The HUD-1, also known as the settlement statement, is a prescribed form from the U.S. Department of Housing and Urban Development (HUD).   This form itemizes all credits and charges imposed on the borrower and all credits and charges imposed on the seller in connection with the settlement of your real estate transaction.  A refinance will only have the borrowers credits and charges itemized.

The HUD-1 is filled out by the settlement agent who will conduct the settlement.  It is then reviewed for compliance and approved by your lender.  The fully completed HUD-1 Settlement Statement generally must be delivered or mailed to you at or before the settlement.  In cases where there is no settlement meeting, the escrow agent will mail you the HUD-1 after settlement, and you have no right to inspect it one day before settlement.

Let’s take a look at the updated HUD-1.  The HUD-1 is the final disclosure of settlement costs provided to the borrower at closing.  It may also be requested by the borrower one business day prior to closing so that he/she may review the document prior to actually coming to the settlement table.

The HUD-1 form is used in purchase transactions, and it includes lines for both borrower charges/fees and seller charges/fees.  Also, note that HUD updated the HUD-1A form.  The HUD-1A is an option, instead of using the HUD-1, for loan transactions that do not include a seller (refinance).  The HUD-1 is three pages, while the HUD-1A is only two pages.

Although some fees are subject to tolerances, where re-disclosure and borrower credit are required if they are not accurate, the overall goal of the HUD-1 is to present an accurate depiction of the settlement costs related to the loan transaction.  We will review the disclosure section by section.

HUD-1  Sections A. – I.

Section A.  Is the document title and requires no information to be entered on the form.

 Section B. Type of Loan:   Includes check boxes for the type of loan (i.e. FHA, VA, RHS, Conventional, etc.) as well as spaces for an internal file number, the loan number (FHA loans) and the mortgage insurance case number, if applicable.

 Section C.    Is a notice about settlement costs and requires no information to be entered on the form. The section clarifies that items marked “P.O.C.” are paid outside of closing.

 Sections D. – F.    Provide spaces for the names and addresses of the borrower, seller and lender, respectively.  HUD’s guidelines about this section indicate that an extra page may be attached if there is more than one borrower and/or seller.

 Section G:  Provides space for the street address of the subject property.  HUD’s guidelines specify that if no street address is available, a legal description and the property zip code should be entered.

 Sections H. and I.:   Provide spaces for information about the settlement agent, the settlement date and the address of the place of settlement.

HUD-1  Section J.  Summary of Borrower’s Transaction

Section J .   provides a summary of the borrower’s transaction.  It is broken down into the following line items:

 100. Gross Amount Due from Borrower:   These line items include costs such as the contract sales price, total settlement charges, taxes and assessments.  There are a number of blank lines for additional entries.  Line 120 lists the “Gross Amount Due from Borrower.”

 200. Amount Paid by or on Behalf of Borrower:   These items include deposits, principal of new loan(s), existing loan(s) and adjustments for items unpaid by the seller (i.e. taxes and assessments).  Similar to the 100.  line items, there are blanks for additional entries, and Line 220.  lists “Total Paid by/for Borrower.”

 300. Cash at Settlement from/to Borrower:   These lines account for the difference between Lines 120 and 220.

Section J.  Line Item Details

HUD guidelines provide the following details about the line items listed in this section: [1]

 Line 101:   Gross sales price of the property being sold, minus the price of any personal property included in the sale if a separate price has been agreed upon for those items.  In other words, this is the contract sales price.

 Line 102 :  Gross sales price of tangible personal property excluded from Line 101. Examples include carpet, drapes, and appliances.  HUD’s guidelines specify that manufactured homes are not considered personal property for the purposes of this line item.

 Line 103:   Total settlement costs charged to the borrower are detailed in Section L. of the HUD-1 and also totaled on Line 1400.

 Lines 104 and 105:   Are blank for additional entries.  HUD’s guidelines provide the following example of items that may be entered here:  reserve account balance in the case of a loan assumption, rent still due prior to settlement when a tenant has not made payment and tenant security deposits – the seller is credited for these items in Section K.

 Lines 106 – 112:   Are items which the seller has paid in advance and which the borrower must reimburse him/her for.  Examples include taxes and assessments paid in advance, ground rent paid in advance, flood and hazard insurance premiums if the borrower is taking the seller’s place on the same policy and mortgage insurance on loan assumptions.

Line 120 :  Lists the “Gross Amount Due from Borrower”

 Line 201:   Is for any amount paid against the sales price prior to settlement such as an earnest money deposit.

 Line 202:   Is for the amount of the new loan made by the lender for the subject property.  There are additional considerations for the whole form if the financing is for temporary or construction/permanent financing.

 Line 203:  Is used for cases in which the borrower is assuming or taking title subject to an existing loan or lien on the property.

 Lines 204 – 209:   Are blank for additional entries.  Examples included in HUD’s guidelines are when the seller has taken a trade-in from the borrower as partial payment for the property or when there are seller financing arrangements not listed in Line 202.

 Lines 210 – 219:   Are for items such as taxes and assessments that are still unpaid and will be required from the borrower at closing.  Blanks in this section might also include interest on loan assumptions, rent collected in advance by the seller from a tenant for a period past settlement and utilities used but not paid for by the seller.

 Line 220-  Lists the “Total Paid by/for Borrower”

Lines 301 – 303:   Are for calculating the cash due from the borrower or the cash due to the borrower at settlement.  Line 303 shows the final amount due from or to the borrower and includes check boxes to clarify.

HUD-1 Section K. Summary of Seller’s Transaction

Section K. is similar to Section J. and provides a summary of the seller’s transaction.  With the exception of specific fees – such as owner’s title insurance paid by the seller – the costs shown in this section are not shown on the GFE.  It is broken down into the following line items:

 400. Gross Amount Due to Seller:   These line items include costs such as the contract sales price, taxes and assessments.  There are a number of blank lines for additional entries.  Line 420 lists the total “Gross Amount Due to Seller.”

 500. Reductions in Amount Due to Seller:   These items include excess deposit, existing loan(s), payoffs of first and second mortgages and adjustments for items unpaid by the seller.  Similar to the 400 line items, there are blanks for additional entries, and Line 520 lists “Total Reduction Amount Due Seller.”

 600. Cash at Settlement to/from Seller:   These lines account for the difference between Lines 420 and 520.

Section K.  Line Item Details

HUD guidelines provide the following details about the line items listed in this section: [1]

 Lines 401 420:   HUD’s instructions for Lines 101, 102 and 104 – 112 apply to these line items.

 Line 501:  Is used if the real estate broker has received and held an earnest money deposit in trust for the seller. This amount, less commission, is entered here if it is not made payable via the settlement agent.

 Line 502:   Lists the total amount of settlement costs charged to the seller.  These items are detailed in Section L. and also totaled on Line 1400.

 Line 503:  Is used in the case of an assumption where the borrower takes title subject to existing liens which will be deducted from the sales price.

 Lines 504 and 505:   Are used for the seller’s first and second (if applicable) loans to be paid through the settlement.

 Lines 506 – 509:   Are used to list any additional liens which must be paid off through settlement to clear the title to the property.  These lines may also be used to account for funds held by the settlement agent to pay for utility bills that cannot be prorated prior to settlement.

 Lines 510 – 519:   HUD’s instructions for Lines 210 – 219 apply to these line items.

Line 520 :  Lists the Total Reduction Amount Due Seller”

HUD-1  Section L.  Settlement Charges

Section L details the settlement charges paid in connection with the loan.  Each section includes columns to denote whether the fee is paid from the borrower’s funds at settlement or the seller’s funds at settlement.  HUD’s guidelines note that for “no cost” or “no point” loans, where the charges are handled through a borrower credit, the relevant line items should be marked “P.O.C.” and should not be used in computing totals.

Section L is broken down into the following line items:

700. Total Real Estate Broker Fees:   This section is used to enter the sales commission charged by the sales agent or broker.  There are lines used to indicate if the commission is split between two or more agents.  The 700 section is another area that does not have a corresponding section on the GFE since the lender does not require this charge to qualify for a loan.

800.  Items Payable in Connection with Loan:   Line items in this section reference the GFE (Line A and Blocks 1 3) and include origination charges, interest rate credits, appraisal fee, credit report fee, tax service fee and flood certification.

900.  Items Required by Lender to be Paid in Advance:  Line items in this section are used for items such as per diem interest, mortgage insurance premium due at closing and homeowner’s insurance premiums due at closing.  GFE amounts are also referenced in this section (Block 3, 10, and 11). These are often referred to as “pre-paids.”

Because daily interest charges will vary based on the actual date of closing, the information in Line 901 may not be the same as what was disclosed on the GFE.  Items that are required to be paid prior to closing – such as the homeowner’s insurance policy – should be marked “P.O.C.”

1000.  Reserves Deposited with Lender:   Line items here are similar to some of those listed in 900 but are amounts used to establish the escrow account.  The initial escrow deposit (GFE Block 9 is referenced) is listed as well as deposits for homeowner’s insurance, mortgage insurance and property taxes.  Line 1007 is used as an adjustment to ensure regulations are observed related to maximum amounts that may be collected for escrow.

1100.  Title Charges:   Line items in this section detail the charges for services performed by the title company or attorneys.  Title services and owner’s title insurance are line items that reference charges listed on the GFE (Blocks 4 and 5).  As noted previously, owner’s title insurance is one charge that may be paid by the seller but is still reflected on both the GFE and the HUD-1.

Details related to these line items include the following:

• Line 1101:   Covers the charge for all title services as well as the lender’s title insurance, and it corresponds with Block 4 on the GFE
• Line 1102:   Is the fee for settlement/closing if the settlement is handled by a person or company that is not the same as the title company that provides title insurance.  It is an itemized amount from the total charges that appear on Line 1101
• Line 1103:   Is the charge for owner’s title insurance.  It matches up with Block 5 on the GFE and may be a borrower-paid or seller-paid cost
• Line 1104:   Itemizes the cost of the lender’s title insurance that is included in the total shown on Line 1101
• Line 1105:   Provides the limit for the lender’s title policy.  It should be noted that the amount may be lower than the subject property value since the policy only covers the loan amount
• Line 1106:   Provides the limit for the owner’s title policy.  Unlike the lender’s policy, the owner’s title policy is usually the purchase price
• Line 1107:   Itemizes the portion of the title insurance premium that goes to the title insurance agent
• Line 1108:   Itemizes the portion of the title insurance premium that goes to the underwriter

1200. Government Recording and Transfer Charges:   These items include the costs of recording the title/deed, transfer taxes, etc.  Government recording charges and transfer taxes are line items that reference charges listed on the GFE (Blocks 7 and 8).

1300.  Additional Settlement Charges:   Required services that the borrower has been required to shop for (references GFE Block 6) are listed in this section.  Examples include survey or inspection for items such as pests, radon, lead paint, etc.

HUD-1A  Section L.

Section L for the HUD-1A is slightly different than the HUD-1.  This section on the HUD-1A begins with 800. Items Payable in Connection with Loan .  It also does not have columns to denote whether a fee is paid from the borrower’s funds at settlement or the seller’s funds at settlement.  Instead, there is a column entitled “M. Disbursements to Others” (Lines 1501 – 1515; 1520 is used to total the previous lines).

There is also a section entitled “N. Net Settlement.”   This section includes line items which calculate the total disbursements to the borrower:  Loan Amount + Cash/Check from Borrower – Total Settlement Charges – Total Disbursements to Others = Total Disbursements to Borrower (after expiration of any applicable rescission required by law).

Comparison of Good Faith Estimate (GFE) and HUD-1 Charges

The following three sections were added to the HUD-1 in its updated format and are used as a summary enabling the borrower to see any differences in charges disclosed on the Good Faith Estimate (GFE) and final amounts on the HUD-1.  Just like the GFE, there are sections for charges that cannot increase, those that cannot increase by more than 10% and those that can increase.

Charges That Cannot Increase

These include the origination charge (HUD-1 Line 801), points (HUD-1 Line 802), adjusted origination charges (HUD-1 Line 803) and transfer taxes (HUD-1 Line 1203).  Remember, even though the GFE is an estimate, these charges are amounts that should be known at the time of loan application, and the loan originator should not have to estimate them.

Charges That in Total Cannot Increase More than 10%

These include government recording charges (HUD-1 Line 1201).  There are also blanks for additional fees in this category.  The bottom of this section provides space to list the percentage of increase and/or the dollar amount of any increase.  These items are permitted to vary but should reflect a close estimate; the loan originator should be aware of the customary amount of these charges.

Charges That Can Change

These include initial escrow account deposit (HUD-1 Line 1001), daily interest charges (HUD-1 Line 901) and homeowner’s insurance (HUD-1 Line 903).  There are also blanks for additional fees in this category.  These are items that can vary until a settlement date is chosen so they are difficult to accurately estimate on the GFE.  They may also include services borrowers shop for and select on their own, and therefore cannot be estimated until close to settlement.

Similar to the GFE section entitled “Summary of Your Loan,” the “Loan Terms” section of the HUD-1 and HUD-1A provide specifics about the loan such as loan amount, term, interest rate, monthly PITI payment and total monthly amount owed for escrow payments.  Just like the GFE, it also answers the following questions for the borrower:

Can your interest rate rise?

Even if you make payments on time, can your loan balance rise?

Even if you make payments on time, can your monthly amount owed for principal, interest and mortgage insurance rise?

Does your loan have a prepayment penalty?

Does your loan have a balloon payment?