HUD-1s and Fees

by Lucy Griffin, BOL Guru

Question: We are a mortgage lender that purchases loans and originates loans using settlement services. We often see final HUD-1s with names for fees that are unfamiliar. For instance, on line 1303, the settlement agent has written "Pay to Broker per borrower's instructions the sum of $1200." Is this a legitimate fee? Is it a finance charge? And what is it doing on line 1303?

Answer: This is a great example of "just because someone did it doesn't make it right." This both looks and smells like a broker fee. The broker fee is a finance charge under TIL. It should definitely be included in the finance charge, even if the lender did not require or arrange for the fee. The settlement agent may be trying to make the fee look like something else by placing it on line 1303. Most lenders put this in the 800 series. For RESPA purposes, it can go either place as long as it is picked up as a finance charge.

Copyright © 2004 Compliance Action. Originally appeared in Compliance Action, Vol. 9, No. 2, 3/04