The HUD-1 form, also known as the Settlement Statement, is an itemized list detailing all the financial charges and credits involved in a real estate transaction. This key document is particularly used for reverse mortgage and refinance transactions, providing borrowers a comprehensive breakdown of what they will be paying at closing.
Historical Context and Evolution
The HUD-1 form originates from the Real Estate Settlement Procedures Act (RESPA) of 1974, aimed at providing transparency in real estate transactions. Historically, it was a critical element in virtually all residential real estate transactions until the introduction of the Closing Disclosure form under the TILA-RESPA Integrated Disclosure (TRID) rule in 2015, which replaced the HUD-1 for most transactions except reverse mortgages and certain refinance transactions.
Key Components of the HUD-1 Form
Charges and Credits
The form consists of various sections that detail the borrower’s and seller’s charges and credits:
- Sections A to I: General information including dates, names, and addresses of the parties involved.
- Sections J to L: The summary of the borrower’s transaction.
- Sections M to N: The summary of the seller’s transaction.
- Sections 1000: Fees related to the loan, like origination charges and lender’s administrative fees.
- Sections 1100: Title charges.
- Sections 1200: Government recording and transfer charges.
- Sections 1300: Additional settlement charges such as pest inspection fees.
- Sections 1400: Total settlement charges either by the borrower or seller.
Lender Reconciliation
All costs associated with originating and servicing the loan are reconciled in this section, ensuring transparency and compliance with lending guidelines.
Practical Example
Consider a scenario where a borrower refinances their mortgage:
- Loan Origination Fee: $2,500
- Title Services and Lender’s Title Insurance: $1,000
- Government Recording Charges: $125
On the HUD-1 form, these charges will be itemized, showing the borrower all individual fees contributing to the total closing costs.
Differences and Comparisons
HUD-1 vs Closing Disclosure
- Scope: HUD-1 is specific to reverse mortgages and certain refinance transactions, whereas the Closing Disclosure is used for other mortgage transactions.
- Content: Both convey the same essential information but do it in different formats tailored to their specific purposes.
HUD-1 vs Good Faith Estimate (GFE)
- Timing: GFE is provided at the beginning of the loan application process, listing estimated charges, while HUD-1 is given at closing with final charges.
- Purpose: GFE forms provide an estimate, whereas HUD-1 provides the actual costs and reconciliations at settlement.
Related Terms
- RESPA (Real Estate Settlement Procedures Act): Legislation aimed at providing clarity and transparency in real estate transactions.
- TRID (TILA-RESPA Integrated Disclosure): New regulation combining the disclosures required under TILA and RESPA.
- Closing Disclosure: A five-page form that provides final details about the mortgage loan for transactions other than reverse mortgages.
FAQs
Is the HUD-1 Used for All Mortgage Transactions?
When Should the Borrower Receive the HUD-1 Form?
Can Costs Listed on the HUD-1 Form Vary Significantly from the Good Faith Estimate?
Summary
The HUD-1 form remains a critical document in specific real estate transactions, providing a detailed breakdown of all costs and serving a crucial role in transparent and compliant loan settlements. Understanding the HUD-1 form ensures borrowers are well-informed about their financial obligations and can navigate their real estate transactions with confidence.
References:
- Real Estate Settlement Procedures Act (RESPA).
- TILA-RESPA Integrated Disclosure (TRID) Rule.
- Consumer Financial Protection Bureau (CFPB) resources on HUD-1 and Closing Disclosure forms.
