David Saks: The Uniform Settlement Statement : HUD-1 Serious Question

David Saks - Real Estate Broker - The Real Estate Mart of Tennessee, Inc. - 4040 North Watkins-Suite #4 - Memphis, Tennessee 38127 - Phone (901) 357-4663

The Uniform Settlement Statement : HUD-1 Serious Question

 

                                       hud1

The Uniform Settlement Statement - HUD-1 Form.

What does it mean ?

RESPA, the Real Estate Settlement Procedures Act, requires that a special HUD form be completed.

This form itemizes all of the charges to be paid by a borrower and a seller at the settlement. All of the charges that are collected at the closing table required of the lender or any other party to the transaction are indicated on the HUD-1.

Any items outside of closing paid by the borrower and the seller not required by the lender won't be included in the HUD-1. When you pay for something required by the lender outside of closing it is referred to as "POC" or 'paid outside of closing'.

We know that RESPA prohibits lenders from requiring borrowers to deposit amounts in escrow accounts for taxes and insurance that exceed definite or specified limits so that the lenders can't take advantage of borrowers. We also know that sellers are not allowed to require a buyer to purchase title insurance from a particular company as a contingency of the sale.

What problems have you encountered with the HUD-1 ?

Have you ever had a situation where a lender or seller required you to use any particular company as a contingency of the sale ?

Many thanks to the honorable Active Rain community for your input on this serious issue ?




David Saks



Time&Temp Memphis

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Comment balloon 10 commentsDavid Saks • April 06 2008 01:24PM

Comments

Hey David...if that's really you playing the piano....YOU'RE DAMN GOOD!!!!!!!!!!!

On your question...We also know that sellers are not allowed to require a buyer to purchase title insurance from a particular company as a contingency of the sale.

What problems have you encountered with the HUD-1 ? Have you ever had a situation where a lender or seller required you to use any particular company as a contingency of the sale ?

My answer to those questions are I would clearly take the position that anyone requiring you to use a certain servicing company for anything in a real estate transaction would be a clear violation of RESPA.  Secondly trying to require a particular company as a contingency would be like signing a contract to murder someone...it's still just as illegal....in other words...you can't legislate by contract.

Posted by David W. Bolick (Network Real Estate, Inc.) almost 12 years ago

David,

The only problem that I have encountered recently is: which title company should close the transaction  (we do not use attorneys in New Mexico).  Many buyer brokers have sometimes insisted that the buyer choose the title company; probably because they have just heard or read that the buyer cannot be required to use a particular title company to close the transaction).  The problem is that, in our market, the seller usually pays for the title insurance.  An overly aggressive buyer broker sometimes insists the transaction be closed by a different title company than the seller (or the seller's broker) has chosen to do the preliminary title work.  So the response to such a request/demand from the buyer broker is:  "fine ... since your buyer will now be paying for the title insurance, it is only fair that the buyer select the title company."  Since the purchase agreement typically states that the seller will pay for the title insurance policy, the buyer and the buyer broker will quickly relinquish their demand to use "their" title company.

Posted by Bill Schwent, Santa Fe Broker (Casa Tierra Realty) almost 12 years ago
Wow Bill...that's strange.  In Arkansas the Buyer has to pay for the title insurance required by "their" mortgage company making the loan and the seller pays their portion to insure to the buyer proof they have clear title.  I can't imagine not having each pay an almost 1/2 share.  Glad I don't have to deal with that.  I choose one title company and swing all the business I can and in return they accomodate me more.
Posted by David W. Bolick (Network Real Estate, Inc.) almost 12 years ago
Generally, I have found that many real estate agents and mortgage companies don't dictate which title company to use. And, under RESPA, the seller may not require a buyer to to purchase title insurance from any particular title company as a condition of the sale. To do so is a clear violation of RESPA. However, your lender can require title insurance from a company that is acceptable to it. In most cases you can shop for and choose a company that meets the lender's standards.
Posted by Lew Corcoran, ASP®, Home Stager & Real Estate Photographer (Scena Home Staging & Decora Photography) almost 12 years ago
As long as the buyer acknowledges with their initials in the margin of the purchase agreement that they're purchasing the title insurance the contract is valid. Whoever lends you the money makes the decision to accept or deny the title insurance policy before they release funds from escrow.
Posted by David Saks ((retired)) almost 12 years ago

I'm a Realtor in Missouri attempting to relocate to Kansas, where I ran into a significant issue in this regard. Any help would be appreciated...

The property is an REO property that requires offers to be submitted with a prequal from the seller's finance company. Because I did not want to use that lender, I took a copy of my credit report (run one week earlier) to its retail branch and requested a pre-qual letter that did not require them running my credit report. This retail branch, their corporate headquarters, and another retail branch all told me the same thing: That they wouldn't provide a prequal if they were not going to get the loan.

Short version: Seller requires me to apply with them directly before selling me the house. 

Note: The Broker and Realtor in question did not submit my offer for more than 24 hours due to this, and even then it was only submitted because I specifically stated that I would not comply, and would take further action if my bonafide offer was not presented to the seller. I did offer a prequalification from my own choice of lender to accompany the offer, and this was declined initially but later they stated if the company accepts my offer, they will require it within 48 hours.

Thoughts? Suggestions? 

 

 

Posted by Kathy Bohon almost 12 years ago

Sounds like someone's playing favorites for somebody somewhere based on what I think I'm understanding here, Kathy. Might be time to call the legal department if you suspect occupational favorites, financial fraud or abuse here. Maybe the sellers requirement for the prequal is considered acceptable in Missouri rather than what the law requires for the actual loan which should always allow you to choose the lender of your discretion; a question for competent legal authority. Besides, a prequal is not a preapproval. There's a difference. The prequal just says that they're capable of buying the house and is just an estimate of the most expensive home a buyer can afford based on the buyers income and available liquid assets. The preapproval says that they can buy it because they have the money available and have been approved for a certain loan amount already by the lender. Preapproval is a practice by the lender that allows a prospective homebuyer to shop with confidence and knowledge that they can share with a seller or broker and demonstrate their financial security. Just because they have a prequal doesn't mean they'll be approved for the loan they're requesting, and the loan might be denied on the basis of a prequal without further proof of funds. The prequal isn't the whole picture of a borrowers financial health. A preapproval says that they're already approved. The seller should know that they can't make you apply for the loan with anyone other than the lender of your buyers choice. They'd be in some real hot water if they refused the sale because you refused to use their lender.

Of course, if your lender isn't approved by your seller because of some appropriate legal issue, then they may have the right to refuse the lender. As an example, if your buyer is borrowing the money and receiving a deed of trust from a lender that works for the mafia, and works from the back seat of his Lincoln in front of the Tangiers Casino in Las Vegas, I believe they can refuse the lender. Again, an attorney would be a good start for a ruling.

Hope it all works out satisfactorily for you. Thanks for commenting, Kathy. It's an important issue that merits attention.

Posted by David Saks ((retired)) almost 12 years ago

David, I would say to Kathy Bohon....ask this listing agent "Can You Spell   R E S P A ?"

As for PreQual and PreApproval...Preapproval isn't as all encompassing as one might think...all preapprovals are "Subject To...." a whole host of things which can make financing fall though at the underwriting level.  That's more often than not, a less experienced loan officer that doesn't anticipate.

As for Chosing a Lender....I don't think the law would make distinctions as to what potential lender is "valid" or not.  Money is money.  "Uncle Sal's cash in the truck" shouldn't matter.

Posted by David W. Bolick (Network Real Estate, Inc.) almost 12 years ago
Good point, David. Although there might be some buyer assisted issues at closing that arise with Uncle Sal,
Posted by David Saks ((retired)) almost 12 years ago
btw...David...thanks for your nice thoughts about my recording. I'm honored by your comments.
Posted by David Saks ((retired)) almost 12 years ago

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