HUD-1 Form Definition
The HUD-1 Settlement Statement, colloquially known as a ‘closing sheet’, is a form that lists all the closing costs involved in real estate sale transactions. Buyers and sellers typically use the HUD-1 to finalize reverse mortgage and mortgage refinance transactions. A Closing Disclosure form is used for all other types of transactions pertaining to real estate transfer.
A Little More on What is the HUD-1 Form
The HUD-1 form depicts the closing transactions and offers both the seller and the buyer a comprehensive list of inbound and outbound cash flows. The HUD-1 is also used as the generic settlement document in reverse mortgage and mortgage refinance settlements as mandated by the Real Estate Settlement Procedures Act (RESPA). Settlement agents also use the HUD-1 form to settle mortgage transactions in which the mortgage was applied for before Oct. 3, 2015.
The Real Estate Settlement Procedures Act entails settlement agents to provide borrowers with a copy of the HUD-1 preceding the final settlement. However, the parties are free to modify data until the time the settlement process initiates. Usually real estate agents, attorneys or settlement agents are present during settlement in order to review the forms and detect errors. The HUD-1 form was conspicuous by its use of the term “borrowers” for property buyers even when no loan is associated with the purchase.
HUD-1 Itemized Costs
The reverse side of the HUD-1 consists of two columns. The left-hand column is an itemized list of borrower’s charges: miscellaneous mortgage fees such as loan origination fees, discount points, credit reports, and appraisal and flood certification fees. The column also includes prepaid interest cost, homeowner’s insurance fees, property taxes, owner and lender’s title insurance, and the closing agent’s fees. The right-hand column, on the other hand, is an itemized list of the seller’s charges, including real estate commission, credit due to the buyer and mortgage pay-off data. The borrower’s charges are usually higher than the seller’s charges. The front side of the HUD-1 form includes the sum of all charges hitherto mentioned on the reverse side of the form. At the bottom of this side are included the total amount due from the borrower as well as the amount payable to the seller.
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 makes it mandatory for mortgagees to provide mortgagors with a closing disclosure for all types of mortgages. However, reverse mortgages and mortgage refinances are left out of the purview of the act. The TILA-RESPA Integrated Disclosure rule makes it obligatory for lenders to provide borrowers with the disclosure three days before closing the mortgage. Such disclosures typically contain information regarding the final cost of the mortgage, and closing costs. The three-day prerequisite grants the borrowers enough time to clear any issues that they might have, before the mortgage is closed.
References for HUD 1 Form
Academic Research on the HUD-1 statement
Housing and Urban Development, Agent, H. S., & Date, I. S. and Urban Development.
An overview of the predatory mortgage lending process, Renuart, E. (2004). An overview of the predatory mortgage lending process. Housing Policy Debate, 15(3), 467-502. The article begins with a description of the mortgage marketplace and its players. Next, it examines distinctions among the prime, subprime, and predatory segments of this market, particularly as they relate to risk, pricing, and borrower characteristics.The remainder of the article describes the characteristics of predatory loans and their life cycle, from marketing and origination to securitization and servicing. The article closes with a description of the revenue source(s) for each of the actors and the effect of that revenue stream on the actor’s incentives.
Hidden Costs to Homeowners: The Prevalent Non-Disclosure of Yield Spread Premiums in Mortgage Loan Transactions, Hong, P. J., & Reza, M. (2005). Hidden Costs to Homeowners: The Prevalent Non-Disclosure of Yield Spread Premiums in Mortgage Loan Transactions. Loy. Consumer L. Rev., 18, 131.
RESPA in a Nutshell, Field, C. G. (1976). RESPA in a Nutshell. Real Property, Probate and Trust Journal, 447-453.
Consumer confusion in the mortgage market, Woodward, S. E. (2003). Consumer confusion in the mortgage market.
Federal Regulation of Home Closings-The Real Estate Settlement Procedures Act of 1974, Hisrchler, E. S. (1975). Federal Regulation of Home Closings-The Real Estate Settlement Procedures Act of 1974. U. Rich. L. Rev., 10, 63.
2010 Survey of REPSA Developments, Kromer, J. P., Shatz, S., & Cannon, J. W. (2010). 2010 Survey of REPSA Developments. Bus. Law., 66, 435.
2012 Survey of RESPA and TILA Regulatory Developments, Shatz, S., & Cannon, J. W. (2012). 2012 Survey of RESPA and TILA Regulatory Developments. Bus. Law., 68, 583.
Mortgage Lenders’ New Regulator: The Plaintiffs’ Bar, Jaworski, R. M., & Cronk, H. H. (2001). Mortgage Lenders’ New Regulator: The Plaintiffs’ Bar. Bus. Law., 57, 1275.
Consumer Protection Out of the Shadows of Shadow Banking: The Role of the Consumer Financial Protection Bureau, Reiss, D. (2012). Consumer Protection Out of the Shadows of Shadow Banking: The Role of the Consumer Financial Protection Bureau. Brook. J. Corp. Fin. & Com. L., 7, 131. This essay suggests that consumer protection regulation has an important role to play in the regulatory structure of the shadow banking sector. It describes the role of shadow banking in the residential mortgage market. It also contrasts two mortgages. One is emblematic of shadow mortgage banking during the Subprime Boom. The other is Dodd-Frank’s response to the excesses of the Subprime Boom — the “Qualified Mortgage.” It then evaluates whether “Qualified Mortgages” can restrain some of shadow mortgage banking’s excesses, and finds that they may be able to do so.
Dealing with Mortgage Loan Brokers: Legal and Practical Issues, Mazzaghetti, D. A. (1997). Dealing with Mortgage Loan Brokers: Legal and Practical Issues. Banking LJ, 114, 923.