Hazard insurance on the HUD-1

Question: Do we have to show the cost of hazard insurance on the HUD-1 if the customer has already purchased the insurance?

Answer: Yes. HUD is of the opinion that you wouldn't make the loan without it and therefore it is a cost of settlement. While this is a highly questionable interpretation of RESPA, the safe procedure is to include the cost on the HUD-1 and show it as a POC.

I'm looking over our mortgage fees to find whether there are any kickbacks or duplications. I am concerned about attorneys fees. There appears to be some duplication, such as for document preparation. Does this constitute a kickback? What would be the penalties?If the attorney's bill is for work already done by the lender, then the fee is a duplicate fee and would violate RESPA. However, if it is for documents that the lender didn't prepare, then the fee would be legitimate. Attorney's fees are a murky area in RESPA. This is partly because the attorneys don't like breaking apart their fees to specify what they are for (RESPA requires this so don't let them get away with this) and partly because what lawyers actually do can be a mystery. The best way to approach the situation would be through in-house counsel if you have one. Lawyers are best at talking to other lawyers.

As for penalties, the statute outlines the fines in Section 8(d). The standard fine is $10,000. This can increase based on the number of violations.

Copyright © 2004 Compliance Action. Originally appeared in Compliance Action, Vol. 8, No. 14, 1/04