What Is a HUD-1 Form?
A HUD-1 form, also known as a HUD-1 Settlement Statement, is a standardized document used in mortgage lending. This form creates an itemized list of all charges and credits to the buyer and seller involved in a consumer credit mortgage transaction, especially for reverse mortgages and refinance transactions.
Originally, the HUD-1 form was used for all real estate transactions, but as of October 3, 2015, it was replaced by the Closing Disclosure form for most transactions. Real estate deals without a seller, such as refinancing, may use a HUD-1A form. Regardless of the form, borrowers must review it before closing to avoid errors or unexpected expenses.
Key Takeaways
- The HUD-1 form lists all closing costs and is primarily used for reverse mortgages and mortgage refinance transactions.
- Since late 2015, the Closing Disclosure form is used for all other real estate transactions.
- It is crucial for the borrower to review the form before closing to detect any errors or unplanned expenses.
Understanding a HUD-1 Form
The HUD-1 form itemizes all costs related to closing a real estate transaction. Federal law mandates the use of this form in standard real estate settlements for reverse mortgages and refinance transactions. Borrowers must receive a copy of the HUD-1 at least one day prior to settlement, though last-minute updates are permissible.
Reviewing the form with a real estate agent, attorney, or settlement agent is common practice. Note that on the HUD-1 form, the term ‘borrowers’ refers to buyers, regardless of whether a loan is involved.
What’s Included in a HUD-1 Form?
Interestingly, the HUD-1 form should be reviewed from the verso (reverse side) first. This page contains two columns: the left-hand column itemizes the borrower’s charges, and the right-hand column itemizes the seller’s charges.
Items for Borrowers:
- Loan origination fee
- Discount points
- Credit report fee
- Appraisal and flood certification fees
- Prepaid interest charges
- Homeowner’s insurance fees
- Property taxes
- Title insurance (owner’s and lender’s)
- Closing agent fees
Items for Sellers:
- Real estate commission
- Agreed-upon buyer credit
- Mortgage pay-off details
After itemizing, the totals from the verso are carried over to the front side (recto) of the form, showing the exact cash required from the borrower and the payments to the seller.
Special Considerations
The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 mandates that lenders provide all mortgage borrowers, excluding those involved in reverse mortgages and refinances, with a Closing Disclosure form. Discrimination in mortgage lending is illegal, and any suspected discrimination should be reported to the Consumer Financial Protection Bureau or the U.S. Department of Housing and Urban Development (HUD).
Borrowers must receive the Closing Disclosure at least three days before closing. This five-page document provides finalized figures for all fees, costs, loan terms, and projected monthly payments. The three-day timeframe allows borrowers to ask questions and resolve discrepancies.
Are HUD-1 Forms Still Used?
Yes, HUD-1 forms are still utilized for reverse mortgages and refinancing. Though largely replaced by the Closing Disclosure for other real estate transactions in 2015, HUD-1 remains the go-to document for detailed charge itemization in specific cases.
Understand Reverse Mortgage
A reverse mortgage allows individuals aged 62 and older to borrow against their home’s equity. The loan can be received as a lump sum, fixed income stream, or line of credit. The loan repayment is due when the homeowner dies, moves, or sells the home.
Timing of Closing Disclosure
You will receive your Closing Disclosure at least three days prior to closing the deal. This document isn’t applicable for reverse mortgages or mortgages originated before October 3, 2015.
The Bottom Line
The HUD-1 form, or Settlement Statement, breaks down all charges and credits in real estate transactions, detailing financial aspects for both buyers and sellers. Despite being replaced by the Closing Disclosure for most mortgage loans, it continues to play a crucial role in reverse mortgages and refinancing processes.
Related Terms: Closing Disclosure, reverse mortgage, real estate settlement agent, Dodd-Frank Act, borrower’s charges, seller’s charges.
References
- Consumer Financial Protection Bureau. “What Is a HUD-1 Settlement Statement?”
- Consumer Financial Protection Bureau. “1024.10 One-Day Advance Inspection of HUD-1 or HUD-1A Settlement Statement; Delivery; Recordkeeping”.
- Consumer Financial Protection Bureau. “When Do I Get a Closing Disclosure?”
- Federal Trade Commission. “Reverse Mortgage”.
