loan obligation has taken place, HUD examines the
real source of funding, and the real interest of the named settlement
lender.
6. Facts: A, a credit reporting company, places a
facsimile transmission machine (FAX) in the office of B, a mortgage
lender, so that B can easily transmit requests for credit reports and A
can respond. A supplies the FAX machine at no cost or at a reduced
rental rate based on the number of credit reports ordered.
Comments: Either situation violates section 8 of RESPA.
The FAX machine is a thing of value that A provides in exchange for the
referral of business from B. Copying machines, computer terminals,
printers, or other like items which have general use to the recipient
and which are given in exchange for referrals of business also violate
RESPA.
7. Facts: A, a real estate broker, refers title
business to B, a company that is a licensed title agent for C, a title
insurance company. A owns more than 1% of B. B performs the title
search and examination, makes determinations of insurability, issues
the commitment, clears underwriting objections, and issues a policy of
title insurance on behalf of C, for which C pays B a commission. B pays
annual dividends to its owners, including A, based on the relative
amount of business each of its owners refers to B.
Comments: The facts involve an affiliated business
arrangement. The payments of a commission by C to B is not a violation
of section 8 of RESPA if the amount of the commission constitutes
reasonable compensation for the services performed by B for C. The
payment of a dividend or the giving of any other thing of value by B to
A that is based on the amount of business referred to B by A does not
meet the affiliated business agreement exemption provisions and such
actions violate section 8. Similarly, if the amount of stock held by A
in B (or, if B were a partnership, the distribution of partnership
profits by B to A) varies based on the amount of business referred or
expected to be referred, or if B retained any funds for subsequent
distribution to A where such funds were generally in proportion to the
amount of business A referred to B relative to the amount referred by
other owners such arrangements would violate
section 8. The exemption for
controlled business arrangements would not be available because the
payments here would not be
{{6-30-05 p.7040}}considered returns on
ownership interests. Further, the required disclosure of the affiliated
business arrangement and estimated charges have not been provided.
8. Facts: Same as illustration 7, but B pays annual
dividends in proportion to the amount of stock held by its owners,
including A, and the distribution of annual dividends is not based on
the amount of business referred or expected to be referred.
Comments: If A and B meet the requirements of the
affiliated business arrangement exemption there is not a violation of
RESPA. Since the payment is a return on ownership interests, A and B
will be exempt from section 8 if (1) A also did not require anyone to
use the services of B, and (2) A disclosed its ownership interest in B
on a separate disclosure form and provided an estimate of B's charges
to each person referred by A to B (see appendix D of this part), and
(3) B makes no payment (nor is there any other thing of value
exchanged) to A other than dividends.
9. Facts: A, a franchisor for franchised real estate
brokers, owns B, a provider of settlement services. C, a franchisee of
A, refers business to B.
Comments: This is an affiliated business arrangement. A,
B and C will all be exempt from section 8 if C discloses its franchise
relationship with the owner of B on a separate disclosure form and
provides an estimate of B's charges to each person referred to B (see
appendix D of this part) and C does not require anyone to use B's
services and A gives no thing a value to C under the franchise
agreement (such as an adjusted level of franchise payment based on the
referrals), and B makes no payments to A other than dividends
representing a return on ownership interest (rather than, e.g.,
an adjusted level of payment being based on the referrals). Nor
may B pay C anything of value for the referral.
10. Facts: A is a real estate broker who refers
business to its affiliate title company B. A makes all required written
disclosures to the homebuyer of the arrangement and estimated charges
and the homebuyer is not required to use B. B refers or contracts out
business to C who does all the title work and splits the fee with B. B
passes its fee to A in the form of dividends, a return on ownership
interest.
Comments: The relationship between A and B is an
affiliated business arrangement. However, the affiliated business
arrangement exemption does not provide exemption between an affiliated
entity, B, and a third party, C. Here, B is a mere "shell" and
provides no substantive services for its portion of the fee. The
arrangement between B and C would be in violation of section 8(a) and
(b). Even if B had an affiliate relationship with C, the required
exemption criteria have not been met and the relationship would be
subject to section 8.
11. Facts: A, a mortgage lender, is affiliated with B,
a title company, and C, an escrow company, and offers consumers a
package of mortgage, title, and escrow services at a discount from the
prices at which such services would be sold if purchased separately. A,
B, and C are subsidiaries of H, a holding company, which also controls
a retail stock brokerage firm, D. None of A, B, or C requires consumers
to purchase the services of its sister companies, and each company
sells such services separately and as part of the package. A also pays
an employee T, a full-time bank teller who does not perform settlement
services, a bonus for each loan, title insurance binder, or closing
that T generates for A, B, or C. A pays T these bonuses out of A's own
funds and receives no reimbursements for these bonuses from B, C, or H.
At the time that T refers customers to B and C, T provides the
customers with a disclosure using an affiliated business arrangement
disclosure format. Also, Z, a stockbroker employee of D, occasionally
refers her customers to A, B, or C; gives a statement in an affiliated
business disclosure format; and receives a payment from D for each
referral.
Comments: Selling a package of settlement services at a
discount is not prohibited by RESPA, consistent with the definition of
"required use" in 24 CFR
3500.2. Also, A is always allowed to compensate its own
employees for business generated for A's company.
{{6-30-05 p.7041}}Here, A may also compensate T,
an employee who does not perform settlement services in this or any
transaction, for referring business to a business entity in an
affiliate relationship with A. Z, who does not perform settlement
services in this or any transaction, can also be compensated by D, but
not by anyone else. Employees who perform settlement services cannot be
compensated for referrals to other settlement service providers. None
of the entities in an affiliated relationship with each other may pay
for referrals received from an affiliate's employees.
Sections
3500.15(b)(3)(i)(A) and (B) set forth the permissible exchanges
of funds between affiliated business entities. In all circumstances
described a statement in the controlled business disclosure format must
be provided to a potential consumer at or before the time that the
referral is made.
12. Facts: A, a real estate broker is affiliated with
B, a mortgage lender, and C, a title agency. A employs F to advise and
assist any customers of A who have executed sales contracts regarding
mortgage loans and title insurance. F collects and transmits (by
computer, fax, mail, or other means) loan applications or other
information to B and C for processing. A pays F a small salary and a
bonus for every loan closed with B or title insurance issued with C. F
furnishes the controlled business disclosure to consumers at the time
of each referral. F receives no other compensation from the real estate
or mortgage transaction and performs no settlement services in any
transaction. At the end of each of A's fiscal years, M, a managerial
employee of A, receives a $1,000 bonus if 20% of the consumers who
purchase a home through A close a loan on the home with B and have the
title issued by C. During the year, M acted as a real estate agent for
his neighbor and received a real estate sales commission for selling
his neighbor's home.
Comments: Under
§ 3500.14(g)(1),
employers may pay their own bona fide employees for
generating business for their employer (§ 3500.14(g)(1)(vii)).
Employers may also pay their own bona fide employees for
generating business for their affiliate business entities
(§ 3500.14(g)(1)(ix)), as long as the employees do not perform
settlement services in any transaction and disclosure is made. This
permits a company to employ a person whose primary function is to
market the employer's or its affiliate's settlement services
(frequently referred to as a Financial Services Representative, or
"FSR"). An FSR may not perform any settlement services including,
for example, those services of a real estate agent, loan processor,
settlement agent, attorney, or mortgage broker. In accordance with the
terms of the exemption at § 3500.14(g)(1)(ix), the marketing of a
settlement service or product of an affiliated entity, including the
collection and conveyance of information or the taking of an
application or order for the services of an affiliated entity, does not
constitute the performance of a settlement service. Under the
exemption, marketing of a settlement service or product also may
include incidental communications with the consumer after the
application or order, such as providing the consumer with information
about the status of an application or order; marketing may not include
serving as the ongoing point of contact for coordinating the delivery
and provision of settlement services.
Thus, in the circumstances described, F and M may receive the
additional compensation without violating RESPA.
Also, employers may pay managerial employees compensation in the
form of bonuses based on a percentage of transactions completed by an
affiliated company (frequently called a "capture rate"), as long
as the payment is not directly calculated as a multiple of the number
or value of the referrals. 24 CFR 3500.14(g)(1)(viii). A managerial
employee who receives compensation for performing settlement services
in three or fewer transactions in any calendar year "does not
routinely" deal directly with the consumer and is not precluded from
receiving managerial compensation.
{{6-30-05 p.7042}}
13. Facts: A is a mortgage broker who provides
origination services to submit a loan to a Lender for approval. The
mortgage broker charges the borrower a uniform fee for the total
origination services, as well as a direct up-front charge for
reimbursement of credit reporting, appraisal services or similar
charges.
Comment: The mortgage broker's fee must be itemized in
the Good Faith Estimate and on the HUD--1 Settlement Statement. Other
charges which are paid for by the borrower and paid in advance are
listed as P.O.C. on the HUD--1 Settlement Statement, and reflect the
actual provider charge for such services. Also, any other fee or
payment received by the mortgage broker from either the lender or the
borrower arising from the initial funding transaction, including a
servicing release premium or yield spread premium, is to be noted on
the Good Faith Estimate and listed in the 800 series of the HUD--1
Settlement Statement.
14. Facts: A is a dealer in home improvements who has
established funding arrangments with several lenders. Customers for
home improvements receive a proposed contract from A. The proposal
requires that customers both execute forms authorizing a credit check
and employment verification, and, frequently, execute a dealer consumer
credit contract secured by a lien on the customer's (borrower's) 1- to
4-family residential property. Simultaneously with the completion and
certification of the home improvement work, the note is assigned by the
dealer to a funding lender.
Comments: The loan that is assigned to the funding
lender is a loan covered by RESPA, when a lien is placed on the
borrower's 1- to 4-family residential structure. The dealer loan or
consumer credit contract originated by a dealer is also a RESPA-covered
transaction, except when the dealer is not a "creditor" under the
definition of "federally related mortgage loan" in
§ 3500.2. The lender to
whom the loan will be assigned is responsible for assuring that the
lender or the dealer delivers to the borrower a Good Faith Estimate of
closing costs consistent with Regulation X, and that the HUD--1 or
HUD--1A Settlement Statement is used in conjunction with the settlement
of the loan to be assigned. A dealer who, under § 3500.2, is covered
by RESPA as a creditor is responsible for the Good Faith Estimate of
Closing Costs and the use of the appropriate settlement statement in
connection with the loan.
[Codified to 24 C.F.R. Part 3500, Appendix B]
[Appendix B amended at 59 Fed. Reg. 6521, February 10,
1994, effective August 9, 1994; 61 Fed. Reg. 13251, March 26, 1996,
effective April 1, 1996; 61 Fed. Reg. 29253, June 7, 1996, effective
October 7, 1996; 61 Fed. Reg. 58476, November 15, 1996, effective
January 14, 1997]
{{6-30-05 p.7043}}
Appendix C to Part 3500—
Sample Form of Good Faith Estimate
[Name of Lender]1
The information provided below reflects estimates of the charges
which you are likely to incur at the settlement of your loan. The fees
listed are estimates--the actual charges may be more or less. Your
transaction may not involve a fee for every item listed.
The numbers listed beside the estimates generally correspond to the
numbered lines contained in the HUD--1 or HUD--1A settlement statement
that you will be receiving at settlement. The HUD--1 or HUD--1A
settlement statement will show you the actual cost for items paid at
settlement.
| ITEM2 |
HUD--1or
HUD--1A |
Amount orrange |
|---|
| Loan origination
fee. |
801 |
$_______ |
| Loan
discount fee. |
802 |
$_______ |
| Appraisal
fee |
803 |
$_______ |
| Credit
report |
804 |
$_______ |
| Inspection
fee |
805 |
$_______ |
| Mortgage broker fee. |
[Use
blank line in 800 Section] |
$_______ |
| CLO acces fee |
[Use
blank line in 800 Section] |
$_______ |
| Tax related service
fee. |
[Use blank line in 800
Section] |
$_______ |
| Interest for [X]
days at $_______ per
day. |
901 |
$_______ |
| Mortgage insurance
premium. |
902 |
$_______ |
| Hazard insurance
premiums. |
903 |
$_______ |
| Reserves3 |
1000-1005 |
$_______ |
| Settlement
fee. |
1101 |
$_______ |
| Abstract or title
search. |
1102 |
$_______ |
| Title
examination |
1103 |
$_______ |
| Document preparation
fee. |
1105 |
$_______ |
| Attorney's
fee |
1107 |
$_______ |
| Title
insurance |
1108 |
$_______ |
| Recording
fees. |
1201 |
$_______ |
| City/County tax
stamps. |
1202 |
$_______ |
| State
tax |
1203 |
$_______ |
| Survey |
1301 |
$_______ |
| Pest
Inspection. |
1302 |
$_______ |
| [Other fees--list
here]. |
|
$_______
|
____________________________________________
Applicant
____________________________________________
Date
____________________________________________
Authorized Official
________________________________________________________
1The name of the lender shall be placed at the top of the form.
Additional information identifying the loan application and property
may appear at the bottom of the form or on a separate page. Exception:
If the disclosure is being made by a mortgage broker who is not an
exclusive agent of the lender, the lender's name will not appear at
the top of the form, but the following legend must
appear: This Good Fair Estimate is being provided by
_______ , a mortgage broker, and no lender has yet been
obtained.
2Items for which there is estimated to be no charge to the
borrower are not required to be listed. Any additional items for which
there is estimated to be a charge to the borrower shall be listed if
required on the HUD--1.
3As an alternative to using aggregate accounting with no more
than a two-month cushion, the estimate may be obtained by using
single-item accounting with no more than a one-month
cushion.
{{6-30-05 p.7044}}
These estimates are provided pursuant to the Real Estate Settlement
Procedures Act of 1974, as amended (RESPA). Additional information can
be found in the HUD Special Information Booklet, which is to be
provided to you by your mortgage broker or lender, if your application
is to purchase residential real property and the Lender will take a
first lien on the property.
[Codified to 24 C.F.R. Part 3500, Appendix C]
[Appendix C amended at 57 Fed. Reg. 56856, December 1,
1992, effective December 2, 1992; 58 Fed. Reg. 17165, April 1, 1993,
effective December 2, 1992; 59 Fed. Reg. 6521, February 10, 1994,
effective August 9, 1994; 63 Fed. Reg. 3237, January 21, 1998,
effective February 20, 1998]
APPENDIX D TO PART 3500
Affiliated
Business Arrangement Disclosure
Statement Format
Notice
| To: |
_______ |
Property: _______ |
|---|
| From: |
_______ |
Date: _______ |
| (Entity
Making Statement)
|
This is to give you notice that [referring party]
has a business relationship with
[settlement services provider(s)] . [Describe the
nature of the relationship between the referring party and the
provider(s), including percentage of ownership interest, if
applicable.] Because of this relationship, this referral may provide
[referring party] a financial or other benefit.
[A.] Set forth below is the estimated charge or range of charges
for the settlement services listed. You are NOT required to use the
listed provider(s) as a condition for [settlement of your loan on]
[or] [purchase, sale, or refinance of] the subject property. THERE
ARE FREQUENTLY OTHER SETTLEMENT SERVICE PROVIDERS AVAILABLE WITH
SIMILAR SERVICES. YOU ARE FREE TO SHOP AROUND TO DETERMINE THAT YOU ARE
RECEIVING THE BEST SERVICES AND THE BEST RATE FOR THESE
SERVICES.
| [provider
and settlement service] |
[charge or range of
charges] |
|---|
|
| ____________________________________________ |
_____________________ |
|
| ____________________________________________ |
_____________________
|
[B.] Set forth below is the estimated charge or range of charges
for the settlement services of an attorney, credit reporting agency, or
real estate appraiser that we, as your lender, will require you to use,
as a condition of your loan on this property, to represent our
interests in the transaction.
| [provider
and settlement service] |
[charge or range of
charges] |
|---|
|
| ____________________________________________ |
_____________________ |
|
| ____________________________________________ |
_____________________
|
ACKNOWLEDGEMENT
I/we have read this disclosure form, and understand that
[referring party] is referring me/us to purchase the
above-described settlement service(s) and may receive a financial or
other benefit as the result of this referral.
|
_____________________ Signature
|
|---|
{{6-30-05 p.7045}}
[INSTRUCTIONS TO PREPARER:] [Use paragraph A for referrals other
than those by a lender to an attorney, a credit reporting agency, or a
real estate appraiser that a lender is requiring a borrower to use to
represent the lender's interests in the transaction. Use paragraph B
for those referrals to an attorney, credit reporting agency, or real
estate appraiser that a lender is requiring a borrower to use to
represent the lender's interests in the transaction. When applicable,
use both paragraphs. Specific timing rules for delivery of the
affiliated business disclosure statement are set forth in 24 CFR
3500.15(b)(1) of Regulation X). These INSTRUCTIONS TO PREPARER should
not appear on the statement.]
[Codified to 24 C.F.R. Part 3500, Appendix D]
[Appendix D amended at 57 Fed. Reg. 56856, December 1,
1992, effective December 2, 1992; 58 Fed. Reg. 17165, April 1, 1993,
effective December 2, 1992; 61 Fed. Reg. 29254, June 7, 1996, effective
October 7, 1996; 61 Fed. Reg. 41944, August 12, 1996, effective October
7, 1996; 61 Fed. Reg. 58477, November 15, 1996, effective January 14,
1997]
APPENDIX E—ARITHMETIC STEPS
I. Example Illustrating Aggregate Analysis:
ASSUMPTIONS:
Disbursements:
$360 for school taxes disbursed on September 20
$1,200 for county property taxes:
$500 disbursed on July 25
$700 disbursed on December 10
Cushion: One-sixth of estimated annual disbursements
Settlement: May 15
First Payment: July
1
| STEP
1.--INITIAL TRIAL | STEP 2.--ADJUSTED | STEP 3.--TRIAL
BALANCE |
| BALANCE | TRIAL BALANCE | WITH
CUSHION |
| [Increase monthly balances
to | |
| eliminate negative
balances] |
| Aggregate
| | Aggregate
| | Aggregate |
|---|
|
pmt |
disb |
bal |
|
pmt |
disb |
bal |
|
pmt |
disb |
bal |
| Jun |
0 |
0 |
0 |
Jun |
0 |
0 |
780 |
Jun |
0 |
0 |
1040 |
| Jul |
130 |
500 |
–370 |
Jul |
130 |
500 |
410 |
Jul |
130 |
500 |
670 |
| Aug |
130 |
0 |
–240 |
Aug |
130 |
0 |
540 |
Aug |
130 |
0 |
800 |
| Sep |
130 |
360 |
–470 |
Sep |
130 |
360 |
310 |
Sep |
130 |
360 |
570 |
| Oct |
130 |
0 |
–340 |
Oct |
130 |
0 |
440 |
Oct |
130 |
0 |
700 |
| Nov |
130 |
0 |
–210 |
Nov |
130 |
0 |
570 |
Nov |
130 |
0 |
830 |
| Dec |
130 |
700 |
–780 |
Dec |
130 |
700 |
0 |
Dec |
130 |
700 |
260 |
| Jan |
130 |
0 |
–650 |
Jan |
130 |
0 |
130 |
Jan |
130 |
0 |
390 |
| Feb |
130 |
0 |
–520 |
Feb |
130 |
0 |
260 |
Feb |
130 |
0 |
520 |
| Mar |
130 |
0 |
–390 |
Mar |
130 |
0 |
390 |
Mar |
130 |
0 |
650 |
| Apr |
130 |
0 |
–260 |
Apr |
130 |
0 |
520 |
Apr |
130 |
0 |
780 |
| May |
130 |
0 |
–130 |
May |
130 |
0 |
650 |
May |
130 |
0 |
910 |
| Jun |
130 |
0 |
0 |
Jun |
130 |
0 |
780 |
Jun |
130 |
0 |
1040
| |
{{6-30-05 p.7046}}
II. Example Illustrating Single-Item Analysis (Existing
Accounts)
Assumptions:
Disbursements:
$360 for school taxes disbursed on September 20
$1,200 for county property taxes:
$500 disbursed on July 25
$700 disbursed on December 10
Cushion: One-sixth of estimated annual disbursements
Settlement: May 15
First Payment: July 1
STEP 1.—INITIAL TRIAL
BALANCE
| Single-item
| Taxes | School
taxes
|
pmt |
disb |
bal |
pmt |
disb |
bal |
|---|
| Jun |
0 |
0 |
0 |
0 |
0 |
0 |
| Jul |
100 |
500 |
–400 |
30 |
0 |
30 |
| Aug |
100 |
0 |
–300 |
30 |
0 |
60 |
| Sep |
100 |
0 |
–200 |
30 |
360 |
–270 |
| Oct |
100 |
0 |
–100 |
30 |
0 |
–240 |
| Nov |
100 |
0 |
0 |
30 |
0 |
–210 |
| Dec |
100 |
700 |
–600 |
30 |
0 |
–180 |
| Jan |
100 |
0 |
–500 |
30 |
0 |
–150 |
| Feb |
100 |
0 |
–400 |
30 |
0 |
–120 |
| Mar |
100 |
0 |
–300 |
30 |
0 |
–90 |
| Apr |
100 |
0 |
–200 |
30 |
0 |
–60 |
| May |
100 |
0 |
–100 |
30 |
0 |
–30 |
| Jun |
100 |
0 |
0 |
30 |
0 |
–0
| |
|---|
|
|---|
STEP 2.—ADJUSTED TRIAL BALANCE (INCREASE MONTHLY
BALANCES TO ELIMINATE NEGATIVE
BALANCES)
| Single-item
| Taxes | School
taxes
|
pmt |
disb |
bal |
pmt |
disb |
bal |
|---|
| Jun |
0 |
0 |
600 |
0 |
0 |
270 |
| Jul |
100 |
500 |
200 |
30 |
0 |
300 |
| Aug |
100 |
0 |
300 |
30 |
0 |
330 |
| Sep |
100 |
0 |
400 |
30 |
360 |
0 |
| Oct |
100 |
0 |
500 |
30 |
0 |
30 |
| Nov |
100 |
0 |
600 |
30 |
0 |
60 |
| Dec |
100 |
700 |
0 |
30 |
0 |
90 |
| Jan |
100 |
0 |
100 |
30 |
0 |
120 |
| Feb |
100 |
0 |
200 |
30 |
0 |
150 |
| Mar |
100 |
0 |
300 |
30 |
0 |
180 |
| Apr |
100 |
0 |
400 |
30 |
0 |
210 |
| May |
100 |
0 |
500 |
30 |
0 |
240 |
| Jun |
100 |
0 |
600 |
30 |
0 |
270
| |
|---|
|
|---|
{{6-30-05 p.7047}}
STEP 3.—TRIAL BALANCE WITH
CUSHION
| Single-item
| Taxes | School
taxes
|
pmt |
disb |
bal |
pmt |
disb |
bal |
|---|
| Jun |
0 |
0 |
800 |
0 |
0 |
330 |
| Jul |
100 |
500 |
400 |
30 |
0 |
360 |
| Aug |
100 |
0 |
500 |
30 |
0 |
390 |
| Sep |
100 |
0 |
600 |
30 |
360 |
60 |
| Oct |
100 |
0 |
700 |
30 |
0 |
90 |
| Nov |
100 |
0 |
800 |
30 |
0 |
120 |
| Dec |
100 |
700 |
200 |
30 |
0 |
150 |
| Jan |
100 |
0 |
300 |
30 |
0 |
180 |
| Feb |
100 |
0 |
400 |
30 |
0 |
210 |
| Mar |
100 |
0 |
500 |
30 |
0 |
240 |
| Apr |
100 |
0 |
600 |
30 |
0 |
270 |
| May |
100 |
0 |
700 |
30 |
0 |
300 |
| Jun |
100 |
0 |
800 |
30 |
0 |
330
| |
|---|
|
|---|
[Codified to 24 C.F.R. Part 3500, Appendix E]
[Appendix F added at 59 Fed. Reg. 53908, October 26, 1994,
effective April 24, 1995; amended at 60 Fed. Reg. 8816, February 15,
1995, effective May 24, 1995; Appendix F redesignated as Appendix E at
61 Fed. Reg. 29255, June 7, 1996, effective October 7,
1996]
APPENDIX MS-1 to PART 3500
[Sample language; use business stationery or similar
heading]
SERVICING DISCLOSURE STATEMENT
NOTICE TO FIRST LIEN MORTGAGE LOAN APPLICANTS: THE RIGHT TO COLLECT
YOUR MORTGAGE LOAN PAYMENTS MAY BE TRANSFERRED. FEDERAL LAW GIVES YOU
CERTAIN RELATED RIGHTS. IF YOUR LOAN IS MADE, SAVE THIS STATEMENT WITH
YOUR LOAN DOCUMENTS. SIGN THE ACKNOWLEDGMENT AT THE END OF THIS
STATEMENT ONLY IF YOU UNDERSTAND ITS CONTENTS.
Because you are applying for a mortgage loan covered by the Real
Estate Settlement Procedures Act (RESPA) (12 U.S.C. § 2601 et
seq.) you have certain rights under that Federal law.
This statement tells you about those rights. It also tells you what
the chances are that the servicing for this loan may be transferred to
a different loan servicer. "Servicing" refers to collecting your
principal, interest and escrow account payments, if any. If your loan
servicer changes, there are certain procedures that must be followed.
This statement generally explains those procedures.
Transfer practices and requirements
If the servicing of your loan is assigned, sold, or transferred to a
new servicer, you must be given written notice of that transfer. The
present loan servicer must send you notice in writing of the
assignment, sale or transfer of the servicing not less than 15 days
before the effective date of the transfer. The new loan servicer must
also send you notice within 15 days after the effective date of the
transfer. The present servicer and the new servicer may combine this
information in one notice, so long as the notice is sent to you 15 days
before the effective date of transfer. The 15 day period is not
applicable if a notice of prospective transfer is provided to you at
settlement. The law allows a delay in the time (not more
than
{{6-30-05 p.7048}}30 days after a
transfer) for servicers to notify you, upon the occurrence of certain
business emergencies.
Notices must contain certain information. They must contain the
effective date of the transfer of the servicing of your loan to the new
servicer, and the name, address, and toll-free or collect call
telephone number of the new servicer, and toll-free or collect call
telephone numbers of a person or department for both your present
servicer and your new servicer to answer your questions. During the
60-day period following the effective date of the transfer of the loan
servicing, a loan payment received by your old servicer before its due
date may not be treated by the new loan servicer as late, and a late
fee may not be imposed on you.
Complaint Resolution
Section 6 of RESPA (12 U.S.C.
§ 2605) gives you certain consumer rights, whether or
not your loan servicing is transferred. If you send a
"qualified written request" to your servicer, your servicer must
provide you with a written acknowledgment within 20 Business Days of
receipt of your request. A "qualified written request" is a
written correspondence, other than notice on a payment coupon or other
payment medium supplied by the servicer, which includes your name and
account number, and the information regarding your request. Not later
than 60 Business Days after receiving your request, your servicer must
make any appropriate corrections to your account, or must provide you
with a written clarification regarding any dispute. During this
60-Business Day period, your servicer may not provide information to a
consumer reporting agency concerning any overdue payment related to
such period or qualified written request.
A Business Day is any day in which the offices of the business
entity are open to the public for carrying on substantially all of its
business functions.
Damages and Costs
Section 6 of RESPA also provides for damages and costs for
individuals or classes of individuals in circumstances where servicers
are shown to have violated the requirements of that Section.
Servicing Transfer Estimates
1. The following is the best estimate of what will happen
to the servicing of your mortgage loan:
A. We may assign, sell or transfer the servicing of your
loan while the loan is outstanding. [We are able to service your
loan[.][,] and we [will][will not] haven't decided whether
to] service your loan.].
[or]
B. We do not service mortgage loans[.][,] and we have not
serviced mortgage loans in the past three years.] We presently intend
to assign, sell or transfer the servicing of your mortgage loan. You
will be informed about your servicer.
INSTRUCTIONS TO PREPARER: The model format may be annotated
with further information that clarifies or enhances the model language.
The following model language may be used where appropriate:
We assign, sell or transfer the servicing of some of
our loans while the loan is outstanding depending on the type of loan
and other factors. For the program you have applied for, we expect to
[sell all of the mortgage servicing] [retain all of the mortgage
servicing] [assign, sell or transfer _______% of the mortgage
servicing].
{{6-30-05 p.7049}}
2. For all the first lien mortgage loans that we
make in the 12 month period after your mortgage loan is funded, we
estimate that the percentage of such loans for which we will transfer
servicing is between: _______
|
