RESPA Tip

When the HUD-1 is prepared by an outside settlement agent, the bank should have a process for reviewing the HUD-1s for quality, recommends Ken Baebel of the FDIC. Baebel advised attendees at BAI's ACE conference that they should identify settlement agents who generate errors on HUD-1s, and ask the settlement agents to complete HUD-1s correctly. Whether the bank is liable for the settlement agent's errors may depend on state law. Baebel recommends that you also know your state law on agency.Baebel also predicts that dropping interest rates this summer and fall will result in an increase in refinances. Refinances is where many HUD-1 violations occur, particularly the error of omitting items such as hazard insurance and taxes from the HUD-1.

Copyright © 2001 Compliance Action. Originally appeared in Compliance Action, Vol. 6, No. 3, 4/01