GFE and HUD-1 Disclosures

Question: I have heard that we should disclose taxes and insurance costs on the GFE and HUD 1A even in a non-sale transaction, i.e. a home equity loan. Can you give me some guidance on that? I am wondering how accurate the figures should be given that, I presume, we often may be taking the customer's word for it. And I presume we should show them as POC as we will never be collecting them.

Answer: HUD's view is that all settlement costs must be disclosed, even if they are not direct costs of credit. Then HUD makes the assumption that you wouldn't be making the loan if the borrower was not current on taxes and did not have insurance. This is one of the ultimate acts of regulatory bootstrapping. HUD has finally backed off on the tax issue but still wants to see the cost of insurance on the GFE and HUD-1. Accuracy, of course, depends on what the customer tells you. You can't get more accurate than the customer

Copyright © 2005 Compliance Action. Originally appeared in Compliance Action, Vol. 10, No. 13, 11/05