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Financial Institution Letter

SUBJECT: Guidance on Completing HUD-1, HUD-1A and Good Faith Estimate Forms for Home Mortgage Loans

We have received many questions from FDIC-supervised institutions about the proper completion of the HUD-1, HUD-1A and Good Faith Estimate (GFE) forms for home mortgage loans required by the Real Estate Settlement Procedures Act (RESPA) and the Department of Housing and Urban Development's (HUD) implementing Regulation X. The attached documents from HUD should assist FDIC-supervised institutions in understanding and complying with some of the more complex disclosure requirements imposed under RESPA.

Attachment A is a response issued by the HUD General Counsel's Office to a series of questions raised by the Massachusetts Bankers Association in late 1999. The guidance answers questions relating to:

  • HUD-1;
  • aggregate accounting adjustments;
  • "paid outside of closing" (P.O.C.) and third-party settlement service providers; and
  • title changes.

Attachment B amplifies the guidance provided in Attachment A about proper completion of the HUD-1 form. This response was prepared by HUD's General Counsel to answer questions posed in class action litigation brought against a financial institution in state court. The court requested clarification from HUD about the requirements of RESPA in situations where an institution marked up costs of third-party service providers, and then improperly disclosed those costs on the HUD-1 form. The attachment's main points are the following:

  • A lender that purchases third-party vendor services for the purpose of closing a federally related mortgage loan may not, under RESPA, mark up the third-party vendor fees to make a profit. A HUD-1 form must reflect the actual amount paid for third-party settlement service providers.

  • If a lender performs actual settlement services in addition to those provided by third- party vendors, RESPA rules and regulations permit the lender to charge the borrower for those services plus those provided by the third-party vendor. Such fees must be disclosed specifically and separately, however, from any fees for third-party settlement services.

For more information, please contact Ken Baebel, Assistant Director in the FDIC's Division of Compliance and Consumer Affairs, on (202) 942-3086 (e-mail ) or Susan VanDenToorn, Counsel in the FDIC's Legal Division, on (202) 898-8707 (e-mail ).

Stephen M. Cross

Attachments: Attachment A - U.S. Department of Housing and Urban Development's Response to Questions from the Massachusetts Bankers Association
Attachment B - U.S. Department of Housing and Urban Development Responses to Questions under the Real Estate Settlement Procedures Act

Distribution: FDIC-Supervised Banks (Commercial and Savings)

NOTE: Paper copies of FDIC financial institution letters may be obtained through the FDIC's Public Information Center, 801 17th Street, NW, Room 100, Washington, DC 20434 (800-276-6003 or (703) 562-2200).

Last Updated: July 12, 2000