7655. Interpretation of Regulation Z

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FED ER A L RESERVE BANK O F N E W YORK [ Circular No. 7 6 5 5 "I June 18, 197S J INTERPRETATION OF REGULATION Z Standardized Form for the Disclosure of Real Estate Settlement Costs To All State Member Banks, and Others Concerned, in the Second Federal Reserve District:

The following statement has been issued by the Board of Governors of the Federal Reserve System in connection with the adoption of a new Truth in Lending disclosure form designed to as­ sist home buyers in understanding the credit terms of their mortgages: The Board of Governors of the Federal Reserve System today announced the adoption of a Truth in Lending disclosure form to assist consumers in understanding the credit terms of home purchase transactions. The new form will be part of a combined settlement and credit cost form developed by the Housing and Urban Development Department, to implement the requirements of the Real Estate Settlement Procedures Act of 1974.

The Act requires that consumers be given a Uniform Disclosure/Settlement Statement at the time of lender commitment (but in no case less than 12 days before settlement) and again at the time of settlement in home purchase credit transactions.

This statement will contain all information required to be disclosed under the Truth in Lending Act. The Federal Reserve Board prepared this part of the Statement since it is the rule-making agency under the Truth in Lending Act.

The new form is accompanied by instructions for its use. The form will be the third page of the Uniform Disclosure/Settlement Statement.

The Board also published an interpretation of its Regulation Z—Truth in Lending—in connection with the disclosure requirement.

Enclosed is a copy of the interpretation to Regulation Z. Any questions regarding this matter may be addressed to our Bank Regulations Department. Additional copies of the interpretation will be furnished upon request.

As indicated in the above statement, the Real Estate Settlement Procedures Act of 1974 re­ quires that consumers be given a Uniform Disclosure/Settlement Statement at the time of lender commitment (but in no case less than 12 calendar days before settlement) and again at the time of settlement. This standard form developed by the Department of Housing and Urban Development (H U D ) includes, as the third page, a Truth in Lending disclosure form, which was prepared by the Board of Governors of the Federal Reserve System in its capacity as the rulemaking agency under the Truth in Lending Act. This form contains all information that is required to be dis­ closed under the Truth in Lending Act. A sample of the three-page statement, together with in­ structions for its use and printing, is included in the May 22, 1975 Federal Register, “Real Estate Settlement Procedures and Costs,” (P art III, Vol. 40, No. 100), issued by HUD, reprints of which are being sent with this circular to all State member banks in this District, for their main offices and branches.

In addition to the above disclosure statement, HU D has prepared a booklet entitled “Settle­ ment Costs” that you are required to provide to each person applying for a home mortgage loan after June 20, 1975. The booklet is designed to help borrowers better understand the nature and costs of real estate settlement services. You may obtain copies from the Superintendent of Docu­ ments, U. S, Government Printing Office, Washington, D. C. 20402. A l f r e d H a y e s , President.

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Board of Governors of the Federal Reserve System TRUTH IN LENDING IN T E R PR E T A T IO N OF REG U LA TIO N Z Disclosures Made in Connection With the Real Estate Settlement Procedures Act This interpretation is written to clarify the application of Regulation Z to the standardized form, including Truth in Lending disclosures and instructions, prescribed by the Department of Housing and Urban Development to meet the disclosure requirements of the Real Estate Settlement Procedures Act. For example, the standardized form is designed for the disclosure of loans and credit sales, and it should be used regardless of any differing requirements in Regulation Z.

§226.102—Disclosures made in connection with the Real Estate Settlement Procedures Act of 1974.

The Real Estate Settlement Procedures Act of 1974 (P.L. 93-533) requires the Department of Housing and Urban Development to pre­ scribe a standardized form for the disclosure of settlement costs, which must be given to home buyers in transactions which involve federally related mortgage loans. Section 4 of the statute specifically requires that such form include all information and data required to be disclosed by the Federal Truth in Lending Act. A Truth in Lending disclosure form (herein­ after referred to as “form” ) and instructions to be used in completing such form have been pre­ scribed as a part of the standardized form. Because of the unavoidable complexity inherent in combining settlement and credit costs into one form, the requirements relating to the use of the standardized form differ to some degree from the requirements imposed under Regula­ tion Z. It is the purpose of this interpretation to eliminate any confusion as to the steps creditors must take in complying with the Truth in Lend­ ing disclosure requirements in completing the form and to clarify the interrelationship be­ tween the Truth in Lending Act and the Real Estate Settlement Procedures Act. Sections 226.6(b), 226.8(c), and 226.8(d) of Regulation Z characterize credit transactions as loans or credit sales and require differing disclosures for each. The form is designed for the disclosure of both credit sales and loans. The form should be used for consumer credit transactions subject to the Real Estate Settle­ ment Procedures Act regardless of whether the transaction may be characterized as a loan or [Enc. Cir. No. 7655] a credit sale and such use shall not constitute a violation of the Truth in Lending Act. Notwithstanding the provisions of § 226.8- (a) (1), the form precludes the inclusion of the promissory note or other instrument evidencing the obligation. Notwithstanding the provisions of § 226.6(c) (2), the form precludes the inclu­ sion of any inconsistent State disclosure re­ quirements. Notwithstanding the provisions of § 226.8(a), itemization and disclosure of charges excludable from the finance charge under § 226.4(b) may be made on the settlement costs portion of the combined form. The form, when properly completed in ac­ cordance with Regulation Z and the instructions provided with the form, constitutes compliance with the provisions of § 226.6(a) relating to “clear, conspicuous, and meaningful sequence” disclosure requirements.

(Under § 226.6(a) creditors must continue to disclose more con­ spicuously the terms “annual percentage rate” and “finance charge” as well as making numeric disclosures under the type size requirements specified.) The instructions accompanying the form permit creditors to delete inapplicable dis­ closures, to substitute more pertinent disclosures for those presently included, to provide for ad­ ditional space or language where necessary to satisfy full disclosure, and to make additional disclosures not presently included where such are required. Such permissive changes to the form should be made in compliance with § 226.6(a).

The form provides for the optional disclosure of the simple annual rate of contract interest. The disclosure of such rate does not constitute a violation of § 226.6(c).

The definition of “federally related mortgage loan” provided in § 3 of the Real Estate Settle­ ment Procedures Act (12 U.S.C. § 2602) could be interpreted as requiring settlement cost dis­ closures in transactions which are exempt under § 226.3. In such cases, the form need not be provided.

The effective date of this interpretation is June 20, 1975, which coincides with that of the Real Estate Settlement Procedures Act. (Interprets and applies 12 C.F.R. 226.4, 226.6, and 226.8) By order of the Board of Governors, May 5, 1975.

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Federal Register, May 22, 1975 C O R R E C T I O N Please note that there is a technical error in the enclosed Federal Register reprint.

The samples of HUD Form 1 on page 22^+55 and page 22^62 should he reversed, since the sample on page 22^55 has numbered settlement costs that correspond with the accompanying explanation of each item on page 22U60. Circulars Division Federal Reserve Bank of New York Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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THURSDAY, MAY 22, 1975 WASHINGTON, D.C.

Volume 40 ■ Number 100 PART III DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Office of Assistant Secretary for Housing Production and Mortgage Credit-Federal Housing Commissioner Real Estate Settlement Procedures and Costs Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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22448 RULES AND REGULATIONS Title 24— Department of Housing and Urban Development SUBTITLE A— OFFICE OF THE SECRETARY [D ocket No. R 75—318] PART 82— REAL ESTATE SETTLEMENT PROCEDURES On February 18, 1975, 40 F R 7072, the D epartm ent published a notice of proposed rulem aking which would amend Subtitle A by adding a new P art 82. This p art implements sections 4, 5 and 6 of the R eal Estate Settlem ent Procedures Act of 1974, 12 U.S.C. 2601, which pro­ vide for a settlem ent cost statem ent form , a special inform ation booklet to be distributed at time of loan application, and an itemized disclosure of each charge arising in connection with each settle­ ment th at involves a federally related m ortgage loan transaction. A general no­ tice prescribing the text of the special inform ation booklet is being published concurrently with the regulations. The final versions of the uniform disclosure settlem ent statem ent, and the Truth in Lending statem ent which is a part of it, are included as Appendices A and B of the regulations. The uniform disclosure settlem ent statem ent is required by sec­ tion 4 of the Act to include the inform a­ tion and data required for relevant transactions under the Federal Truth in Lending Act and the regulations issued thereunder by the Federal Reserve Board. On M arch 24, 1975, (40 F R 13008) the Board published a proposed standard Truth in Lending Statem ent to satisfy the requirements of the Act. The B oard’s final revision of the form and instruc­ tions are included in these regulations as Appendix B. As a result of the invitation for public comment contained in the no­ tice for rulemaking, more than 500 re­ sponses have been received. The D epart­ ment h as considered each comment care­ fully and as a result has adopted certain changes in both the regulations and the accom panying form, as they were pro­ posed. The principal changes are as follow s:

G e n e r a l C o m m e n t s A number of comments objected to the overall concept of the Act, arguing that the conduct of real estate transactions was essentially a local m atter, that uni­ form ity in form s was im practical, that advance disclosure would not be of a s­ sistance to consumers, and that the pro­ cedures required by the Act would add to paperwork and costs of lend v s and providers of settlem ent services. C o v er a g e Numerous comments requested that the scope of coverage be defined. The final regulations provide that they apply to cases involving a purchase or transfer of property. Refinancings, junior m ort­ gages, consumer borrowings, and other cases in which there is no transfer of title to the real estate are not covered. Transfers in which an existing loan is assum ed or taken subject to are covered only if the loan terms are modified or the lender imposes charges exceeding $50.

The geographical coverage of the pro­ posed regulation was unclear, as several comments pointed out. The final regula­ tions apply to all territories and posses­ sions of the United States in addition to the continental United States and Puerto Rico.

Several comments requested that ex­ clusions be m ade for agriculture property and for builders or developers. In re­ sponse to these comments, the final regulations do not apply to real estate purchased for the purpose of resale to a custom er in the ordinary course of busi­ ness. The final regulations apply to m ort­ gages covering agricultural properties. Although numerous comments requested that the regulations not apply to corpo­ rations, partnerships, and other business entities, such an exclusion was not made and does not appear to be permissible. Several comments asked that sales of vacant land be exempted from the regu­ lations. The final regulations exempt such land unless the proceeds of the loan involved in the transaction are to be used, in whole or in part, to finance the construction of a dwelling. Several comments requested clarification of the coverage of mobile homes. The final reg­ ulations cover mobile homes and mobile home lots only if both the mobile home and the lot on which it is to be located are being purchased with the proceeds of the loan in question.

It was suggested th at the effective date of the regulations be extended beyond Jun e 20, 1975, in order to perm it more time for the persons who must implement the Act to study it, prepare forms, and train their personnel. Section 19 of the Act does not give the Departm ent dis­ cretion in this regard.

In response to numerous requests, the final regulations provide that lenders may, without special approval, place their own covers on the special inform a­ tion booklets which m ust be given to loan applicants. Other limited changes are permitted, as set forth in the final regu­ lations or as approved by the Secretary. Lenders m ay translate the booklet into other languages for the benefit of their custom ers, with the approval of the Secretary.

A d v a n ce D is c l o s u r e The advance disclosure required by the Act m ust be m ade at least 12 days prior to settlem ent unless the 12-day period is waived. Many comments re­ quested th at a period shorter than 12_ days be m ade standard, but section 6(a)* of the Act does not leave this m atter to the D epartm ent’s discretion. In general, advance disclosure m ust be given not later than 7 days after the date of the loan commitment. In cases in which a loan commitment is made more than 60 days before the anticipated date of settlement, the disclosure m ay be given later than the loan commitment, but not less than 60 days prior to settle­ ment.

Many comments asked for a clarifica­ tion of the term “ loan commitment” . The final regulations clarify the term, so that general advertising would not be re­ garded as a loan commitment. On the other hand, suggestions that the term be confined to written commitments were not adopted, since under such a rule, lenders might in some cases forego giv­ ing written commitments.

Numerous commentators believed that the lender or its employees were required to prepare and transm it the advance dis­ closure. The final regulations have been clarified to perm it the lender either to do such work itself or to cause it to be done by some other party, such as a title, settlement, or escrow company or a law­ yer. However, under the Act (section 6 (b )) the lender rem ains responsible. Som e comments raised questions con­ cerning the degree of efforts which the lender or other person preparing the ad ­ vance disclosure m ust exert to determine the charges to be made for various serv­ ices. If no provider of a particular service has been selected for the transaction at the time of disclosure, the lender may make an estim ate based on its knowledge of general practices in the area. If a provider has been selected, that provider should be contacted and asked what his fee will be, unless the lender already knows the provider’s schedule of fees and reasonably expects that schedule to be followed in the present case. Advance disclosure of prorations of taxes and assessm ents may be based on estim ates if exact figures are not avail­ able. Such advance disclosure m ay be based on the assum ption that no taxes or assessm ents are delinquent. A number of comments asked if the advance disclosure m ust be reissued if more inform ation about settlement charges become available to the lender after the initial disclosure but prior to settlement. Under the final regulations, reissuance of the advance disclosure is not required.

Som e comments pointed out that the retention-of-records requirements in the proposed regulations were not clear and were not identical to the requirements for Truth in Lending statem ents. Under the final regulations, copies of the ad ­ vance disclosure and the settlement statem ent m ust be retained by the lender for two years, except where the loan file is transferred, and copies m ust be submitted to the Departm ent upon re­ quest. This requirement will enable the Departm ent to fulfill its statutory duty under section 14 of the Act to study and investigate settlem ent costs and to report to Congress thereon.

The proposed regulations required the signatures of the borrower and the seller on the advance disclosure statem ent, and several comments objected to this proce­ dure or requested clarification. In the final regulations all requirements for signature on either the advance dis­ closure or the settlem ent statem ent have been dropped.

M ailing of the advance disclosure is perm itted by the final regulations, but in certain cases the applicable time limits are 3 days earlier where advance dis­ closure is mailed.

FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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RULES AND REGULATIONS 22449 W a iv e r o f A d v a n c e D i s c l o s u r e Several comments requested clarifica­ tion whether a seller or borrower can bind the other by a waiver. The final regulations specify that each party who has not received timely advance disclo­ sure waives this right, so that one party cannot waive for the other. Numerous comments objected to the shortness of the 18-day period processing rule. The final regulations extend this period to 21 days. The final regulations provide th at advance disclosure m ay be made prior to commitment. This will en­ able lenders, by m aking advance disclo­ sure before commitment as to loans re­ quiring speedy settlem ents, to be able to hold settlem ent on such loans as soon as the commitment is issued. Som e comments objected to the 3-day advance disclosure requirement in the proposed regulations. The provisions in the final regulations as to waiver take into account the express directions in the Act that, in its prescribing of the waiver regulations and form, the Secre­ tary should take into account the need to protect the borrower’s and seller’s right to timely disclosure. In keeping with the Act, the final regu­ lations require th at the advance disclo­ sure be received by the parties on or be­ fore the time of the loan commitment but not less than 3 days prior to settle­ ment in any waiver situation. A number of comments pointed out that the execution of the waiver by the lender served no purpose and this re­ quirement was om itted in the final regu­ lations. Sim ilarly, the witness lines are omitted from the waiver form. S e t t l e m e n t S t a t e m e n t Many of the comments indicated a lack of understanding of the relationship between the advance disclosure form and the settlem ent statem ent. Although the sam e basic form at is used for both, it is permissible for lenders to print such form s separately and to place titles on them accordingly. The official version published in these final regulations can be used for both purposes by checking the appropriate square near the top of the form. Ordinarily some of the entries on the settlem ent statem ent will differ from those on the advance disclosure (be­ cause some charges are different than estim ated, or because the date of actual settlem ent is different from the date esti­ m ated). The final regulations specify that copies of the settlem ent statem ent m ust be provided to the buyer and seller as soon after settlem ent as practicable, and in no case later than three days after settlement.

When charges are paid directly by the borrower or seller, rather than paid through the settlem ent agent, some com­ m ents asked whether it would be neces­ sary to show them on the forms. The final regulations provide special rules for haz­ ard insurance charges, attorney’s fees and charges for certain other services independently procured by the borrower or seller.

F o r m D e s ig n Many comments requested flexibility in the design of the form. The final regulations allow some degree of flexi­ bility. Additional items describing com­ mon local charges m ay be inserted in blank spaces on the form. The spacing between lines may be increased for com­ puter printing, and the lender or settle­ m ent agent may add a firm nam e or logotype to the title block. Signature lines m ay be added.

Numerous comments objected to the number of subtotals which the proposed form required. These have been largely eliminated in the final version. The “ dis­ bursem ents”

column has also been eliminated, since nearly all comments which discussed it thought that it would confuse consumers.

A large number of comments requested that separate form s be provided for bor­ rower and seller. The form was rede­ signed so that separate sum m aries of the borrower’s and seller’s transactions ap ­ pear on page 1, but the inform ation on page 2 m ust be provided to both bor­ rower and seller, as required by the Act. The instructions perm it the lender or settlem ent agent to send a copy of the form to the borrower with the seller’s sum m ary left blank, and sim ilarly to send a copy to the seller with the bor­ rower’s sum m ary left blank. A large number of comments objected to inclusion in the advance disclosure of the liens and charges against the seller’s land; these comments asserted that such inform ation would not be available until a title search was com­ pleted and payoff letters from existing lenders were obtained, and that the am ounts could not theretofore be esti­ m ated in any meaningful way. The De­ partm ent believes th at this view is cor­ rect, and the final instructions to the form perm it the portions dealing with these m atters to be left blank when the form is used for advance disclosure. This m eans that in most cases the advance disclosure will not indicate to the seller the amount of cash he can expect to realize from the transaction. However, the portions of the form summarizing the buyer’s transaction m ust be com­ pleted when the form is used for advance disclosure, thus indicating to the buyer the am ount of cash he will need to com­ plete settlement.

The Departm ent has determined this rule does not have significant im pact on the environment and a finding of inap­ plicability has been prepared pursuant to HUD Handbook 1390.1. A copy of this finding is available during regular busi­ ness hours for public inspection in the Office of the Rules Docket Clerk, Office of General Counsel, Room 10245, De­ partm ent of Housing and Urban Devel­ opment, 451 7th Street SW., W ashing­ ton, D.C. 20410.

Accordingly, Subtitle A of Title 24 is amended by adopting a new P art 82— Real Estate Settlem ent Procedures to read as follows:

PART 82— REAL ESTATE SETTLEMENT PROCEDURES S e c .

8 2 .1 A u t h o r i t y , s c o p e a n d p u r p o s e . 8 2 .2 D e f i n i t io n s .

8 2 .3 R e l i a n c e u p o n r u l e , r e g u l a t i o n s o r i n ­ t e r p r e t a t i o n b y H U D o f R E S P A . 8 2 .4 A p p l i c a b i l i t y . 8 2 .5 I n f o r m a t i o n b o o k l e t f o r p e r s o n s a p ­ p l y i n g f o r l o a n s t o p u r c h a s e r e s i ­ d e n t i a l r e a l p r o p e r t y . 8 2 .6 U n i f o r m D i s c l o s u r e / S e t t l e m e n t S t a t e ­ m e n t F o r m .

8 2 .7 A d v a n c e d i s c l o s u r e o f s e t t l e m e n t c o s t s b y l e n d e r .

8 2 .8 U n i f o r m S e t t l e m e n t S t a t e m e n t . 8 2 .9 M a il in g .

8 2 .1 0 N o f e e .

82.11 R e l a t i o n t o S t a t e la w s . A u t h o r i t y : R e a l E s t a t e S e t t l e m e n t P r o c e ­ d u r e s A c t o f 1 9 7 4 , P u b . L . 9 3 - 5 3 3 (1 2 U .S .C 2 6 0 1 ) .

R e g u l a t io n X § 82.1 Authority, scope and purpose. This part, which m ay be referred to as Regulation X , comprises the regula­ tions issued by the Secretary of Housing and Urban Development pursuant to the Real Estate Settlem ent Procedures Act of 1974 (Pub. L. 93-533), 12 U.S.C. 2601, herein “R ESPA ” . This part applies to certain 1 to 4 fam ily m ortgages, defined as “Home M ortgages"

in this part.

RESPA Section 4 (Uniform Settlem ent Statem ent) authorizes and directs the Secretary to prescribe a uniform settle­ ment statem ent to be used in the settle­ ment of Home M ortgages. R ESPA Sec­ tion 5 authorizes and directs the Secre­ tary to prescribe special inform ation booklets to be provided by the Lender to each person borrowing money to fi­ nance the purchase of certain residential real estate transactions so that he or she m ay better understand the nature and costs of real estate settlem ent services. RESPA Section 6 authorizes and directs the Secretary to prescribe the form and implementing regulations by which every Lender, with respect to a Home M ort­ gage subject to Section 6, shall disclose in advance of settlem ent every charge arising in connection with the settle­ ment. R ESPA Section 12 prohibits im ­ position by a lender of a fee for or on account of preparing and subm itting the statem ents required by Sections 4 and 6 or by the Truth in Lending Act, 15 U.S.C. 1601 et seq. RESPA section 18(a) authorizes the Secretary to determine whether state laws with respect to settle­ m ent practices are inconsistent with any provision of RESPA . Section 18(b) pro­ vides that no provision of R ESPA or of the laws of a state shall apply to any act done or omitted in good faith in con­ form ity with any rule, regulation, or in­ terpretation thereof by the Secretary. § 82.2 Definitions.

F or purposes of this part, the follow­ ing definitions apply, unless the context indicates otherwise.

(a) “Assumption Approval” m eans the approval by the Lender or his duly au ­ thorized agent or representative of an assum ption of, or a sale subject to, a Home M ortgage where such approval is FEDERAL REGISTER, VOL. 40, NO. TOO— THURSDAY, MAY 22, 1975 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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22450 RULES AND REGULATIONS conditioned or based upon a change in the interest rate or other term s and con­ ditions of the promissory note or docu­ ment creating the m ortgage lien, or is m ade in consideration of the paym ent of a fee in excess of fifty dollars ($50) paid to the Lender or his agent, representa­ tive or servicer.

(b) “D ate of Settlem ent” means, in the case of a sale or transfer financed by a new m ortgage, the date on which the documents creating the mortgage become effective as between the borrower and the Lender, and in the case of a pur­ chase of a property subject to an exist­ ing m ortgage, whether or not the buyer assum es personal liability, the date on which title is transferred as between seller and buyer not subject to revocation by seller or buyer.

(c) “D ays” are computed as follows: All tim e periods in this part are ex­ pressed in days. Periods do not include the day from which they are measured. Where the last day on which an act or event is perm itted to occur is a Saturday, Sunday or Federal or State holiday, such act or event m ay occur on the next suc­ ceeding day which is not a Saturday, Sunday or Federal or State holiday. Where a period is 7 days or more, it is m easured in calendar days. Where a pe­ riod is less than 7 days and not specified as calendar days, it is m easured in busi­ ness days, excluding Saturdays, Sundays and Federal or State holidays. (d) “Federal Lender” m eans: (1) A lending institution, the deposits or ac­ counts of which are insured by the Fed­ eral Savings and Loan Insurance Cor­ poration (F SL IC ), the Federal Deposit Insurance Corporation (FDIC) or any other agency of the Federal Government, or (2) a lending institution which is reg­ ulated by the Federal Home Loan Bank Board or any other agency of the Federal Government, or (3) a “creditor,” as de­ fined in section 103(f) of the Consumer Credit Protection Act (15 U.S.C. 1602 (f) ) , who m akes or m ade new invest­ m ents in residential real estate loans ag­ gregating more than $1,000,000 in either the calendar year in which the D ate of Settlem ent of the Home M ortgage in question occurs or the calendar year prior thereto. Section 103(f) defines “creditor” as follow s:

( f ) T h e t e r m “ c r e d i t o r ”

r e f e r s o n l y t o c r e d i t o r s w h o r e g u l a r l y e x t e n d , o r a r r a n g e f o r t h e e x t e n s i o n o f , c r e d i t f o r w h i c h t h e p a y m e n t o f a f i n a n c e c h a r g e is r e q u i r e d , w h e t h e r i n c o n n e c t i o n w i t h l o a n s , s a le s o f p r o p e r t y o r s e r v ic e s , o r o t h e r w i s e . T h e p r o ­ v i s i o n s o f t h i s t i t l e a p p l y t o a n y s u c h c r e d ­ i t o r , i r r e s p e c t i v e o f h i s o r i t s s t a t u s a s a n a t u r a l p e r s o n o r a n y t y p e o f o r g a n i z a t i o n . (e) “Home M ortgage” m eans a loan which is not made to finance an exempt transaction under section 82.4(b) and which m eets all of the following four re­ quirem ents:

(1) The proceeds of the loan are used in whole or in part to finance the pur­ chase by the borrower, or other transfer of title, of the m ortgaged property or the loan was previously m ade and the lender m akes an assum ption approval in con­ nection with the purchase of or transfer of title to the m ortgaged property; (2) The loan is secured by a lien on or other security interest in real estate, including a fee simple, life estate, re­ mainder interest, or leasehold estate, upon which there is located a structure, including a mobile home owned or to be owned by the borrower and covered or to be covered by the m ortgage, designed principally for the occupancy of from 1 to 4 fam ilies or upon which such a structure is to be constructed, or pur­ chased in the case of a mobile home, u s­ ing part or all of the proceeds of the loan, or the loan is secured by a lien or other security interest covering a 1 to 4 fam ily residential condominium unit, or the loan is secured by a pledge of cooperative stock or interest correspond­ ing to a 1 to 4 fam ily residential coopera­ tive unit;

(3) The M ortgaged Property is located in a State; and (4) The loan is made by a Federal Lender, or is m ade in whole or in part, or insured, guaranteed, supplemented, or assisted in any way, by the Secretary or any other officer or agency of the Federal Government, or is made in con­ nection with a housing or urban devel­ opment program adm inistered by the Secretary or other agency of the Federal Government, or is eligible for purchase by the Federal National M ortgage A s­ sociation (FN M A ), the Government N a­ tional M ortgage Association (G N M A ), or the Federal Home Loan M ortgage Cor­ poration (FH LM C ). Note th at GNMA’s authority to purchase m ortgages includes broad authority undor 12 U.S.C. 1720(a) “ to purchase such types, classes, or cate­ gories of home m ortgages” as the Presi­ dent shall determine to carry out the purposes of 12 U.S.C. 301(b). (f) “Lender” means, in the case of a new loan, the secured creditor or cred­ itors nam ed as such in the debt obliga­ tion and document creating the lien or other security interest, and in the case of an Assumption Approval with respect to a preexisting loan, the current owner or owners of the Home M ortgage at the time of the Assumption Approval. (g) “Loan Application” m eans an oral or written application for a Home M ort­ gage or Assumption Approval received by the Lender or his agent or representative or independent contractor originating the Home M ortgage in the nam e of the Lender or servicing the Home M ortgage for the Lender. The date of Loan Appli­ cation is the date of actual receipt. (h) “Loan Commitment” m eans a promise by a Lender to a borrower, oral or written, to m ake a Home M ortgage or Assumption Approval, with respect to a specified property, whether or not such promise is subject to any conditions and whether or not the borrower is obligated to accept such Home M ortgage or As­ sumption Approval.

(i) “M ortgaged Property” m eans the real property covered by the Home M ort­ gage, or the cooperative unit with re­ spect to which stock is pledged to secure the Home M ortgage loan.

(j) “Person” m eans any individual, corporation, partnership, trust, associa­ tion or other entity.

(k) “R ESPA ” . The R eal Estate S et­ tlement Procedures Act of 1974 (Pub. L. 93-533), 12 U.S.C. 2601, a s amended. (1) “Secretary.”

The Secretary of Housing and Urban Development or any official delegated the authority of the Secretary with respect to RESPA . (m) “S tate” m eans any State of the United States, the D istrict of Columbia, the Commonwealth of Puerto Rico, and any territory or possession of the United States.

§ 82.3 Reliance upon rule, regulation or interpretation by HUD of RESPA. (a) Section 18(b) of RESPA provides: N o p r o v i s i o n o f t h i s A c t o r o f t h e l a w s o f a n y S t a t e i m p o s i n g a n y l i a b i l i t y s h a l l a p p l y t o a n y a c t d o n e o r o m i t t e d i n g o o d f a i t h i n c o n f o r m i t y w i t h a n y r u l e , r e g u l a t i o n , o r i n ­ t e r p r e t a t i o n t h e r e o f b y t h e S e c r e t a r y , n o t ­ w i t h s t a n d i n g t h a t a f t e r s u c h a c t o r o m is s io n h a s o c c u r r e d , s u c h r u l e , r e g u l a t i o n , o r i n ­ t e r p r e t a t i o n i s a m e n d e d , r e s c i n d e d , o r d e ­ t e r m i n e d b y j u d i c i a l o r o t h e r a u t h o r i t y t o b e I n v a l i d f o r a n y r e a s o n . (b) For purposes of section 18(b), only the following constitute a “rule, regula­ tion, or interpretation thereof by the Secretary” :

(1) The Uniform D isclosure/Settle­ m ent Statem ent, HUD Form 1, and HUD instructions set forth in Appendix A, but not including page 3 of the form and the Federal Reserve Board instructions thereto, set forth in Appendix B ; (2) All other provisions and Appen­ dices contained in this part, but not in­ cluding any document referred to in this part except to the extent such document is set forth in this part; and (3) Each form al legal opinion regard­ ing RESPA, designated as a “RESPA Legal Opinion,” numbered and dated, by the General Counsel of the Department. (c) A “rule, regulation, or interpreta­ tion thereof by the Secretary” for pur­ poses of R ESPA section 18(b) shall not include the Special Inform ation Book­ let prescribed by the Secretary or any other statem ent or issuance, whether oral or written, by an officer or repre­ sentative of HUD, letter or memorandum by the Secretary, General Counsel, any A ssistant Secretary or other officer or employee of HUD, pream ble to a regula­ tion or other issuance of HUD, report to Congress, pleading, affidavit or other doc­ ument in litigation, pamphlet, handbook, guide, telegraphic communication, expla­ nation, instructions to forms, speech or other m aterial of any nature which is not specifically included in paragraph (b) of this section.

§ 82 .4 Applicability.

(a) Transactions covered. This part applies to loans which constitute Home M ortgages as defined in § 82.2(e). As de­ fined therein, Home M ortgage does not include a home improvement loan or other loan secured by a lien on a 1 to 4 fam ily residential property where the proceeds of the loan are not used to finance the purchase or transfer of the property. Nor does Home M ortgage in- FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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RULES AND REGULATIONS 22451 elude refinancing of a m ortgage loan secured by a lien on a 1 to 4 fam ily residential property where there is no transfer of title.

(b) Exempt transactions. This part shall not apply to purchases of property for resale in the ordinary course of busi­ ness.

(c) Commencement of applicability— (1) Information booklet. The Special In ­ form ation Booklet m ust be distributed with respect to every Loan Application received on or after June 20, 1975. (2) Advance disclosure. After June 20, 1975, advance disclosure, as required by § 82.7 of this Part, m ust be provided with respect to every Home M ortgage except a Home M ortgage (i) which is made pur­ suant to a Loan Commitment evidenced by a letter or written agreem ent signed by the Lender prior to June 20, 1975, and (ii) as to which the D ate of Settlem ent occurs on or before October 20, 1975. Where advance disclosure is required, it may be m ade prior to June 20, 1975. (3) Settlement statement. The Uni­ form D isclosure/Settlem ent Statem ent shall be used as the settlem ent statem ent with respect to every Home M ortgage subject to the advance disclosure re­ quirements pursuant to paragraph (c) (2) of this section.

§ 82.5 Inform ation booklet for persons applying for loans to purchase resi­ dential real property.

(a) Lender to provide information booklet. Every lender shall provide a copy of the Special Inform ation Booklet cur­ rently prescribed by the Secretary to every person who m akes a loan applica­ tion. Where more than one individual makes a loan application, the lender is required to supply a copy of the Special Inform ation Booklet to at least one of the individuals applying. The lender shall supply the Special Inform ation Booklet *by delivering it to or placing it in the mail to the applicant not later than the third business day of the lender following the day on which the applica­ tion is received.

(b) Printing and duplication. The Spe­ cial Inform ation Booklet m ay be ob­ tained from the Superintendent of Docu­ ments, U.S. Government Printing Office, W ashington, D.C. 20402. The Secretary m ay from time to time revise the Spe­ cial Inform ation Booklet. The Special Inform ation Booklet m ay be printed or reproduced in any form, provided that no change is made, other than as per­ mitted under paragraph (c) of this sec­ tion. The Special Inform ation Booklet m ay not be m ade a part of a larger docu­ ment for purposes of distribution under RESPA and this section. Any color, size and quality of paper, type of print, and method of reproduction m ay be used so long as the booklet is clearly legible and easily readable.

(c) Permissible changes. No change to, deletion from or addition to the Fore­ word and text of the Special Inform ation Booklet currently prescribed by the Sec­ retary shall be m ade other than those specified below or any others approved in writing by the Secretary: (1) The cover of the booklet m ay be in any form and m ay contain any draw­ ings, pictures, or artwork, provided that the words “settlement costs” are used in the title. Names, addresses and tele­ phone numbers of the lender or others and sim ilar inform ation m ay appear on the cover, but no discussion of the m at­ ters covered in the booklet shall appear. (2) The Special Inform ation Booklet m ay be translated into other languages. (3) The wording may be deleted which precedes the foreword, authorizing the reprinting of the booklet and referring to sale by the Superintendent of Docu­ ments, but not the first paragraph, re­ ferring to preparation of the booklet by the Secretary.

(4) In the last sentence of the fore­ word, “ a lending institution” may be added after “local consumer affairs agency.”

(5) In the “Advance disclosure” sec­ tion, the third sentence of the second paragraph may be deleted. (6) In the section, “ 2. Settlem ent a t­ torneys, escrow and closing agents,” the second paragraph and first senten6e of the third paragraph may be deleted. (7) In section B6, in the paragraph entitled “c. Settlem ent Agent,” the words “ and location” m ay be deleted from the last sentence.

§ 82.6 U niform D isclosure/Settlem ent Statem ent Form.

(a) Use of Form. HUD Form 1, “D is­ closure/Settlem ent Statem ent,” pages 1 and 2 of which, with instructions, are set forth in Appendix A to this part, and the third page of which, with instruc­ tions, is set forth in Appendix B to this part, shall be used as the advance dis­ closure statem ent under RESPA section 6 and § 82.7 of this Part, and as the settlem ent statem ent under RESPA sec­ tion 4 and § 82.8 of this Part. (b) Printing and duplication of Form. The Uniform D isclosure/Settlem ent Statem ent Form m ay be reproduced by lenders or others. Lenders are required to use the form, with the first two pages as prescribed by the Secretary and the third page as prescribed by the Federal Reserve Board. Only the following per­ missible changes and insertions m ay be m ade:

(1) In Block A, the lender or other company reproducing the form may in­ sert its business nam e and/or logotype and may rearrange, but not delete, the other information which appears in Block A.

(2) In Block F, the name, address and other inform ation regarding the lender may be printed, and a space or spaces m ay be printed for lender’s loan pumber or sim ilar information.

(3) The form m ay be printed sepa­ rately to be used only as an advance disclosure form or to be used only as a form for settlement, in which cases the paragraph entitled “STA TEM EN T OF ACTUAL C O ST S” and items 5 00 through 603 may be deleted from the form used for advance disclosure, and the p ara­ graph entitled “ADVANCE D ISCLO ­ SU R E O F C O ST S” may be deleted from the form used for settlement. (4) A statem ent may be printed at the end of the paragraph “ ADVANCE D IS­ CLO SURE OF C O ST S” , in any style or type of print, th at advance disclosure of prorations of taxes and assessm ents is based upon the assum ption that taxes and assessm ents are not delinquent. Such statem ent if printed on the form will then be stricken where advance disclo­ sure is not based upon such assumption. See § 82.7 (k ).

(5) No changes in the size or type style of print or the layout of the first two pages of the form shall be made, except as follows: (A) The layout of the form m ay only be reset in type if such type style is approxim ately the sam e size and appearance, is easily read­ able, and the entire form layout is iden­ tical to the form as prescribed by HUD; and (B) where necessary to accommo­ date computer equipment, the first two pages of the form m ay be printed in a larger size of print and different type style and the distance between lines may be increased, but not decreased, but there shall be no other change in the layout and placem ent of inform ation on the form. As to the third page, see R egula­ tion Z, 12 C FR P art 226, and the Federal Reserve Board instructions in Appen­ dix B.

/ (6) In the first two pages, items listed in the form not used locally or not used in connection with m ortgages by the lender m ay be lined out in a m anner so that they m ay still be read. (7) In the first two pages, charges not listed which are m ade locally m ay be in­ serted in blank spaces in any style or type of print of sim ilar size, but which is different from the style and type of print used in the balance of the form (to in­ dicate items not listed nationwide). (8) Signature lines and custom ary lo­ cal recitals prior to signature lines m ay be added at the end of the second page or at the end of the third page. (9) Additional blank space m ay be added above and/or below each page and the form m ay be printed on rolls, which may have sprocket holes e.g. for com­ puter purposes. The pages m ay be printed on separate sheets or placed on the front and back of a single sheet, or one above the other on a single, continuous sheet. (10) The form m ay be printed on light shades of tinted paper and m ay be printed in one or more colors of clearly legible inks.

(11) The form m ay be printed in multi-copy tear-out sets. Such sets or any other method for m aking copies may delete Block J, lines 100 through 303, from the seller’s copy and Block K , lines 400 through 603, from the Borrower’s copy.

(12) The form m ay be translated into any other language with the approval of the Secretary, but items of the Truth in Lending Statem ent required by law to be stated in English m ust be so stated. (13) Any other deviation in pages 1 and 2 of the form is only permissible upon receipt of written approval of the Secretary. Any other deviation in the FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Page 9

22452 RULES AND REGULATIONS page 3 Truth in Lending disclosure m ust be in accordance with requirements of the Board of Governors of the Federal Reserve System . See Regulation Z, 12 C FR 226.102 and form instructions in Appendix B to this P art. A request to the Secretary for approval m ust be submitted in writing to the A ssistant Secretary for Housing Production and M ortgage Credit—Federal Housing Commissioner, Room 6100, 451 7th Street, SW., W ash­ ington, D.C. 20410, stating the reasons why the applicant believes such devia­ tion is needed. Prior to receiving such approval, the prescribed form m ust be used.

(c) HUD-prescribed additions of items to form. HUD reserves the right to direct the order and the m anner in which addi­ tional items are added to the first two pages of the form or in which any other changes are m ade in the first two pages of the form for any locality, jurisdiction or area.

(d) Additional sheet. Where there is an unusually large number of insertions for which blank spaces in the first two pages of the form are not sufficient, an additional sheet for such items m ay be added to the form and referenced at the appropriate place or places in the form. Such additional sheets may be printed. The reverse side of the form m ay be used instead of an additional sheet. § 82.7 Advance disclosure of settlem ent costs by lender.

(a) Lender to provide. As required by RESPA section 6, each lender m aking a home m ortgage or assum ption approval of a home m ortgage shall make or cause to be m ade advance disclosure of settle­ m ent costs on HUD Form 1 in accordance with this section.

(b) Timing of advance disclosure. E x ­ cept as provided in paragraphs (c) and (d) of this section, the lender shall place in the m ail to or deliver to the borrower and the seller the advance disclosure statem ent (on HUD Form 1) a t any time not later than 7 calendar days after the date of loan commitment. Ad­ vance disclosure may be m ade prior to loan commitment. Settlem ent shall not occur less than 15 calendar days after such m ailing or 12 calendar days after such delivery. Where advance disclosure statem ents to different parties are m ailed or delivered on different dates, the m ini­ mum period to settlem ent provided above shall be the latest date required with re­ spect to any one disclosure statem ent. See paragraph (p) of this section regard­ ing Truth in Lending disclosure. E x a m p le 1. L o a n C o m m i t m e n t Is m a d e J u l y 2 . S e t t l e m e n t Is a n t i c i p a t e d t o o c c u r w i t h i n 6 0 d a y s .

A d v a n c e d i s c l o s u r e s t a t e ­ m e n t i s d e l i v e r e d t o o n e s e l l e r o n J u l y 5, m a i l e d t o a s e c o n d s e ll e r o n J u l y 7 a n d m a i l e d t o b o r r o w e r o n J u l y 9 . S e t t l e m e n t m a y n o t b e h e l d p r i o r t o J u l y 2 4 ( 1 5 d a y s f r o m , a n d n o t i n c l u d i n g , J u l y 9 ) . A d v a n c e d i s ­ c l o s u r e i s t i m e l y b e c a u s e i t is m a d e n o t l a t e r t h a n J u l y 9 (7 d a y s f r o m , a n d n o t i n ­ c l u d i n g , J u l y 2 ) . (c) Timing where settlement is an­ ticipated more than 60 days after loan commitment. Where as of the date of loan commitment, the date of settlem ent is anticipated by the lender, based upon inform ation given to the lender, to occur more than 60 calendar days after the date of loan commitment, the lender m ay in its discretion mail or deliver the advance disclosure statem ent subsequent to the time prescribed in paragraph (b), but not later than 60 days prior to the anticipated date of settlement. There­ after, if the lender is advised th at the date of settlem ent is expected to occur still later, the lender m ay in its dis­ cretion mail or deliver the advance dis­ closure statem ent a t any time not later than 60 calendar days prior to such re­ vised anticipated date of settlement. If a t any time subsequent to the date of loan commitment the lender is advised that the date of settlem ent is anticipated earlier than previously anticipated, lend­ er shall mail or deliver the advance dis­ closure statem ent on or before 60 days prior to such revised anticipated date of settlem ent or, if such revised date is within 67 days of the date lender is ad ­ vised of the revised anticipated date of settlement, lender shall m ail or deliver the advance disclosure statem ent not later than 7 calendar days after being advised of such revised date of settle­ ment. Nothing in this subsection (c) shall alter or affect the minimum periods between disclosure and settlem ent set forth in the third sentence of paragraph (b) of this section. See paragraph (p) of this section regarding Truth in Lend­ ing disclosure.

E x a m p le 2 .

L o a n C o m m i t m e n t i s m a d e J u l y 1 a n d s e t t l e m e n t i s a n t i c i p a t e d t o o c c u r O c t o b e r 1 5 . L e n d e r m a y m a i l o r d e li v e r a d ­ v a n c e d i s c l o s u r e a t a n y t i m e o n o r b e f o r e A u g u s t 1 4 (6 0 d a y s b e f o r e , a n d n o t i n c l u d i n g , O c t o b e r 1 5 ) . A s o f A u g u s t 1 , L e n d e r h a s n o t y e t m a d e a d v a n c e d i s c l o s u r e a n d is a d v is e d t h a t s e t t l e m e n t is a n t i c i p a t e d N o v e m b e r 15. L e n d e r m a y m a i l o r d e li v e r a d v a n c e d i s ­ c l o s u r e s t a t e m e n t a n y t i m e o n o r b e f o r e S e p t e m b e r 14 . O n S e p t e m b e r 1, L e n d e r i s a d ­ v i s e d t h a t s e t t l e m e n t i s a n t i c i p a t e d t o o c c u r N o v e m b e r 1. L e n d e r m u s t m a i l o r d e li v e r a d v a n c e d i s c l o s u r e s t a t e m e n t o n o r b e f o r e S e p t e m b e r 8 .

(d) Waiver of minimum period be­ tween advance disclosure and settlement. The minimum period between advance disclosure and settlem ent provided in paragraph (b) m ay be reduced to 3 days from actual receipt of the advance dis­ closure statem ent by the borrower and the seller where settlem ent is held not later than 21 days after the date the loan application was made. Such reduction shall only be m ade where a copy of the following waiver form is voluntarily executed by each borrower and seller who has not been mailed or delivered the advance disclosure statem ent on or be­ fore the time lim it specified in paragraph (b) of this section and is attached to the settlem ent statem ent. Such waiver does not waive any applicable right of rescission under the Truth in Lending Act; see Regulation Z, 12 C FR P art 226, for requirements applicable to waiver of right of rescission.

W a iv e r t o R e d u c e P e r io d B e t w e e n A d v a n c e D is c l o s u r e a n d S e t t l e m e n t I d e n t i f i c a t i o n o f T r a n s a c t i o n : B o r r o w e r ( s ) :

________________________________________ S e l l e r ( s ) : ____________________________________________ P r o p e r t y :

____________________________________________ L o a n a m o u n t : _______________________________________ L e n d e r : _______________________________________________ D a t e o f s e t t l e m e n t : ________________________________ I h e r e b y a c k n o w l e d g e a n d a f f ir m t h a t I k n o w t h a t t h e R e a l E s t a t e S e t t l e m e n t P r o c e ­ d u r e s A c t o f 1 9 7 4 r e q u i r e s t h e L e n d e r t o m a i l t o m e a n a d v a n c e i t e m i z e d d i s c l o s u r e i n w r i t ­ i n g o f e a c h c h a r g e a r i s i n g i n c o n n e c t i o n w i t h t h i s s e t t l e m e n t n o t l a t e r t h a n 15 c a l e n d a r d a y s p r i o r t o t h e d a t e o f s e t t l e m e n t , o r d e ­ l i v e r s u c h d i s c l o s u r e t o m e n o t l a t e r t h a n 12 d a y s p r i o r t o t h e d a t e o f s e t t l e m e n t . I f u r ­ t h e r u n d e r s t a n d t h a t i f t h e l e n d e r f a i l s t o p r o v i d e t h e r e q u i r e d d i s c l o s u r e I m a y r e c o v e r f r o m i t $ 5 0 0 o r a c t u a l d a m a g e s , w h i c h e v e r is g r e a t e r , p l u s c o u r t c o s ts a n d a r e a s o n a b l e a t t o r n e y ’s f e e a s d e t e r m i n e d b y t h e c o u r t . N o t w i t h s t a n d i n g t h e a b o v e , I h e r e b y w a iv e t h e r i g h t t o r e c e i v e s u c h d i s c l o s u r e 12 d a y s o r h a v e i t m a i l e d 1 5 d a y s p r i o r t o s e t t l e m e n t a n d I f u r t h e r c e r t i f y t h a t : ( 1 ) A p p l i c a t i o n f o r t h i s l o a n w a s m a d e n o t m o r e t h a n 21 c a l e n d a r d a y s p r i o r t o s e t ­ t l e m e n t d a t e a n d I h a v e c o n s e n te d , t o s e t t l e ­ m e n t o n t h a t d a t e ; a n d (2 ) I r e c e i v e d t h e a d v a n c e d i s c l o s u r e o f s e t t l e m e n t c o s ts a t l e a s t 3 d a y s ( e x c l u d i n g S a t u r d a y s , S u n d a y s a n d h o l i d a y s ) p r i o r t o t h e d a t e o f s e t t l e m e n t . ( 3 ) I u n d e r s t a n d t h a t I a m n o t r e q u i r e d t o e x e c u t e t h i s w a i v e r a n d m a y , i n s t e a d , d e ­ t e r m i n e n o t t o w a i v e a n d t o r e q u i r e t h e a d ­ v a n c e d i s c l o s u r e o f s e t t l e m e n t c o s t s t o b e d e li v e r e d t o m e 1 2 d a y s b e f o r e s e t t l e m e n t o r m a i l e d t o m e 1 5 d a y s b e f o r e s e t t l e m e n t ; a n d (4 ) I u n d e r s t a n d t h a t if I s i g n t h i s w a i v e r i n a d v a n c e o f t h e d a t e o f s e t t l e m e n t , I m a y r e v o k e t h i s w a iv e r a t a n y t i m e p r i o r t o t h e d a t e o f s e t t l e m e n t . S i g n a t u r e ( s ) D a t e (e) More than one lender. Where two or more home m ortgages are made with respect to the sam e sale or transfer of the mortgaged property, each lender may independently satisfy the advance dis­ closure requirements, or they may jointly satisfy the advance disclosure require­ ments. In either case, each lender shall be fully responsible to the borrower and seller to make the required disclosure. (f) Good faith estimates. Where the exact amount of a charge required to be stated in the advance disclosure state­ ment is not known, the lender may state a good faith estim ate made by the lender, or an estim ate obtained by the lender from a provider of settlement services which the lender reasonably believes is a good faith estim ate. Each estim ate m ust be stated as a specific figure, and not as a range of possible figures. The advance disclosure statem ent shall state an “ (e )” after each figure which is an estim ate.

(g) Charges to be disclosed. The ad­ vance disclosure statem ent shall state the am ount or estim ated amount of - the charges to be imposed upon the borrower and the seller shall set forth in the Uni­ form Disclosure/Settlem ent Statem ent (HUD Form 1) lines 700 through 1400 and all sim ilar charges to be paid by bor­ rower and seller which are not listed in FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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RULES AND REGULATIONS 22453 said lines 700 through 1400, except as provided in paragraph (h) of this section regarding hazard insurance, paragraph (i) of this section regarding attorney’s fees, and paragraph (j) of this section regarding inspection charges and other charges. Blocks J and K shall be com­ pleted; adjustm ents may be m ade in ac­ cordance with paragraph (k) of this sec­ tion. At the lender’s option, lender may delete Block J from the disclosure to the seller. At the lender’s option, lender may omit Block K from the disclosure state­ m ent to the borrower.

(h) Exception to advance disclosure of hazard insurance charges. The charges for hazard insurance binder or policy covering the m ortgaged property are not required to be stated in the advance dis­ closure statem ent where the borrower independently obtains his own hazard insurance binder or policy, whether or not the lender requires such binder or policy to be obtained for settlement, pro­ vided that the binder or policy has not been obtained by, and the carrier or in­ surance broker or agent has not been se­ lected for the borrower by, any of the following persons: The lender; an agent or representative of the lender or inde­ pendent contractor originating the home m ortgage in the nam e of the lender; the real estate agent or broker; or the per­ son selected to conduct the settlement. (i) Exception to advance disclosure of attorney’s fees. Fees or estim ated fees to be paid by borrower to borrower’s attor­ ney or by seller to seller’s attorney are not required to be stated in the advance disclosure statem ent where such attor­ ney is not retained to perform the title search or other services required by the lender and the borrower or seller, as the case m ay be, independently elects to be represented by an attorney and inde­ pendently selects the particular attorney. Attorney’s fees or estim ates thereof are, however, required to be stated in the following cases:

(1) Fees to be paid by the borrower for an attorney representing the lender, the seller or any other person; (2) Fees to be paid by the seller for an attorney representing the lender, the borrower or any other person; (3) Fees to be paid by the borrower or the seller for an attorney represent­ ing the borrower or seller, respectively, if the borrower or seller is required by the lender or his agent or representative or independent contractor originating the home m ortgage in the nam e of the lender to be represented by counsel; (4) Fees to be paid by the borrower or the seller for an attorney representing the borrower or seller, respectively, if the lender or his agent or representative or independent contractor originating the home m ortgage in the nam e of the lender selects the attorney. For purposes of this paragraph (i) (4), the lender or such other person is not considered to select the attorney if he merely recom­ mends a list of at least three attorneys and does not require the borrower to select an attorney from such list. (j) Exception to advance disclosure for charges for certain other services inde­ pendently procured by borrower or seller. Charges or estim ates thereof for services not required by the lender or his agent or representative or independent con­ tractor originating the home mortgage for the lender are not required to be stated in the advance disclosure state­ ment where the borrower or seller inde­ pendently elects to obtain such services and independently selects the provider of such services.

(k) Disclosure of adjustments for taxes and assessments. Lender m ay make the disclosure of adjustm ents for taxes and assessm ents based upon the assum ption that no taxes and assessm ents are delin­ quent, in lieu of determ ining from the appropriate records whether delinquen­ cies exist. Where lender m akes disclosure based upon such assum ption, lender shall place in Block C a statem ent that ad­ vance disclosure of prorations of taxes and assessm ents is based upon the a s­ sumption that taxes and assessm ents are not delinquent. See § 82.6(b) (4) regard­ ing the printing of such a statem ent. (1) Single disclosure. Where subsequent to m ailing or delivering the advance dis­ closure statem ent, changes in anticipated charges come to the attention of the lender no additional or revised advance disclosure statem ent is required to be provided. The lender may in its discre­ tion, but is not required to, provide up­ dated or corrected am ounts to a party the lender understands will pay the charges in question or all parties by let­ ter or otherwise.

(m) Record-keeping. Lender shall re­ tain a copy of the advance disclosure statem ent required to be prepared pur­ suant to RESPA section 6 for 2 years, ex­ cept that in the event lender disposes of its interest in the Home M ortgage and does not service the home m ortgage, lender m ay permit its copy of the ad­ vance disclosure statem ent to be deliv­ ered to the owner or servicer of the home m ortgage as part of the transfer of the loan file. A copy of the advance disclo­ sure statem ent m ay be required to be submitted to the Secretary and/or to other Federal agencies. Nothing in this Part alters, amends or in any way re­ duces the separate record keeping re­ quirements of Regulation Z of the Fed­ eral Reserve Board. See 12 OFR 226.6(i). (n) Damages. As provided in RESPA section 6(b), a lender which fails to provide the prospective borrower(s) or seller (s) with the required advance dis­ closure shall be liable to such borrow­ er (s) or to such seller(s), as the case m ay be, in an amount equal to actual dam ages or $500 to all borrowers and $500 to all sellers, whichever is greater, and in the event a court action is filed and judgm ent is obtained against the lender, court costs and a reasonable a t­ torney’s fee as determined by the court, provided th at: (1) A lender shall not be liable under RESPA for m ailing or de­ livering the disclosure statem ent later than the time lim its established in this section, if within the time lim its estab­ lished by the third sentence of p ara­ graph (b).

(2) A lender shall not be liable under RESPA for a violation which was not in ­ tentional and resulted from a bona fide error notwithstanding the m aintenance of procedures adopted to avoid such an error.

(3) In order to show actual dam ages under RESPA , the borrower(s) or the seller(s) seeking dam ages above $500 must establish on the particular facts of the case th at had the required disclosure been made, the borrower (s) or the sell­ er (s) would have obtained settlem ent services costing at least $500 less than those he or she actually paid. (4) Loss based upon seller’s claimed loss of a sale, borrower’s claim th at he was unable to purchase due to lender’s failure to m ake proper disclosure, bor­ rower’s claim th at he would have pur­ chased a different property, or dam ages other than described in paragraph (M) (3) of this section m ay not be the basis for a claim under RESPA for actual dam ages in excess of $500. (o) No Fee for Preparation of Advance Disclosure Statement. See § 82.10. (p) Truth in Lending disclosure. The third page of the Uniform D isclosure/ Settlem ent Statem ent, Appendix B to this part, setting forth the Truth in Lending disclosure, shall be completed and provided in accordance with the Truth in Lending Act, Regulation Z of the Federal Reserve Board, 12 C FR Part 226, and any other Federal Reserve Board requirements. Where Regulation Z establishes a time lim it for the m aking of such Truth in Lending disclosure which is earlier than the applicable time limit under paragraphs (b), (c) and (d) of this section for the m aking of ad­ vance disclosure, the Truth in Lending disclosure m ust be m ade at the time re­ quired by Regulation Z. In such cases, the first two pages of the Uniform D is­ closure/Settlem ent Statem ent, HUD Form 1, m ay be m ailed or delivered sub­ sequently, but within the applicable time lim its established in this part, and the third page Truth in Lending disclosure is not required to be given a second tim e when pages 1 and 2 are mailed or delivered.

§ 82.8 U niform Settlem ent Statem ent. (a) Use of HUD Form 1. As required by RESPA section 4, the Uniform S et­ tlem ent/Disclosure Statem ent, HUD Form 1, shall be used as the settlem ent statem ent for every Home M ortgage set­ tlement transaction involving a purchase or transfer of a m ortgaged property for every home m ortgage settlem ent pur­ suant to an assum ption approval. (b) Charges to be stated. The Uniform D isclosure/Settlem ent Statem ent, HUD Form 1, shall be completed to itemize all charges imposed upon the borrower and the seller in connection with the settlement, other than charges exempted from advance disclosure under § 82.7 (h ), (i) and (j) and which borrower or seller contract to pay for separately out­ side of the settlement. The person pre- FEDERAL REGISTER, V O L 40, NO. TOO— THURSDAY, MAY 22, 1975 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Page 11

22454 RULES AND REGULATIONS paring the settlem ent statem ent is not required to supply the inform ation in Block J in the copy supplied to the seller, nor to supply the inform ation in Block K to the borrower.

(c) Delivery. The settlem ent statem ent shall be delivered or mailed to the bor­ rower and the seller on the date of settle­ m ent or a s soon thereafter as practicable, and in any case not later than 3 days after the date of settlement. (d) Recordkeeping. Lender shall re­ tain a copy of each settlem ent statem ent required to be prepared pursuant to R E SPA section 4 for 2 years, except that in the event lender disposes of its inter­ est in the home m ortgage and does not service the home m ortgage, lender m ay perm it its copy of the settlem ent state­ m ent to be delivered to the owner or serv­ icer of the home m ortgage a s part of the transfer of the loan file. Nothing in this p art alters, am ends or in any way re­ duces the separate recordkeeping re­ quirem ents of Regulation Z of the Fed­ eral Reserve Board. See 12 C PR 226.6( i). A copy of the settlem ent statem ent m ay be required to be subm itted to the Secre­ tary an d/or other Federal agencies. § 82.9 M ailing.

The provisions of this p art requiring ox perm itting m ailing of advance disclosure statem ents, Special Inform ation Book­ lets or settlem ent statem ents shall be deemed to be satisfied by placing the document in the mail (whether or not received by the addressee) addressed to the address stated in the loan applica­ tion or in other inform ation submitted to or obtained by lender at the tim e of loan application, or subm itted to or ob­ tained by the person conducting the settlement, except that a revised address shall be used where the lender or such other person has been expressly informed in writing of a change of address. § 82.10 No fee.

As provided in RESPA section 12, no fee sh all be imposed or charge m ade upon any other person, as a p art of set­ tlem ent costs or otherwise, by a lender in connection with or on account of the preparation and distribution required by R ESPA of the statem ent or statem ents required by RESPA section 4 (Settlem ent S tatem en t), R ESPA section 6 (Advance Disclosure) or by the Truth in Lending Act.

§ 82.11 Relation to State laws.

RESPA section 18(a) provides: T h i s A c t d o e s n o t a n n u l , a l t e r , o r a f f e c t, o r e x e m p t a n y p e r s o n s u b j e c t t o t h e p r o v i s i o n s o f t h i s A c t f r o m c o m p l y i n g w i t h , t h e la w s o f a n y S t a t e w i t h r e s p e c t t o s e t t l e m e n t p r a c ­ t i c e s , e x c e p t t o t h e e x t e n t t h a t t h o s e l a w s a r e i n c o n s i s t e n t w i t h a n y p r o v i s i o n o f t h i s A c t , a n d t h e n o n l y t o t h e e x t e n t o f t h e i n ­ c o n s i s t e n c y , T h e S e c r e t a r y i s a u t h o r i z e d t o d e t e r m i n e w h e t h e r s u c h i n c o n s i s t e n c i e s e x i s t . T h e S e c r e t a r y m a y n o t d e t e r m i n e t h a t a n y S t a t e l a w i s i n c o n s i s t e n t w i t h a n y p r o v i s i o n o f t h i s A c t if t h e S e c r e t a r y d e t e r m i n e s t h a t s u c h l a w g iv e s g r e a t e r p r o t e c t i o n t o t h e c o n ­ s u m e r . I n m a k i n g t h e s e d e t e r m i n a t i o n s t h e S e c r e t a r y s h a l l c o n s u l t w i t h t h e a p p r o p r i ­ a t e F e d e r a l a g e n c i e s . A determ ination by the Secretary that such an inconsistency exists shall be made, after consultation with appropri­ ate Federal agencies, by publication of a notice in the F e d e r a l R e g i s t e r . Effective date. These regulations are effective as of Jun e 20,1975. C a r l a H . H i l l s , Secretary of Housing and Ufban Development.

U.S. department of housing and urban DEVELOPMENT DISCLOSURE'SETTLEMENT STATEMENT 1 1 1hr* T rJlh'U i’L tw iin g Act <i/>/>/££.* to th is tra n sa ctio n , a T ruih-in-L ending s * M O flT C * ,NS< c a g e n o . h-'otfrr.'.'r.* :v •:*» p o f

form.

S. TYPE OF LOAN:

- FMA 2 * ., FMHA 3.^7 1 CONV. UNINS.

.» v * c o n s /. In s .

F IL S N U M B ER 7. LQ AN N U M £j£rl C. NO75: 'This’tora is J^rmshed to vr.u prior to *ettlemrnt to give you information about your settlement costs, and again after settlement to siiow th v costs you have paid. The present copy of the fo;m is: “ * ADV.\\TCE DiSCLOb'URf. Or COSTS. Some items are estimated, and are marked <f(e)*'. Some amounts may change if .

inr* scitiew n t is held a date other than the date estimated below. The preparer of this form is cot responsible for errors or c h a s e s m «mounto furnished by others. *.

STAT KMKNT OF ACTUAL COSTS. Amounts paid to and b y the settlement n^ent are shown. Items marked " ( __•-•■yrr- .»,! I M-itsiuV the closing: they nre shown here for Informs tfonaLourposes and aro no? «nsTud*v? in __________ __ O.

BO RRO W E R P.

L E N D E R r<w=»cW Tf LO C A T IO N H . SETTLEMENT AGENT P L A C E O F S E T T L E M E N T LOAN COMMITMENT SETTLEMENT ADVANCE DISCLOSURE D ATE OF PRORATIONS IF DIFFER EN T FROM SETTLE­ MENT J. SUMMARY OF BORROWER'S TRANSACTION K. SUMMARY OF SELLER'S TRANSACTION ICO. CROSS AMOUNT DUE FROM BORROWER: 400. GROSS AMOUNT DUE TO SELL ER: 401. Contract sales price JG1. Controcf sales price 402. Personal property 102. Personal property 403.

103. Settlement charges to borrower ( frorr. 1 in ~ It00. Frrtion L ) 404.

' — .....- ...

Adjustments for items paid by seller in odvcnee: 1C4.

10 5.

405. City/town taxes to adjustments for ilcms paid by seller In odvance: 406. County taxes to 407. Assessments to 106./ City/town taxes to 408.

to 10A County taxes to 409.

to 103. Assessments to 410.

to 109.

to 411.

110.

*> 420, GROSS AMOUNT BUE TO SELLER i n .

to 112.

«® N O T E : T h e fo llo w in g 5 0 0 a n d 6 0 0 s e r ie s s e c tio n s a ro n ot req u ired to b e c o m p le te d w hen th is form i s u s e d lo r a d v a n c e d ix c lo su re o t s e ttle m e n t c o s ts prior to se ttle m e n t. 120. GROSS AMOUNT DUE FROM SORROWER; 200. AMOUNTS PAtO BY OR IN BEHALF OF BORROWER: 500.

REDUCTIONS IN AMOUNT OUE TO SELLER: 601. Poyott ot first morlgoge loan 201. Deposit or eornest money 502. Payoff of second mortgage loon ?02. Principal amount of new loon(s) 503. Settlement charges to seller (frnm lint• l400.St'clm n ft f 203. Existing loan(s) taken subiectto 201.

504. Existing ioan(s) taken subject to A c ­ c re d its to borrow er fo r ite m s un pa id b y s e lle r: 505.

506.

. . . -------------------- 206. City/fown taxes to 507.

207. County taxes to 503.

203. issessmenls to .509.

20?.

to Credits to borrower for items unpoid by seller: 210.

1<» 2 !? .

510. City/town taxes to 2U .

• ‘ fa 511. County taxes to -l V TOTAL AMOUNTS PAID 8Y OR IN BEHALF OP "

b o r v o v e h 512. Assessments to 513.

" ' i o .....

31G. c *,sh a t s e t t l e m e n t r s q u ir e o f r o m o r p a y a b l e -TO SORROWER:

514.

to 515.

to 30!. Gross amount due frca borrower .fiu ri !in c 120) 520. TOTAL REDUCTIONS IN AMOUNT DUE TO SELLER 600. CASH TO SELLER FROM SETTLEMENT: iJ2. Lets oiMunts paid by or in behalf of borrower {*'■‘*1 lint' 2101 ( ) 631. Gross amount due to seller / from line 420) 602. Less total reductions in amount due to seller f trom line ii'jn* ( ) 303. C A S H :"",' REQUIRED FROM; OR PAYABLE T O / BORROWER:

603.

CASH TO SELLER FROM SETTLEMENT FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Page 12

RULES AND REGULATIONS 22455 L . SETTLEM EN T CHARGES PA ID FROM BORROWER’ S FUNDS PA ID FROM S E LLE R ’ S FUNDS 701. Totol commission paid by seller Division of commission os follows:

702. $ to 703. $ to 704.

' # ' 800. ITEMS PAYABLE in CONNECTION WITH LOAN.

801.

Loan Origination fee % 802.

Loon Discount % r f * 4 ) 803.

Appraisal Fee to * ( / ^ ) 804.

Credit Report to ~ 805.

Lender's inspection fee _ 806.

Mortgage Insuronce application fee to U 807.

Assumption/refinancing fee ^ 808.

809.

810.

811.

900. ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE. 901.

Interest from to 0 $ /<J0V 902.

Mortgage insuronce premium for mo. to 903.

Hoxard insurance premium for yrs. to f ^ 904.

yrs. to 905.

1000.

RESERVES DEPOSITED WITH LENDER FOR:

1001. Hoxard insurance mo. 0$ /mo.

— Mortgoge insuronce mo.

/mo.

1003. City property taxes mo.

/mo.

1004. County property taxes mo. 3$ / mo.

1005. Annual assessments mo. j8$ / mo.

1006.

nio.

/mo.

1007.

mo. 0$ / mo.

1008.

mo. «$ .

/ mo.

1100. TITLE CHARGES:

1101.

Settlement or closing fee to 1102.

Abstract or title search to ^ ^ 1103.

Title examination to 1104.

Title insuronce binder to ( ^ ^ 1105.

Document preparation to 1106.

Notary fees to 1107.

Attorney's Fees to (includes above items i\o.:

f 1108.

Title insuronce to (includes above items No.:

) I z o ) 1109.

Lender’s coverage $ 1110.

Owner’ s coveroge $ 1111.

1112.

1113.

1200. GOVERNMENT RECORDING AND TRANSFER CHARGES 1201.

Recording fees:

Deed $ ■ Mortgoge $ Releases $ 1202.

City/county tox/stomos: DeedS , Mnrtgng,. f 1203.

JlQle tgs/slomcj; Deeds ; Mortgage S 1300.

ADDITIONAL SETTLEMENT CHARGES ' “ I.

1302.

Pest inspection to 1303.

V ----- 1304.

1305.

1400. TOTAL SETTLEMENT CHARGES 'e n te re d on lin es 103 and 503, S ection s 1 and K) NO TE: Under certain circu m stan ces the borrower an d se lle r may be p erm itted to w a ive th e J'J^lay period w hich m ust norm ally occur b etw een a dvan ce d is c lo s ir e and settlem en t. In the even t such a w aiver is made, c o p ie s ol the sta tem en ts o l w aiver, ex ecu ted a s p rovided in the regu lation s ol th e D epartm ent o l Housing an d Urban D evelopm ent, sh a ll be a tta ch ed to and made a part o l th is lorm when the lorm is u sed a s a settlem en t statement. HUD-1 (5-75) I n s t r u c t i o n s f o r C o m p l e t i n g U n i f o r m D i s ­ c l o s u r e / S e t t l e m e n t S t a t e m e n t ( H U D F o r m 1) T h e f o ll o w i n g a r e i n s t r u c t i o n s f o r c o m ­ p l e t i n g t h e f i r s t 2 p a g e s o f t h e U n i f o r m D is ­ c l o s u r e / S e t t l e m e n t S t a t e m e n t , H U D F o r m 1, r e q u i r e d u n d e r S e c t i o n s 4 a n d 6 o f t h e R e a l E s t a t e S e t t l e m e n t P r o c e d u r e s A c t o f 1 9 7 4 ( P u b l i c L a w 9 3 - 5 3 3 ) a n d t h e R e g u l a t i o n s t h e r e t o i s s u e d b y t h e U .S . D e p a r t m e n t o f H o u s i n g a n d U r b a n D e v e l o p m e n t c a ll e d R e g u l a t i o n X (2 4 C F R P a r t 8 2 ) . T h i s f o r m is t o b e u s e d t o p r o v id e a n a d v a n c e d i s c l o s u r e o f c o s ts p r i o r t o s e t t l e m e n t , a n d a s a u n i f o r m s t a t e m e n t o f a c t u a l c o s t s a n d a d j u s t m e n t s t o b e g i v e n t o t h e p a r t i e s i n c o n n e c t i o n w i t h t h e s e t t l e m e n t . T h e I n s t r u c t i o n s f o r c o m ­ p l e t i o n a r e p r i m a r i l y f o r t h e b e n e f i t o f t h e p e r s o n s w h o p r e p a r e t h e s t a t e m e n t s a n d n e e d n o t b e t r a n s m i t t e d t o t h e p a r t i e s a s a n i n t e g r a l p a r t o f t h e f o r m . T o d e t e r m i n e if t h e U n i f o r m D i s c l o s u r e / S e t t l e m e n t S t a t e ­ m e n t is le g a l ly r e q u i r e d t o b e u s e d i n a p a r ­ t i c u l a r m o r t g a g e l o a n t r a n s a c t i o n , r e f e r t o R e g u l a t i o n X o f t h e D e p a r t m e n t o f H o u s i n g a n d U r b a n D e v e l o p m e n t (2 4 C F R P a r t 8 2 ) . T h e r e i s n o o b j e c t i o n t o t h e u s e o f t h e f o r m i n t r a n s a c t i o n s i n w h i c h i t s u s e i s n o t le g a l ly r e q u i r e d .

T h e T r u t h - i n - L e n d l n g S t a t e m e n t p r e ­ p a r e d b y t h e F e d e r a l R e s e r v e B o a r d f o r r e a l e s t a t e t r a n s a c t i o n s is a p a r t o f t h e U n i f o r m D i s c l o s u r e / S e t t l e m e n t S t a t e m e n t . I t is t h e t h i r d p a g e o f t h e U n i f o r m D i s c l o s u r e / S e t t l e ­ m e n t F o r m a n d m u s t b e c o m p l e t e d i n a ll c a s e s i n w h i c h t h e • T r u t h i n L e n d i n g A c t a p p l i e s t o t h e t r a n s a c t i o n . F o r s p e c i f ic i n ­ s t r u c t i o n s o n T r u t h - i n - L e n d i n g d i s c l o s u r e r e q u i r e m e n t s u n d e r t h e R e a l E s t a t e S e t t l e ­ m e n t P r o c e d u r e s A c t, r e f e r t o t h e I n s t r u c ­ t i o n s o f t h e F e d e r a l R e s e r v e B o a r d , w h i c h a p p e a r i n A p p e n d i x B t o H U D ’s R e g u l a t i o n X (2 4 C F R P a r t 8 2 ) .

T h e d i s c l o s u r e i n a d v a n c e o f s e t t l e m e n t is t h e r e s p o n s i b i l i t y o f t h e l e n d e r . T h e A c t r e c ­ o g n i z e s t h a t t h e p r e c i s e a m o u n t o f e v e r y i n d i v i d u a l c h a r g e t o b e a s s e s s e d a t s e t t l e m e n t w ill n o t a lw a y s b e k n o w n a t t h e t i m e o f a d ­ v a n c e d i s c l o s u r e . T h e A c t p r o v i d e s : “ I n t h e e v e n t t h e e x a c t a m o u n t o f a n y s u c h c h a r g e is n o t a v a il a b l e , a g o o d f a i t h e s t i m a t e o f s u c h c h a r g e m a y b e p r o v i d e d . ” A s p r o v id e d i n R e g u l a t i o n X , t h e a d v a n c e d i s c l o s u r e s t a t e ­ m e n t s h a l l s t a t e a n “ ( e ) ” a f t e r e a c h f ig u r e w h i c h is a n e s t i m a t e . E a c h e s t i m a t e m u s t b e s t a t e d a s a s p e c if ic f ig u r e , a n d n o t a s a r a n g e o f p o s s i b l e f ig u r e s .

G e n e r a l I n s t r u c t i o n s I n f o r m a t i o n a n d a m o u n t s m a y b e f ille d i n b y t y p e w r i t e r , h a n d p r i n t i n g , c o m p u t e r p r i n t i n g , o r a n y o t h e r m e t h o d p r o d u c i n g c l e a r a n d l e g i b l e r e s u l t s . C o p i e s o f t h e f o r m s e n t t o t h e b o r r o w e r a n d t h e s e l l e r m a y b e c a r b o n c o p ie s , e l e c t r o s t a t i c c o p i e r c o p ie s , o r o t h e r c l e a r l y l e g i b l e c o p ie s . R e f e r t o R e g u ­ l a t i o n X r e g a r d i n g r u l e s a p p l i c a b l e t o p r i n t ­ i n g o f t h e f o r m .

W h e r e t h e r e is a n u n u s u a l l y l a r g e n u m ­ b e r o f i n s e r t i o n s f o r w h i c h b l a n k s p a c e s i n t h e f i r s t t w o p a g e s o f t h e f o r m a r e n o t s u f ­ f i c i e n t , a n a d d i t i o n a l s h e e t f o r s u c h I t e m s m a y b e a d d e d t o t h e f o r m a n d r e f e r e n c e d a t t h e a p p r o p r i a t e p l a c e o r p l a c e s i n t h e f o r m . S u c h a d d i t i o n a l s h e e t s m a y b e p r i n t e d . T h e r e v e r s e s id e o f t h e f o r m m a y b e u s e d i n s t e a d o f a n a d d i t i o n a l s h e e t .

L i n e I t e m I n s t r u c t i o n s I n s t r u c t i o n s f o r c o m p l e t i n g t h e i n d i v i d u a l i t e m s o n t h e f o r m f o llo w . W h e r e n o i n s t r u c ­ t i o n s a r e g i v e n , t h e i t e m i s t h o u g h t t o b e s e l f - e x p l a n a t o r y .

S e c t i o n A. T h e l e n d e r , t i t l e c o m p a n y , o r o t h e r f ir m p r e p a r i n g t h e f o r m m a y i n s e r t i t s n a m e a n d / o r l o g o ty p e in . S e c t i o n A . Section B. C h e c k a p p r o p r i a t e l o a n t y p e a n d c o m p l e t e t h e r e m a i n i n g i t e m s a s a p ­ p l i c a b l e .

Section C. C h e c k t h e a p p r o p r i a t e b o x in ­ d i c a t i n g w h e t h e r t h e p a r t i c u l a r c o p y o f t h e f o r m b e i n g c o m p l e t e d is f o r a d v a n c e d i s ­ c l o s u r e p u r p o s e s o r i s a s t a t e m e n t o f a c t u a l c o s t s a n d d i s b u r s e m e n t s a t o r a f t e r s e t t l e ­ m e n t . A s p r o v i d e d i n R e g u l a t i o n X , in p r e ­ p a r i n g t h e a d v a n c e d i s c l o s u r e s t a t e m e n t , t h e L e n d e r m a y m a k e t h e d i s c l o s u r e o f a d j u s t ­ m e n t s f o r t a x e s a n d a s s e s s m e n t s b a s e d u p o n t h e a s s u m p t i o n t h a t n o t a x e s a n d a s s e s s ­ m e n t s a r e d e l i n q u e n t , i n l i e u o f d e t e r m i n i n g f r o m t h e a p p r o p r i a t e r e c o r d s w h e t h e r d e ­ l i n q u e n c i e s e x i s t . W h e r e L e n d e r m a k e s d i s ­ c l o s u r e b a s e d u p o n s u c h a s s u m p t i o n , L e n d e r s h a l l p l a c e i n B lo c k C a s t a t e m e n t t h a t a d v a n c e d i s c l o s u r e o f p r o r a t i o n s o f t a x e s a n d a s s e s s m e n t s is b a s e d u p o n t h e a s s u m p ­ t i o n t h a t t a x e s a n d a s s e s s m e n t s a r e n o t d e ­ l i n q u e n t .

U n d e r R e g u l a t i o n X , L e n d e r i s p e r m i t t e d t o p r i n t s u c h a s t a t e m e n t i n B l o c k C ; w h e r e t h e s t a t e m e n t Is p r i n t e d in t h e f o r m , i t is t o b e s t r i c k e n w h e r e n o t a p p l i c a b l e .

Sections D and E. F i l l i n t h e n a m e s a n d c u r r e n t m a i l i n g a d d r e s s e s o f t h e b o r r o w e r a n d t h e s e ll e r . W h e r e t h e r e i s m o r e t h a n o n e b u y e r o r s e ll e r , t h e n a m e a n d a d d r e s s o f o n e is s u f f ic ie n t.

FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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22456 RULES AND REGULATIONS Section F and H. F i l l i n t h e n a m e a n d a d ­ d r e s s o f t h e l e n d e r a n d t h e s e t t l e m e n t a g e n t . I f , a t t h e t i m e o f a d v a n c e d i s c l o s u r e , t h e s e t ­ t l e m e n t a g e n t h a s n o t y e t b e e n s e le c te d , t h e a d v a n c e d i s c l o s u r e f o r m s h o u l d h a v e “ n o t k n o w n ” e n t e r e d i n S e c t i o n H . Section G. T h e s t r e e t a d d r e s s o f t h e s e ­ c u r i t y p r o p e r t y , i f a n y s h o u l d b e g iv e n . I f t h e r e i s n o s t r e e t a d d r e s s , a b r i e f l e g a l d e ­ s c r i p t i o n o r o t h e r l o c a t i o n o f t h e p r o p e r t y s h o u l d b e i n s e r t e d . I n a l l c a s e s g iv e t h e z ip c o d e o f t h e p r o p e r t y .

Section I. F i l l i n t h e s e d a t e s t o t h e e x t e n t t h e y a r e k n o w n . I f a d v a n c e d i s c l o s u r e is m a d e b e f o r e c o m m i t m e n t , a n e s t i m a t e d c o m ­ m i t m e n t d a t e s h o u l d b e i n s e r t e d a n d m a r k e d “ ( e ) ” . I f t h e s e t t l e m e n t d a t e is n o t f ir m a t t h e t i m e o f a d v a n c e d i s c l o s u r e , a n e s t i m a t e d s e t t l e m e n t d a t e s h o u l d b e i n s e r t e d a n d m a r k e d “ ( e ) ” . I f t h e p r o r a t i o n s o f t a x e s , i n ­ s u r a n c e , e tc ., a r e t o b e m a d e a s o f a d a t e d i f f e r e n t t h a n t h e s e t t l e m e n t d a t e , i n d i c a t e t h e d a t e o f p r o r a t i o n s o n t h e l a s t l i n e i n t h i s s e c t i o n .

Section J. Summary of Borrower’s Trans­ action. T h e B o r r o w e r m a y b e g iv e n a c o p y o f t h e f o r m ( i n c a s e o f b o t h a d v a n c e d i s ­ c l o s u r e a n d s e t t l e m e n t ) w h i c h d o e s not c o n ­ t a i n t h e i n f o r m a t i o n f il le d i n u n d e r “ S u m ­ m a r y o f S e l l e r ’s T r a n s a c t i o n ” ( B lo c k K , S e r ­ i e s 4 0 0 , 5 0 0 , a n d 6 0 0 i t e m s ) . Lines 104 and 105 a r e f o r a d d i t i o n a l a m o u n t s o w e d b y t h e b u y e r . F o r e x a m p l e , t h e b a l a n c e i n t h e s e l l e r ’s r e s e r v e a c c o u n t h e l d b y t h e l e n d e r , i f a s s i g n e d t o t h e b u y e r i n a l o a n a s s u m p t i o n c a s e , w o u l d b e e n t e r e d h e r e .

Lines 106 through 112 a r e f o r i t e m s w h i c h t h e s e ll e r h a d p a i d i n a d v a n c e , a n d f o r w h i c h t h e b u y e r m u s t t h e r e f o r e r e i m b u r s e t h e s e ll e r . O n t h e a d v a n c e d i s c l o s u r e s t a t e m e n t t h e e x a c t d a t e f o r p r o r a t i o n s w ill n o t u s u a l l y b e k n o w n , a n d t h e s e a m o u n t s w ill t h e r e f o r e b e e s t i m a t e s . E x a m p le s o f i t e m s f o r w h i c h a d j u s t m e n t s a r e m a d e m a y i n c l u d e t a x e s a n d a s s e s s m e n t s p a i d i n a d v a n c e f o r a n e n t i r e y e a r o r o t h e r p e r i o d , w h e n s e t t l e m e n t o c c u r s p r i o r t o t h e e x p i r a t i o n o f t h e y e a r o r o t h e r p e r i o d f o r w h i c h t h e y w e r e p a id . S e e I n s t r u c ­ t i o n f o r B lo c k C a b o v e r e g a r d i n g a d v a n c e d i s ­ c lo s u r e o f t a x e s a n d a s s e s s m e n t s o n t h e a s ­ s u m p t i o n t h a t n o t a x e s a n d a s s e s s m e n t s a r e d e l i n q u e n t . A d d i t i o n a l e x a m p l e s i n c l u d e f lo o d a n d h a z a r d i n s u r a n c e p r e m i u m s i f t h e b u y e r is b e i n g s u b s t i t u t e d a s a n i n s u r e d u n d e r t h e s a m e p o lic y ; m o r t g a g e i n s u r a n c e i n l o a n a s ­ s u m p t i o n c a s e s ; P U D o r c o n d o m i n i u m a s s o ­ c i a t i o n a s s e s s m e n t s p a i d i n a d v a n c e ; f u e l o r o t h e r s u p p l i e s o n h a n d , p u r c h a s e d b y t h e s e ll e r , w h i c h t h e b u y e r w ill u s e w h e n b u y e r t a k e s p o s s e s s i o n o f t h e p r o p e r t y ; a n d g r o u n d r e n t p a i d i n a d v a n c e .

Line 203 is u s e d f o r c a s e s i n w h i c h t h e b u y e r is a s s u m i n g o r t a k i n g t i t l e s u b j e c t t o a n e x i s t i n g l o a n o r o t h e r l ie n . Lines 204 and 205 m a y b e u s e d i n c a s e s i n w h i c h t h e s e ll e r h a s t a k e n a t r a d e - i n o r o t h e r p r o p e r t y f r o m t h e b u y e r i n p a r t p a y m e n t f o r t h e p r o p e r t y b e i n g s o ld , o r w h e n a t e n a n t i n t h e p r o p e r t y h a s n o t y e t p a i d h i s r e n t f o r a p e r i o d o f t i m e p r i o r t o t h e s e t t l e m e n t , a n d w h i c h t h e b u y e r w ill c o ll e c t. T h e y m a y a ls o b e u s e d i n c a s e s i n w h i c h a s e l l e r ( t y p i c a l l y a b u i l d e r ) i s m a k i n g a n “ a l l o w a n c e ” t o t h e b u y e r f o r c a r p e t s o r d r a p e s w h i c h t h e b u y e r is t o p u r c h a s e o n h i s o w n . S u c h a n a ll o w ­ a n c e s h o u l d a ls o b e e n t e r e d o n l i n e s 5 0 5 - 5 0 9 . Lines 206 through 212 a r e f o r i t e m s w h i c h h a v e n o t y e t b e e n p a i d , a n d w h i c h t h e b u y e r i s e x p e c t e d t o p a y , b u t w h i c h a r e a t t r i b u t ­ a b l e i n p a r t t o a p e r i o d o f t i m e p r i o r t o t h e s e t t l e m e n t . I n j u r i s d i c t i o n s i n w h i c h t a x e s a r e p a i d l a t e i n t h e t a x y e a r , m o s t c a s e s w ill s h o w t h e p r o r a t i o n o f t a x e s i n t h e s e l in e s . S e e I n s t r u c t i o n t o B l o c k C a b o v e r e g a r d i n g a d v a n c e d i s c l o s u r e o f t a x e s a n d a s s e s s m e n t s o n t h e a s s u m p t i o n t h a t n o t a x e s a n d a s s e s s ­ m e n t s a r e d e l i n q u e n t . O t h e r e x a m p l e s i n ­ c l u d e u t i l i t i e s u s e d b u t n o t p a i d f o r b y t h e s e ll e r , r e n t c o ll e c te d i n a d v a n c e b y t h e s e ll e r f r o m a t e n a n t f o r a p e r i o d e x t e n d i n g b e y o n d t h e s e t t l e m e n t d a t e , a n d i n t e r e s t o n l o a n a s ­ s u m p t i o n s . A s w i t h l i n e s 1 0 6 t o 1 1 2 , t h e s e a m o u n t s w ill n o r m a l l y b e o n l y e s t i m a t e s o n t h e a d v a n c e d i s c l o s u r e s t a t e m e n t . Line 303 m a y i n d i c a t e e i t h e r t h e c a s h r e ­ q u i r e d f r o m t h e b o r r o w e r a t s e t t l e m e n t ( t h e u s u a l . c a s e i n a p u r c h a s e t r a n s a c t i o n ) o r c a s h p a y a b l e t o t h e b o r r o w e r a t s e t t l e m e n t ( if , f o r e x a m p l e , t h e b u y e r ’s e a r n e s t m o n e y d e p o s i t e x c e e d e d h i s c a s h o b l i g a t i o n s i n t h e t r a n s ­ a c t i o n ) .

T h e a p p r o p r i a t e b o x s h o u l d b e c h e c k e d .

Section K. Summary of Seller’s Transac­ tion. T h e S e l l e r m a y b e g i v e n a c o p y o f t h e f o r m ( i n c a s e o f b o t h a d v a n c e d i s c l o s u r e a n d s e t t l e m e n t ) w h i c h d o e s not c o n t a i n t h e i n ­ f o r m a t i o n f il l e d i n u n d e r “ S u m m a r y o f B o r ­ r o w e r ’s T r a n s a c t i o n ”

( B lo c k J , S e r i e s 10 0 , 2 0 0 , a n d 3 0 0 i t e m s ) .

I n s t r u c t i o n s f o r t h e u s e o f l i n e s 1 0 6 -1 1 2 , a b o v e , a p p l y a ls o t o l i n e s 4 0 5 t o 4 1 1 . A s t h e n o t e o n t h e f o r m i n d i c a t e s , i t is n o t n e c e s s a r y t o c o m p l e t e l i n e s 5 0 0 t h r o u g h 6 0 3 w h e n t h e f o r m is u s e d f o r a d v a n c e d i s ­ c l o s u r e . T h e r e a s o n i s t h a t i n f o r m a t i o n a b o u t p a y o f f f ig u r e s o n e x i s t i n g l i e n s m u s t n o r ­ m a l l y c o m e f r o m a t i t l e s e a r c h a n d p a y o f f l e t t e r s f r o m o t h e r l e n d e r s , a n d i s t h e r e f o r e o f t e n n o t a v a i l a b l e a t t h e t i m e o f a d v a n c e d i s c l o s u r e . T h e r e is , h o w e v e r , n o o b j e c t i o n t o t h e c o m p l e t i o n o f th e s e i s e c t i o n s a t t h e t i m e o f a d v a n c e d i s c l o s u r e i f t h e l e n d e r s o d e s ir e s .

L i n e 5 0 4 i s u s e d i f t h e p u r c h a s e r i s a s ­ s u m i n g o r t a k i n g t i t l e s u b j e c t t o e x i s t i n g l i e n s w h i c h a r e t o b e d e d u c t e d f r o m s a le s p r ic e .

Lines 505 through 509 m a y b e u s e d t o l i s t a d d i t i o n a l l i e n s w h i c h m u s t b e p a i d o ff t h r o u g h s e t t l e m e n t t o c l e a r t i t l e t o t h e p r o p ­ e r t y . T h e y m a y a ls o b e u s e d t o i n d i c a t e f u n d s t o b e h e l d b y t h e s e t t l e m e n t a g e n t f o r t h e p a y m e n t o f r e p a i r s t h e s e l l e r i s o b l i g a t e d t o m a k e o r p a y m e n t o f w a t e r , f u e l , o r o t h e r u t i l i t y b i l l s w h i c h c a n n o t b e p r o r a t e d b e ­ t w e e n t h e p a r t i e s a t s e t t l e m e n t b e c a u s e t h e a m o u n t s u s e d b y t h e s e l l e r p r i o r t o s e t t l e ­ m e n t a r e n o t y e t k n o w n .

I f t h e s e l l e r ’s r e a l e s t a t e b r o k e r h a s r e ­ c e iv e d a n d h e l d a n e a r n e s t m o n e y d e p o s i t w h i c h e x c e e d s t h e c o m m i s s i o n o w e d t o h i m , a n d i f h e w ill t e n d e r t h e e x c e s s d e p o s i t d i ­ r e c t l y t o t h e s e l l e r r a t h e r t h a n t h r o u g h t h e s e t t l e m e n t a g e n t , t h e a m o u n t o f e x c e s s d e ­ p o s i t s h o u l d b e e n t e r e d o n o n e o f l i n e s 5 0 5 - 5 0 9 , t h u s r e d u c i n g t h e a m o u n t t o b e p a i d t o t h e s e ll e r b y t h e s e t t l e m e n t a g e n t b y t h a t a m o u n t .

I n s t r u c t i o n s f o r t h e u s e o f l i n e s 5 1 0 t h r o u g h 5 1 5 a r e t h e s a m e a s t h o s e f o r l i n e s 2 0 6 t o 2 1 2 , a b o v e .

Section L. Settlem ent Charges. G e n e r a l :

F o r a l l i t e m s e x c e p t t h o s e p a i d t o a n d r e ­ t a i n e d b y t h e l e n d e r , t h e n a m e o f t h e p e r ­ s o n o r f ir m r e c e i v i n g t h e p a y m e n t s h o u l d b e s h o w n .

Line 700. I f t h e s a l e s c o m m i s s i o n p a i d b y t h e s e l l e r i s b a s e d o n a p e r c e n t a g e o f t h e p u r ­ c h a s e p r ic e , e n t e r t h e p u r c h a s e p r i c e a n d t h e p e r c e n t a g e h e r e .

Line 701. T h e d o l l a r a m o u n t o f t h e total c o m m i s s i o n p a i d b y t h e s e ll e r is e n t e r e d h e r e . A s in g l e e n t r y is m a d e , r e g a r d l e s s o f w h e t h e r c o m p e n s a t i o n w ill b e p a i d t o o n e a g e n t o r s p l i t a m o n g s e v e r a l a g e n t s . Lines 702-703 a r e t o b e u s e d t o s t a t e t h e s p l i t o f t h e c o m m i s s i o n w h e r e t h e p e r s o n c o n d u c t i n g t h e s e t t l e m e n t d i s b u r s e s p o r t i o n s o f t h e c o m m i s s i o n t o t w o o r m o r e a g e n t s . O n l y t h e t o t a l c o m m i s s i o n is t o b e s h o w n i n t h e b o r r o w e r ’s o r s e l l e r ’s c o l u m n s . Line 704 m a y b e u s e d f o r a d d i t i o n a l c h a r g e s m a d e b y t h e s a le s a g e n t , o r f o r a s a le s c o m m i s s i o n c h a r g e d t o t h e b u y e r , w h i c h w ill b e d i s b u r s e d b y t h e s e t t l e m e n t a g e n t .

Line SOI. E n t e r t h e f e e c h a r g e d b y t h e l e n d e r f o r p r o c e s s in g o r o r i g i n a t i n g t h e lo a n . I f t h i s f e e is c o m p u t e d a s a p e r c e n t a g e o f t h e l o a n a m o u n t , e n t e r t h e p e r c e n t a g e i n t h e b l a n k i n d i c a t e d .

Line 802. E n t e r t h e l o a n d i s c o u n t c h a r g e d b y t h e l e n d e r , a n d i f i t is c o m p u t e d a s a p e r c e n t a g e o f t h e l o a n a m o u n t , e n t e r t h e p e r c e n t a g e i n t h e b l a n k i n d i c a t e d . Line 803. E n t e r a p p r a i s a l f e e s , if t h e r e is a c h a r g e s e p a r a t e f r o m t h e o r i g i n a t i o n f e e . Line 805 i s u s e d o n l y f o r i n s p e c t i o n s b y t h e L e n d e r o r h i s p e r s o n n e l . C h a r g e s f o r o t h e r p e s t o r s t r u c t u r a l i n s p e c t i o n s r e q u i r e d b y R e g u l a t i o n X t o b e s t a t e d s h o u l d b e e n t e r e d i n l i n e s 1 3 0 2 -1 3 0 5 . Line 806 s h o u l d b e u s e d f o r a V A a p p r a i s a l f e e , F H A a p p l i c a t i o n f e e ( w h i c h c o v e r s t h e c o s t o f a p p r a i s a l b y t h e a g e n c y a s w e l l ) , o r a f e e r e q u i r e d b y a p r i v a t e m o r t g a g e i n ­ s u r a n c e c o m p a n y .

Line 807 is p r o v id e d f o r c o n v e n ie n c e i n u s ­ i n g t h e f o r m f o r l o a n a s s u m p t i o n t r a n s a c ­ t i o n s i f a f e e is c h a r g e d b y t h e L e n d e r f o r a g r e e i n g t o a n a s s u m p t i o n o r t r a n s f e r s u b j e c t t o a n e x i s t i n g i n d e b t e d n e s s . Line 901. I f i n t e r e s t i s c o l l e c t e d a t s e t t l e ­ m e n t f o r a p a r t o f a m o n t h o r o t h e r p e r i o d b e t w e e n s e t t l e m e n t a n d t h e d a t e f r o m w h i c h i n t e r e s t w ill b e c o l l e c t e d w i t h t h e f i r s t r e g u ­ l a r m o n t h l y p a y m e n t , e n t e r t h a t a m o u n t h e r e . I f s u c h i n t e r e s t i s n o t c o ll e c te d u n t i l t h e f i r s t r e g u l a r m o n t h l y p a y m e n t , n o e n t r y s h o u l d b e m a d e o n l i n e 9 0 1 . Line 1000. T h i s s e c t i o n i s u s e d f o r a m o u n t s c o ll e c te d b y t h e L e n d e r a n d h e l d i n a n a c ­ c o u n t f o r t h e f u t u r e p a y m e n t o f t h e o b l i g a ­ t i o n s l i s t e d a s t h e y f a l l d u e . I n m a n y j u r i s ­ d i c t i o n s t h i s is r e f e r r e d t o a s a n “ e s c r o w ” , “ i m p o u n d ” o r “ t r u s t ” a c c o u n t . I n a d d i t i o n t o t h e i t e m s l is te d , s o m e L e n d e r s m a y r e q u i r e r e s e r v e s f o r f lo o d i n s u r a n c e , c o n d o m i n i u m o w n e r s a s s o c i a t i o n a s s e s s m e n t s , e tc . Line 1100. I n m a n y j u r i s d i c t i o n s t h e s a m e p e r s o n (e .g ., a n a t t o r n e y o r a t i t l e i n s u r a n c e c o m p a n y ) p e r f o r m s s e v e r a l o f t h e s e r v ic e s l i s t e d i n t h i s s e c t i o n , a n d m a k e s a s in g l e u n d i f f e r e n t i a t e d c h a r g e f o r s o d o i n g . I n s u c h c a s e s , e n t e r t h e o v e r a l l f e e o n l i n e 1 1 0 7 , ( f o r a t t o r n e y s ) o r l i n e 1 1 0 8 ( f o r t i t l e c o m p a n i e s ) , a n d e n t e r o n t h e l i n e p r o v i d e d t h e i t e m n u m ­ b e r s o f t h e s e r v i c e s l i s t e d w h i c h a r e c o v e r e d i n t h e o v e r a l l f e e . I n s u c h c a s e s n o a m o u n t s s h o u l d b e e n t e r e d f o r t h e i n d i v i d u a l i t e m s w h i c h a r e c o v e r e d b y o v e r a l l f e e s . Line 1101. E n t e r h e r e t h e f e e o f t h e p e r s o n o r f i r m c o n d u c t i n g t h e s e t t l e m e n t . I n s o m e j u r i s d i c t i o n s t h i s is t e r m e d a c lo s i n g o r e s c r o w f e e . I f t w o o r m o r e p e r s o n s o r f ir m s m a k e c h a r g e s i n c o n n e c t i o n w i t h t h e s a m e t r a n s a c t i o n , e n t e r t o t a l c h a r g e s i n t h e a p ­ p r o p r i a t e c o l u m n s , a n d i n d i c a t e t h e b r e a k ­ d o w n o f c h a r g e s o n t h e l i n e a f t e r t h e w o r d “ t o ” .

Lines 1102 and 1103. I n s o m e J u r i s d i c t i o n s t h e s a m e p e r s o n ( e .g ., a n a t t o r n e y ) b o t h s e a r c h e s t h e t i t l e ( t h a t is , p e r f o r m s t h e n e c ­ e s s a r y r e s e a r c h i n t h e r e c o r d s ) a n d e x a m i n e s t i t l e ( t h a t is , m a k e s a d e t e r m i n a t i o n a s t o w h a t m a t t e r s a f f e c t t i t l e , a n d p r o v i d e s a t i t l e r e p o r t o r o p i n i o n . ) I f s u c h a p e r s o n c h a r g e s o n l y o n e f e e f o r b o t h s e r v ic e s , i t s h o u l d b e e n t e r e d o n l i n e 1 1 0 3 .

I f s e p a r a t e p e r s o n s p e r f o r m t h e s e t a s k s , o r i f s e p a r a t e c h a r g e s a r e m a d e f o r s e a r c h i n g a n d e x a m i n a t i o n , t h e y s h o u l d b e l i s t e d s e p a r a t e l y . Line 1105. E n t e r c h a r g e s f o r p r e p a r a t i o n o f d e e d s , m o r t g a g e s , n o t e s , e tc . I f m o r e t h a n o n e p e r s o n r e c e iv e s a f e e f o r s u c h w o r k i n t h e s a m e t r a n s a c t i o n , s h o w t h e t o t a l p a i d i n t h e a p p r o p r i a t e c o l u m n a n d t h e I n d i v i d u a l c h a r g e s o n t h e l i n e f o ll o w i n g t h e w o r d “ t o ” . Lines 1108-1110. E n t e r t h e t o t a l c h a r g e f o r t i t l e i n s u r a n c e ( e x c e p t t h e c o s t o f t h e t i t l e b i n d e r ) o n l i n e 1 1 0 8 . E n t e r o n l i n e s 1 1 0 9 a n d 1 1 1 0 t h e i n d i v i d u a l c h a r g e s f o r t h e L e n d e r ’s a n d o w n e r ’s p o l ic i e s . N o t e t h a t t h e s e c h a r g e s a r e n o t c a r r i e d o v e r i n t o t h e b o r r o w e r ’s a n d FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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s e l l e r ’s c o lu m n s , s in c e t o d o s o w o u l d r e s u l t i n a d u p l i c a t i o n o f t h e a m o u n t i n l i n e 1 1 0 8 . Lines 1111-1113. T h e s e l i n e s a r e f o r e n t r y o f o t h e r t i t l e c h a r g e s n o t a l r e a d y i te m iz e d . E x a m p le s i n s o m e j u r i s d i c t i o n s w o u l d i n c l u d e a f e e t o a p r i v a t e t a x s e r v ic e , a f e e t o a c o u n t y t i x c o ll e c to r f o r a t a x c e r t i f i c a t e , a n d a f e e t o a p u b l i c t i t l e r e g i s t r a r f o r a c e r t i f i c a t e o f t i t l e u n d e r a T o r r e n s A c t. S h o w t h e l e n d e r ’s a t t o r n e y ’s f e e , i f a n y , o n l i n e 1 1 0 7 a n d o t h e r a t t o r n e y s ’ f e e s , i f r e q u i r e d t o b e s t a t e d u n d e r R e g u l a t i o n X , o n l i n e s 1 1 1 1 -1 1 1 3 . Lines 1303-1305. E n t e r o n th e s e : l i n e s a n y o t h e r s e t t l e m e n t c h a r g e s n o t r e f e r r a b l e t o t h e c a te g o r ie s l i s t e d a b o v e o n t h e f o r m w h i c h a r e r e q u i r e d b y R e g u l a t i o n X t o b e s t a t e d . E x a m p le s m a y i n c l u d e s t r u c t u r a l i n s p e c t i o n s o r p r e - s a l e i n s p e c t i o n o f h e a t i n g , p l u m b i n g , o r e l e c t r i c a l e q u i p m e n t .

T h e s e i n s p e c t i o n c h a r g e s m a y i n c l u d e a f e e f o r i n s u r a n c e o r w a r r a n t y c o v e r a g e .

Line 1400.

E n t e r t h e t o t a l s e t t l e m e n t c h a r g e s p a i d f r o m b o r r o w e r ’s f u n d s a n d s e l l e r ’s f u n d s . T h e s e t o t a l s a r e a ls o e n t e r e d o n l i n e s 103 a n d 5 0 3 , r e s p e c t i v e ly , i n S e c ­ t i o n s J a n d K .

A t t a c h m e n t o f W aiv er F o r m T h e w a i v e r o r w a i v e r s r e d u c i n g t h e p e r i o d b e t w e e n d i s c l o s u r e a n d s e t t l e m e n t ( i f a n y a r e e x e c u t e d b y th e - p a r t i e s ) a r e a p a r t o f t h e f o r m w h e n i t is u s e d a s a s e t t l e m e n t s t a t e m e n t , a n d s h o u l d b e a t t a c h e d t o t h e f o r m .

RULES AND REGULATIONS EXHIBIT Federal. Truth-in-Lending Statement (As part of Disclosure/Settlement Statement) I. A. Cash price (contract sales price) 1.

Less any cash dovnpayment $_ 2. Less any trade-in' $_ 3.

Total downpayment B. Equals unpaid balance of cash price C. Plus any other amounts financed:

1. Property insurance premiums $ 2.

S' 3.

Total other amounts financed Equals unpaid balance Less any prepaid finance charges:

1. Origination fee or points paid by borrower $ 2. Loan discount or points paid by seller $ 3.

Interest from (spccifv date) to (specify date) $ 4. Mortgage guaranty insurance $ 5.

S' 6.

Total prepaid finance charge F.

Equals amount financed II. The FINANCE CHARGE consists of A.

Interest (simple annual rate of ______ 7.) $_____ C.

D.

III. A.

Total prepaid finance charge (I. E. 6.) Total FINANCE CHARGE The ANNUAL PERCENTAGE RATE on the amount financed is If the contract includes a provision for variation in the interest rate, describe ______________________ .

IV. The repayment terms are:

The finance charge begins to accrue on (specify date) VI. In the event of late payments, charges may be assessed as follows: VII. (L'se either A or B as appropriate) A. Conditions and penalties for prepaying this obligation are __ B.

Identification of method of rebate of unearned finance charge i s __________________________________________________________________ _ V III. Insurance taken in connection with t h i s o b lig a tio n : ______________ IX. The s e c u rity for th i s o b lig a tio n is __ * In d ic a te s a d i t e , r a t e or amount th at is estim ated and may be s u b ject to change.

22457 INSTRUCTIONS FOR FEDERAL TRUTH IN LENDING STATEMENT 1 T h i s f o r m is t h e F e d e r a l T r u t h i n L e n d ­ i n g d i s c l o s u r e p o r t i o n o f t h e D i s c l o s u r e / S e t t l e m e n t S t a t e m e n t t o b e p r o v i d e d b y t h e D e p a r t m e n t o f H o u s i n g a n d U r b a n D e v e l o p ­ m e n t i n c o n n e c t i o n w i t h t h e R e a l E s t a t e S e t t l e m e n t P r o c e d u r e s A c t ( P u b . L . 9 3 - 5 3 3 ) . T h i s f o r m i s i n t e n d e d t o p r o v i d e a f le x i b le , m i n i m u m d i s c l o s u r e s t a n d a r d i n s a t i s f a c t i o n o f t h e T r u t h i n L e n d i n g ( R e g u l a t i o n Z ) r e ­ q u i r e m e n t s o f t h e R e a l E s t a t e S e t t l e m e n t P r o c e d u r e s A c t.

T h i s f o r m is d e s ig n e d t o a c c o m m o d a t e t h o s e T r u t h i n L e n d i n g d i s ­ c lo s u r e s w h i c h a r e m o s t c o m m o n t o r e a l e s t a t e p u r c h a s e t r a n s a c t i o n s . H o w e v e r , t h e f o r m i s n o t c o m p r e h e n s i v e o f a l l c r e d i t c h a r g e s o r t e r m s t h a t m a y b e i n c i d e n t t o a n y p a r t i c u l a r f e d e r a l l y r e l a t e d m o r t g a g e l o a n . W h e n a g i v e n t r a n s a c t i o n i n c l u d e s le s s c o m m o n t e r m s , s u c h a s b a l l o o n p a y m e n t s , f o r w h i c h n o s p e c if ic p r o v i s i o n i s m a d e o n t h e f o r m , t h e s e t e r m s w i ll a l s o n e e d t o b e d i s c l o s e d a n d i d e n t i f i e d o n t h e f o r m . T o m a i n t a i n t h e f o r m a s a s t a n d a r d i z e d d i s c l o s u r e m e c h a n i s m w h i l e s t i l l p r o v i d i n g c r e d i t o r s w i t h f le x i b i l it y , c e r t a i n c h a n g e s t o t h e f o r m m a y b e n e c e s s a r y . A s l o n g a s t h e a p p l i c a b l e T r u t h i n L e n d i n g d i s c l o s u r e r e ­ q u i r e m e n t s a r e m e t :

( a ) D i s c lo s u r e s p r o v i d e d o n t h e f o r m w h i c h a r e n o t a p p l i c a b l e t o a g i v e n t r a n s ­ a c t i o n m a y b e d e l e t e d . F o r e x a m p l e , t h e f i ­ n a n c e c h a r g e d i s c l o s u r e s ( I t e m I I ) n e e d n o t b e m a d e i n t h e c a s e o f a p u r c h a s e m o n e y f i r s t m o r t g a g e o n a d w e l li n g . ( b ) D i s c lo s u r e s a n d l a n g u a g e m o r e p e r ­ t i n e n t t o a s p e c i f ic c h a r g e o r t e r m m a y b e s u b s t i t u t e d f o r t h o s e p r e s e n t l y i n c l u d e d .

F o r e x a m p l e , i n I t e m V I I .A ., i f n o c h a r g e w ill b e a s s e s s e d i n t h e e v e n t o f p r e p a y m e n t o f a l o a n o n w h i c h i n t e r e s t is c o m p u t e d o n t h e u n p a i d p r i n c i p a l b a l a n c e , a s t a t e m e n t t o t h a t e f f e c t m a y b e s u b s t i t u t e d . ( c ) A d d i t i o n a l s p a c e a n d / o r d i s c l o s u r e s m a y b e p r o v i d e d w h e r e n e c e s s a r y t o s a t i s f y t h e r e q u i r e m e n t s o f R e g u l a t i o n Z . F o r e x ­ a m p l e , a d d i t i o n a l s p a c e m a y b e p r o v i d e d f o r d i s c l o s u r e s i n I t e m IV ; o t h e r c h a r g e s , s u c h a s c o n t i n u i n g p r e m i u m s f o r m o r t g a g e g u a r ­ a n t y i n s u r a n c e , m a y b e a d d e d u n d e r I t e m n.

T h i s f o r m is d e s i g n e d a s a d i s c l o s u r e f o r b o t h l o a n a n d c r e d i t s a le t r a n s a c t i o n s a n d s h o u l d b e u s e d r e g a r d l e s s o f w h e t h e r a g i v e n t r a n s a c t i o n m a y b e c h a r a c t e r i z e d a s a l o a n o r c r e d i t s a l e (§ § 2 2 6 . 6 ( d ) , 2 2 6 .8 ( c ) a n d 2 2 6 . 8 ( d ) ) . T h e f o r m c o n t a i n s c e r t a i n d i s ­ c lo s u r e p r o v i s i o n s w h i c h a r e r e q u i r e d i n c r e d i t s a le s d i s c l o s u r e s u n d e r T r u t h i n L e n d ­ i n g b u t n o t r e q u i r e d i n l o a n d i s c l o s u r e s .

L e n d e r s w h o c h o o s e t o m a k e o n l y t h o s e d i s ­ c lo s u r e s r e q u i r e d i n c o n n e c t i o n w i t h l o a n s u n d e r R e g u l a t i o n Z m a y d e l e t e t h e a d d i t i o n a l d i s c l o s u r e s r e l a t e d t o t h e c r e d i t s a le s . A ls o a c e r t a i n a m o u n t o f d e v i a t i o n m a y b e n e c e s ­ s a r y i n m o r e c o m p l i c a t e d t r a n s a c t i o n s , s u c h a s i n t h e c a s e o f p e r m a n e n t f i n a n c i n g f o l ­ l o w i n g t h e m a t u r i t y o f a h o m e c o n s t r u c t i o n lo a n .

T h i s f o r m is i n t e n d e d t o b e u s e d s o le l y f o r t h e d i s c l o s u r e s r e q u i r e d u n d e r t h e F e d ­ e r a l T r u t h i n L e n d i n g A c t. E x c e p t w i t h r e ­ s p e c t t o r e s c i n d a b l e t r a n s a c t i o n s , a s n o t e d b e lo w , a l l T r u t h i n L e n d i n g d i s c l o s u r e s m a d e i n c o m p l i a n c e w i t h t h e R e a l E s t a t e S e t t l e ­ m e n t P r o c e d u r e s A c t s h a l l b e m a d e o n o n e J N o t e : T h e s e i n s t r u c t i o n s a r e i n t e n d e d t o a s s i s t i n t h e c o m p l e t i o n o f t h e T r u t h i n L e n d i n g S t a t e m e n t , a n d e x c e p t t o t h e e x t e n t t o w h i c h R e g u l a t i o n Z is i n t e r p r e t e d t o a c c o m m o d a t e t h e R e a l E s t a t e S e t t l e m e n t P r o c e d u r e s A c t, t h e i n s t r u c t i o n s a r e i n n o w a y i n t e n d e d t o s u p e r s e d e o r s u p p l e m e n t t h e p r o v i s i o n s o f R e g u l a t i o n Z . A ll s e c t i o n a l r e f e r e n c e s i n t h e i n s t r u c t i o n s a r e t o R e g u ­ l a t i o n Z (1 2 C F R 2 2 6 ) .

FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 —1 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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22458 RULES AND REGULATIONS s i d e o f a s i n g l e s h e e t r e g a r d l e s s o f a n y d i f ­ f e r i n g R e g u l a t i o n Z r e q u i r e m e n t s . F o r e x ­ a m p l e , i n s p i t e o f t h e p r o v is i o n s o f § 2 2 6 .8 ( a ) ( 1 ) , f o r t h e p u r p o s e s o f s a t i s f y i n g t h e r e ­ q u i r e m e n t s o f t h e R e a l E s t a t e S e t t l e m e n t P r o c e d u r e s A c t, p r o m i s s o r y n o t e s o r o t h e r c o n t r a c t u a l o b l i g a t i o n s s h a l l n o t b e i n c l u d e d o n t h e T r u t h i n L e n d i n g d i s c l o s u r e f o r m . S i m i l a r l y , i n s p i t e o f § 2 2 6 .6 ( c ) ( 2 ) , t h e T r u t h i n L e n d i n g f o r m t o b e u s e d i n c o n n e c t i o n w i t h t h e R e a l E s t a t e S e t t l e m e n t P r o c e d u r e s A c t m a y n o t i n c l u d e i n c o n s i s t e n t S t a t e d i s ­ c l o s u r e r e q u i r e m e n t s .

C h a r g e s u n d e r § 2 2 6 .4 ( b ) n e e d n o t b e i t e m ­ i z e d o n t h i s f o r m , p r o v i d e d t h e y a r e I te m iz e d a n d d i s c l o s e d o n t h e s e t t l e m e n t c o s t p o r t i o n o f t h e c o m b i n e d f o r m .

I n t h e e v e n t t h a t a g i v e n t r a n s a c t i o n s u b ­ j e c t t o t h e R e a l E s t a t e S e t t l e m e n t P r o c e ­ d u r e s A c t is r e s c i n d a b l e u n d e r p r o v i s i o n s o f § 2 2 6 .9 o f R e g u l a t i o n Z , t w o c o p ie s o f a n o t i c e o f t h e r i g h t o f r e s c i s s i o n (§ 2 2 6 . 9 ( b ) ) s h a l l b e g i v e n s e p a r a t e l y f r o m t h e p r e s c r i b e d f o r m t o e a c h b o r r o w e r w h o h a s t h e r i g h t t o r e s c i n d .

B o n a f id e e s t i m a t e s m a y b e m a d e i n c o n ­ n e c t i o n w i t h d a t e s o r c h a r g e s f o r w h i c h e x a c t d o l l a r a m o u n t s o r r a t e s a r e u n k n o w n a t t h e t i m e o f a d v a n c e d i s c l o s u r e (§ 2 2 6 . 6 ( f ) ) .

W h e n e s t i m a t e s a r e u s e d , t h e y s h o u l d b e s u i t a b l y d e s i g n a t e d a s s u c h , f o r e x a m p l e , b y a s t e r i s k s p l a c e d n e x t t o t h e e s t i m a t e d i n f o r ­ m a t i o n .

T h e R e a l E s t a t e S e t t l e m e n t P r o c e d u r e s A c t r e q u i r e s t h a t T r u t h i n L e n d i n g d i s c l o s u r e s b e m a d e a t l e a s t 1 2 d a y s b e f o r e s e t t l e m e n t a n d a g a i n o n t h e d a y o f s e t t l e m e n t . W h il e t w o s e p a r a t e d i s c l o s u r e s a r e r e q u i r e d , i n t h o s e i n ­ s t a n c e s w h e r e n o m a t e r i a l c h a n g e o c c u r s i n t h e i n f o r m a t i o n r e q u i r e d t o b e d i s c l o s e d , a c o p y o f t h e i n i t i a l d i s c l o s u r e f o r m m a y foe u s e d i n s a t i s f a c t i o n o f t h e d i s c l o s u r e r e q u i r e ­ m e n t o n t h e d a y o f s e t t l e m e n t . C r e d i t o r s i n u s i n g t h e p r e s c r i b e d f o r m m a y d e l e t e t h e n u m b e r i n g s y s t e m p r o v id e d ; t h e n u m b e r s u s e d o n t h e f o r m a r e i n c l u d e d s o le ly t o a id i n r e l a t i n g p e r t i n e n t i n s t r u c t i o n s .

H o w e v e r , i n d e l e t i n g t h e n u m b e r s o r i n m a k i n g a n y o t h e r a d j u s t m e n t s t o t h e f o r m , c r e d i t o r s s h o u l d b e g u i d e d b y t h e r e q u i r e m e n t s o f § 2 2 6 .6 ( a ) t o t h e e f f e c t t h a t T r u t h i n L e n d i n g d i s c l o s u r e s b e m a d e c le a r ly , c o n s p i c u o u s l y , a n d i n m e a n i n g f u l s e q u e n c e . C r e d i t o r s m a y a ls o a d d s i g n a t u r e s , d a t e s , a n d a c k n o w l e d g e m e n t s t o t h e f o r m . I t e m I I t e m I.A .

is p r o v i d e d t o s h o w t h e c a s h p r i c e ( c o n t r a c t s a l e s p r i c e ) w h ic h , s h o u l d e q u a t e t o t h e a m o u n t s h o w n - o n l i n e 101 o f t h e s e t t l e m e n t c o s t d i s c l o s u r e p o r t i o n o f t h e c o m b i n e d f o r m (§ 2 2 6 .8 ( c ) ( 1 ) ) . I t e m s I .A .I. a n d I . A .2 . a r e p r o v i d e d t o s h o w a n y c a s h d o w n p a y m e n t o r t r a d e - i n .

I t e m I.A .3 . i s p r o v id e d t o s h o w t h e t o t a l a m o u n t o f a n y d o w n p a y m e n t s (§ 2 2 6 .8 ( c ) ( 2 ) ) . I t e m I .B . is p r o v i d e d t o s h o w t h e u n p a i d b a l a n c e o f t h e c a s h p r i c e w h i c h s h o u l d e q u a l I.A . m i n u s I.A .3 . (§ 2 2 6 .8 ( c ) ( 3 ) ) . I t e m I .C . is p r o v i d e d t o s h o w o t h e r i te m s w h i c h a r e f i n a n c e d a s p a r t o f t h e c r e d i t t r a n s ­ a c t i o n . F o r e x a m p l e , p r o p e r t y d a m a g e i n s u r ­ a n c e p r e m i u m s u n d e r I .C .l . a r e I n c l u d e d i n t h e a m o u n t f i n a n c e d , i f t h e y a r e f i n a n c e d a s p a r t o f t h e c r e d i t t r a n s a c t i o n a n d t h e o t h e r c o n d i t i o n s o f § 2 2 6 .4 ( a ) ( 6 ) a r e m e t .

T h e b l a n k l i n e I .C .2 . is i n t e n d e d t o i n c l u d e s i m i ­ l a r i t e m s , w h i c h a r e f i n a n c e d , s u c h a s t h o s e l i s t e d i n § 2 2 6 .4 ( b ) o r ( e ) . I t e m I .C .3 . i s p r o ­ v i d e d t o s h o w a t o t a l o f o t h e r a m o u n t s f i­ n a n c e d (§ 226.8( c ) ( 4 ) ) .

I t e m I.D . is p r o v i d e d t o s h o w t h e u n p a i d b a l a n c e ( t h e s u m o f I t e m I .B .

a n d I .C .) (§ 2 2 6 .8 ( c ) ( 5 ) ) .

I t e m I .E . is i n t e n d e d t o s h o w p r e p a i d f i ­ n a n c e c h a r g e s a n d t h e t o t a l p r e p a i d f i n a n c e c h a r g e s (§ § 226.4 ( a ) / 2 2 6 . 8 ( d ) ( 2 ) / 2 2 6 .8 ( e ) ( D ) .

I t e m I . E . l . is p r o v i d e d t o s h o w t h e o r i g i n a ­ t i o n f e e o r p o i n t s p a i d d i r e c t l y b y t h e b o r ­ r o w e r , s u c h a s t h e o n e p o i n t p e r m i t t e d i n V A t r a n s a c t i o n s .

I t e m I .E .2 . is p r o v i d e d t o s h o w t h o s e l o a n d i s c o u n t s o r p o i n t s p a i d b y t h e s e l l e r w h e n t h e y a r e p a r t o f t h e f i n a n c e c h a r g e (§ 2 2 6 .- 4 0 6 ) .

I t e m I .E .3 . is p r o v i d e d t o s h o w t h e p r e ­ p a y m e n t o f a n y a c c r u i n g i n t e r e s t c h a r g e o n t h e c o n t r a c t u n t i l t h e f i r s t p a y m e n t is d u e . T h e b l a n k s p a c e s a r e p r o v i d e d t o s h o w t h e d a t e s f o r w h i c h s u c h i n t e r e s t a c c r u e s . ( T h e d a t e s a n d a m o u n t s d i s c l o s e d m a y f r e ­ q u e n t l y n e e d t o b e e s t i m a t e d . ) I t e m I .E .4 . is p r o v i d e d t o s h o w t h e p a y ­ m e n t o f m o r t g a g e g u a r a n t y i n s u r a n c e p r e ­ m i u m s , s u c h a s f o r F H A o r p r i v a t e m o r t g a g e g u a r a n t y i n s u r e r s , a c c r u i n g p r i o r t o t h e f i r s t r e g u l a r p a y m e n t .

I t e m I .F . i s p r o v i d e d t o s h o w t h e a m o u n t f i n a n c e d : t h e d i f f e r e n c e b e t w e e n i t e m I.D . a n d I .E .

(§ § 2 2 6 .8 ( c ) ( 7 ) / 2 2 6 . 8 ( d ) ( 1 ) ) . I t e m 11 T h i s i t e m i s p r o v i d e d t o s h o w t h e c o m ­ p o n e n t s o f t h e f i n a n c e c h a r g e , s u c h a s p r e ­ p a i d f i n a n c e c h a r g e s , a n d c o n t i n u i n g p r e m i ­ u m s f o r m o r t g a g e g u a r a n t y i n s u r a n c e , a s w e l l a s t o s h o w t h e t o t a l a m o u n t o f t h e f i n a n c e c h a r g e (§ § 2 2 6 . 4 ( a ) / 2 2 6 . 8 ( d ) ( 3 ) ) . I t e m I I .A . p r o v i d e s t h e o p t i o n a l d i s c l o s u r e o f t h e c o n t r a c t r a t e o f i n t e r e s t a s a n a d d i t i o n a l i t e m w h e r e s u c h i n t e r e s t i s c o m p u t e d b y t h e a p p l i c a t i o n o f a s i m p l e a n n u a l r a t e . I t e m I I I A . is p r o v i d e d t o s h o w t h e a n n u a l p e r c e n t a g e r a t e a s d e t e r m i n e d i n a c c o r d a n c e w i t h § 2 2 6 . 5 ( b ) . I t e m I I I .B . is p r o v i d e d t o s h o w a n y v a r i a b l e i n t e r e s t r a t e p r o v i s i o n s ( § 2 2 6 .8 1 0 ) .

I t e m I V T h i s i t e m is p r o v i d e d t o s h o w t h e r e p a y ­ m e n t t e r m s (§ 2 2 6 .8 ( b ) ( 3 ) ) . I t e m V T h i s i t e m i s p r o v i d e d t o s h o w t h e d a t e o n w h i c h t h e f i n a n c e c h a r g e b e g i n s t o a c c r u e o n l y i f t h a t d a t e d i f f e r s f r o m t h e d a t e o f t h e t r a n s a c t i o n (§ 2 2 6 .8 ( b ) ( 1 ) ) . I t e m V I T h i s i t e m i s p r o v i d e d f o r t h e d i s c l o s u r e o f a n y a m o u n t o r m e t h o d o f c o m p u t i n g t h e a m o u n t o f a n y d e f a u l t , d e l i n q u e n c y , o r s i m i ­ l a r c h a r g e s p a y a b l e i n t h e e v e n t o f l a t e p a y ­ m e n t s (§ § 2 2 6 . 4 ( c ) / 2 2 6 . 8 ( b ) ( 4 ) ) . I t e m V I I T h i s i t e m is p r o v i d e d f o r t h e d i s c l o s u r e o f t h e c o n s e q u e n c e s o f p r e p a y m e n t o f t h e m o r t ­ g a g e o b l i g a t i o n ; e i t h e r (A ) o r ( B ) s h o u l d b e u s e d , a s a p p li c a b le .

I t e m V IL A , is p r o v i d e d f o r t h e d i s c l o s u r e o f c o n d i t i o n s o r p e n a l t i e s c h a r g e d i n t h e e v e n t o f p r e p a y m e n t o f a l o a n o n w h i c h i n t e r e s t is c o m p u t e d o n t h e u n p a i d p r i n c i p a l b a l a n c e (§ 2 2 6 .8 ( b ) ( 6 ) ) . S h o u l d t h e r e b e n o p e n a l t y f o r p r e p a y m e n t , a s t a t e m e n t t o t h a t e f f e c t m a y b e s u b s t i t u t e d .

I t e m V I I .B .

i s p r o v id e d t o i d e n t i f y t h e m e t h o d o f r e b a t e o f u n e a r n e d f in a n c e c h a r g e s i n t h e e v e n t o f p r e p a y m e n t i n f u l l o f i n s t a l m e n t o b l i g a t i o n s w h i c h i n c l u d e p r e ­ c o m p u t e d f i n a n c e c h a r g e s . I f n o r e b a t e w ill b e m a d e , a s t a t e m e n t t o t h a t e f f e c t m u s t b e i n c l u d e d (§ 2 2 6 .8 ( b ) ( 7 ) ) .

I t e m V I I I T h i s i t e m i s p r o v i d e d f o r t h e d i s c l o s u r e o f i n s u r a n c e w r i t t e n I n c o n n e c t i o n w i t h t h e o b ­ l i g a t i o n , s u c h a s p r o p e r t y d a m a g e i n s u r a n c e ( t o b e d i s c l o s e d i n a c c o r d a n c e w i t h § 2 2 6 .4 ( a ) ( 6 ) ) , c r e d i t l if e , a c c i d e n t , o r d i s a b i l i t y i n s u r a n c e ( t o b e d i s c l o s e d i n a c c o r d a n c e w i t h § 2 2 6 .4 ( a ) ( 5 ) ) , a n d v e n d o r ’s s i n g l e i n t e r e s t i n s u r a n c e ( t o foe d i s c l o s e d i n a c c o r d a n c e w i t h § 2 2 6 .4 0 4 ).

I t e m I X T h i s i t e m i s p r o v id e d t o s h o w a n y s e c u r i t y i n t e r e s t s t a k e n i n c o n n e c t i o n w i t h t h e t r a n s ­ a c t i o n (§ 2 2 6 .2 ( z ) a n d § 2 2 6 .8 ( b ) ( 5 ) ) . [ P R D o c .7 5 - 1 3 2 6 0 F i l e d 5 - 1 9 - 7 5 ; 8 :4 5 a m ] Item III FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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NOTICES 22459 DEPARTMENT OF HOUSING AND URBAN DEVELOPMENT Office of Assistant Secretary for Housing Production and Mortgage Credit— Fed­ eral Housing Commissioner [ D o c k e t N o . N - 7 5 - 3 1 1 ] REAL ESTATE SETTLEMENT COSTS Special Information Booklet Notice is hereby given that HUD has prepared the booklet, “ Settlem ent Costs”

pursuant to Section 5(a) of the Real E s­ tate Settlem ent Procedures Act of 1974.

Section 5(a) requires HUD to prepare and distribute to lenders who make fed­ erally related m ortgage loans a special inform ation booklet to better inform per­ sons borrowing money to finance the purchase of residential real estate con­ cerning the settlem ent process.

The booklet explains the purpose of each cost involved in a settlement, reproduces and explains the standard disclosure/settle­ ment form required by sections 4 and 6 of the Act, discusses such abuses as unfair practices and unreasonable charges, and explains choices available to homebuy­ ers in shopping for settlem ent services.

Section 5(c) of the Act requires each lender which m akes federally related mortgage loans to provide the booklet to each person submitting an application to borrow money to finance the purchase of residential real estate. The lender is required to provide the booklet at the time it receives the application.

To insure that each federally related m ortgage lender has a sufficient supply of booklets on hand on the effective date of the Act, June 20, 1975, the D epart­ ment will provide an initial supply of booklets for lender use at each HUD Area and Insuring Office and expects that the booklets will be available in early June.

Lenders may pick up a lim ited supply from these offices but no mail or tele­ phone orders can be accommodated.

After this initial distribution, additional supplies of the booklet will be on sale through the Government Printing Office and m ust be paid for by the lender.

This booklet (1) may be reproduced and distributed by lenders, using a cover of their own design (which may bear the nam e of the lender), without further approval by HUD; or (2) lenders may print and distribute booklets approved by the Secretary as to form and content.

In the form er case, it is not permissible to make any change, deletion, or addi­ tion in the content of the booklet as pre­ pared by HUD. Lenders desiring to take advantage of the latter option should so request in writing and subm it proposed booklets for review to the Office of Gen­ eral Counsel, Departm ent of Housing and Urban Development, Room 2253, 451 7th Street, SW., W ashington, D.C. 20410.

A copy of the contents of the booklet which may be reproduced by lenders is set forth as an appendix to this notice.

D a v i d M . d e W i l d e , Acting Assistant Secretary for Housing Production and Mortgage Credit, EH A Com­ missioner.

S e t t l e m e n t C o s t s A HUD GUIDE T h e c o n t e n t o f t h i s b o o k l e t h a s b e e n p r e ­ p a r e d , p r e s c r i b e d a n d a p p r o v e d b y t h e U .S . D e p a r t m e n t o f H o u s i n g a n d U r b a n D e v e l o p ­ m e n t , a s r e q u i r e d b y s e c t i o n 5 o f t h e R e a l E s t a t e S e t t l e m e n t P r o c e d u r e s A c t o f 1 9 7 4 ( P u b . L . 9 3 - 5 3 3 ) , e f f e c ti v e o n J u n e 2 0 , 1 9 7 5 . T h i s p u b l i c a t i o n m a y b e r e p r i n t e d . H o w ­ e v e r , i n n o c a s e m a y a n y c h a n g e , d e l e t i o n , o r a d d i t i o n b e m a d e i n i t s c o n t e n t . F o r s a le b y t h e S u p e r i n t e n d e n t o f D o c u ­ m e n t s , U .S .

G o v e r n m e n t P r i n t i n g O ffice, W a s h i n g t o n , D .C . 2 0 4 0 2 .

CONTENTS F o r e w o r d H o m e L o a n F i n a n c i n g D i s c l o s u r e / S e t t l e m e n t S t a t e m e n t A d v a n c e D i s c lo s u r e U n f a i r P r a c t i c e s a n d U n r e a s o n a b l e o r U n ­ n e c e s s a r y C h a r g e s t o A v o id E s c r o w A c c o u n t s P r e v i o u s S e l li n g P r ic e D i s c lo s u r e J u r i s d i c t i o n o f C o u r t s T r u t h i n L e n d i n g D i s c lo s u r e FOREWORD Y o u a r e p l a n n i n g t o b u y a h o m e . W h e n y o u d o , y o u w i ll p r o b a b l y m a k e a d o w n p a y ­ m e n t a n d f i n a n c e t h e b a l a n c e o f t h e p u r c h a s e p r i c e w i t h a l o a n s e c u r e d b y a m o r t g a g e o n y o u r h o m e .

B e f o r e y o u t a k e p o s s e s s i o n o f y o u r h o m e , a c lo s i n g o r s e t t l e m e n t w ill o c c u r a t w h i c h o w n e r s h i p o f t h e p r o p e r t y w ill b e t r a n s f e r r e d t o y o u , a n d y o u r o b l i g a t i o n t o r e p a y t h e m o r t g a g e l o a n w ill b e c o m e e f f e c ti v e .

T h e t e r m s a n d c o n d i t i o n s o f t h e l o a n — i n t e r e s t r a t e , m o n t h l y p a y m e n t , a n d t h e r e p a y m e n t p e r i o d — a r e s p e c i f ie d i n t h e d o c u m e n t s s ig n e d b y y o u . T h e s e i n c l u d e a n o t e e v i d e n c i n g t h e l o a n f o r t h e u n p a i d p u r c h a s e p r ic e , a m o r t ­ g a g e p l a c i n g a l i e n o n y o u r h o m e , a n d o t h e r d o c u m e n t s .

I n s o m e S t a t e s , i t is t h e c u s t o m f o r t h e b u y e r a n d s e l l e r t o a t t e n d t h e s e t t l e m e n t i n p e r s o n ; i n o t h e r s i t is h a n d l e d a u t o m a t i c a l l y b y a n e s c r o w a g e n t w h e n a l l p a p e r s a n d f u n d s h a v e b e e n d e p o s i t e d w i t h h i m . A t t h e c l o s i n g o r s e t t l e m e n t , b o t h y o u a n d t h e s e ll e r w il l h a v e t o p a y c e r t a i n c h a r g e s i n c i d e n t t o t r a n s f e r r i n g t i t l e t o r e a l e s t a t e a n d o b t a i n i n g t h e m o r t g a g e l o a n .

T h e s e c h a r g e s a r e c a l l e d “ s e t t l e m e n t c o s t s ”

o r “ c lo s i n g c o s t s ” .

T h i s b o o k l e t h a s b e e n p r e p a r e d t o i n f o r m y o u , t h e b u y e r , a b o u t t h e n a t u r e a n d c o s ts o f t h e s e t t l e m e n t p r o c e s s . A s r e q u i r e d b y la w , t h i s b o o k l e t i s g i v e n t o y o u b y a l e n d i n g i n s t i t u t i o n a t t h e t i m e y o u a p p l y f o r a m o r t ­ g a g e l o a n t o f i n a n c e t h e p u r c h a s e o f a o n e - t o f o u r - f a m i l y r e s i d e n t i a l d w e l li n g .

A t t h i s s ta g e , y o u h a v e s e l e c t e d t h e h o m e y o u w a n t t o b u y . Y o u m a y h a v e a l r e a d y r e a c h e d i n ­ f o r m a l a g r e e m e n t w i t h a s e ll e r o r e v e n s ig n e d a s a le s c o n t r a c t a n d m a d e a d e p o s i t ( “ e a r n e s t m o n e y d e p o s i t ” ) i n d i c a t i n g y o u r s e r i o u s i n ­ t e n t i o n t o b u y — a d e p o s i t w h i c h c o u l d b e f o r f e i t e d s h o u l d y o u f a i l t o c o m p l e t e y o u r p u r c h a s e .

T h i s b o o k l e t is i n t e n d e d t o a c q u a i n t y o u w i t h t h e a p p r o p r i a t e p r o c e d u r e s a n d c h a r g e s f o r s e t t l e m e n t s e r v i c e s w h i c h y o u w ill e n ­ c o u n t e r i n c lo s i n g y o u r h o m e p u r c h a s e t r a n s a c t i o n .

F o r a n s w e r s t o s p e c if ic q u e s t i o n s o r f o r i n f o r m a t i o n o n m o r t g a g e l e n d i n g a n d s e t t l e ­ m e n t p r a c t i c e s i n y o u r l o c a l it y , y o u m a y w a n t t o c o n s u l t a S t a t e o r lo c a l c o n s u m e r a f f a ir s a g e n c y , a n a t t o r n e y , a l e g a l a i d s o c ie ty , o r t h e l o c a l r e a l e s t a t e b o a r d . HOME LOAN FINANCING T h e h o m e p u r c h a s e l o a n is e v id e n c e d b y y o u r s i g n a t u r e o n a n o t e o r b o n d , a n d t h e l o a n ( y o u r d e b t ) is s e c u r e d b y a m o r t g a g e ( o r d e e d o f t r u s t ) w h i c h y o u m u s t s ig n , w h i c h p l e d g e s t h e h o m e a s s e c u r i t y f o r r e p a y m e n t o f t h e l o a n . I f y o u f a i l t o r e p a y t h e l o a n o r c o m p l y w i t h t h e t e r m s a n d c o n d i t i o n s o f t h e m o r t g a g e , t h e l e n d e r c a n i n i t i a t e f o r e c lo s u r e o f t h e l o a n w h i c h w o u l d l e a d t o s a le o f y o u r h o m e a t a p u b l i c a u c t i o n t o s a t i s f y t h e d e b t . I n a h o m e m o r t g a g e t r a n s a c t i o n , y o u p r o m ­ is e t o r e p a y t h e l o a n a n d i n t e r e s t i n m o n t h l y i n s t a l l m e n t s a t t h e i n t e r e s t r a t e a n d o v e r t h e p e r i o d o f t i m e s p e c i f i e d i n t h e m o r t g a g e c o n t r a c t . I n t h e e a r l y y e a r s w h e n y o u r d e b t is l a r g e s t , m o s t o f t h e m o n t h l y p a y m e n t g o e s f o r i n t e r e s t . T h e a m o u n t a p ­ p l i e d t o t h e o u t s t a n d i n g d e b t g r a d u a l l y i n ­ c r e a s e s s o t h a t i n t h e f i n a l y e a r s o f t h e m o r t g a g e m o s t o f t h e p a y m e n t g o e s t o p r i n ­ c i p a l a n d le s s t o I n t e r e s t . T h i s is k n o w n a s a n a m o r t i z e d m o r t g a g e , a n d m o s t m o r t g a g e s a r e w r i t t e n t h i s w a y .

I n s o m e S t a t e s , t h e s e c u r i t y i n s t r u m e n t i n s t e a d o f b e i n g a m o r t g a g e i s a d e e d o f t r u s t u n d e r w h i c h t h e b o r r o w e r d e e d s t h e p r o p e r t y t o a t r u s t e e . N o r m a l l y , t h e t e r m s o f a d e e d o f t r u s t a r e s u b s t a n t i a l l y t h e s a m e a s t h o s e o f a m o r t g a g e .

H u s b a n d a n d w if e o f t e n t a k e n t i t l e t o t h e i r h o m e a s j o i n t t e n a n t s w i t h r i g h t o f s u r v i v o r ­ s h i p . Y o u m a y w i s h t o s e e k l e g a l a d v ic e o n t h i s a n d o t h e r m a t t e r s . T h e m a n n e r i n w h i c h y o u t a k e t i t l e t o t h e h o m e y o u b u y c a n h a v e i m p o r t a n t i n c o m e t a x , e s t a t e p l a n n i n g , a n d o t h e r c o n s e q u e n c e s .

DISCLOSURE/SETTLEMENT STATEMENT T h e R e a l E s t a t e S e t t l e m e n t P r o c e d u r e s A c t o f 1 9 7 4 ( P u b . L . 9 3 - 5 3 3 ) r e q u i r e s u s e o f a s t a n d a r d f o r m f o r a d v a n c e d i s c l o s u r e o f s e t ­ t l e m e n t c o s t s a n d t o r e c o r d a c t u a l c h a r g e s i n c u r r e d a t s e t t l e m e n t i n a l l m o r t g a g e t r a n s ­ a c t i o n s i n v o l v i n g f e d e r a l l y r e l a t e d l o a n s . T h e s a m e f o r m is u s e d f o r b o t h a d v a n c e d i s c l o s u r e a n d s e t t l e m e n t a n d i s r e p r o d u c e d o n t h e f o ll o w i n g p a g e s t o a c q u a i n t y o u w i t h i t . S e t t l e m e n t c o s t i t e m s a r e n u m b e r e d t o c o r r e s p o n d w i t h t h e a c c o m p a n y i n g e x p l a n a ­ t i o n o f e a c h i t e m . T h e l i s t i n g o f t h e s e i t e m s o n t h e f o r m d o e s n o t i m p l y t h a t a n y p a r ­ t i c u l a r c h a r g e l i s t e d is o r s h o u l d b e m a d e i n a g i v e n g e o g r a p h i c a r e a . E v e n i n a g i v e n g e o ­ g r a p h i c a r e a , y o u m a y f i n d t h a t d i f f e r e n t l e n d e r s a n d p r o v i d e r s o f s e t t l e m e n t s e r v i c e s v a r y a s t o w h e t h e r t h e y m a k e c e r t a i n c h a r g e s a n d a s t o t h e a m o u n t o f t h e c h a r g e . Y o u m a y w i s h t o “ s h o p a r o u n d ” .

S o m e s e t t l e m e n t c o s t s t y p i c a l l y a r e c h a r g e d t o t h e b u y e r . O t h e r s u s u a l l y a r e t h e r e s p o n s i ­ b i l i t y o f t h e s e l l e r . A l t h o u g h l o c a l c u s t o m a n d p r a c t i c e s o f t e n d i c t a t e w h i c h a r e t h e b u y e r ’s a n d w h i c h t h e s e l l e r ’s c o s ts , t h e r e a r e n o h a r d a n d f a s t r u l e s t h a t a p p l y , a n d i n m o s t c a s e s t h e b u y e r a n d s e l l e r c a n n e g o ­ t i a t e a s t o w h o w i l l p a y s p e c i f ic s e t t l e m e n t c h a r g e s . Y o u c a n a l s o n e g o t i a t e w i t h p r o ­ v i d e r s o f s e t t l e m e n t s e r v i c e s a s t o w h e t h e r e a c h c h a r g e w i l l b e m a d e a n d t h e a m o u n t . Y o u s h o u l d b e c h a r g e d o n l y f o r s e r v i c e s a c ­ t u a l l y p e r f o r m e d , a s r e q u i r e d b y s e t t l e m e n t p r a c t i c e s i n a p a r t i c u l a r l o c a l i t y . 1. Contract Sales Price. T h i s i s t h e p r i c e o f t h e h o m e a g r e e d t o i n t h e s a le s c o n t r a c t b e t w e e n b u y e r a n d s e ll e r . 2 . Personal Property. T h o s e i t e m s , s u c h a s c a r p e t s , d r a p e s , o r a p p l i a n c e s , w h i c h t h e s e l l ­ e r t r a n s f e r s w i t h t h e h o m e , m a y b e p a i d f o r b y t h e b u y e r a t s e t t l e m e n t . W h e n t h e s a le s c o n t r a c t i s m a d e , y o u s h o u l d m a k e s u r e t h a t i t e m s t o b e t r a n s f e r r e d a r e d e s c r i b e d . T h e s a l e s c o n t r a c t s h o u l d s t a t e w h e t h e r s u c h i t e m s a r e i n c l u d e d i n t h e s a le s p r ic e . 3. Settlem ent Charges. T h i s is t h e t o t a l a m o u n t o f t h e s e t t l e m e n t c h a r g e s t o b e p a i d b y t h e b u y e r . T h e s e c h a r g e s a r e i t e m i z e d o n p a g e 2 o f t h e f o r m .

4 ,9 . Adjustm ents or Pro-rations.

T h e s e a m o u n t s r e p r e s e n t p r o - r a t e d a d j u s t m e n t s o f c e r t a i n c o s ts , s u c h a s r e a l e s t a t e t a x e s , u t i l ­ i ti e s , a n d f u e l . S u c h a d j u s t m e n t s a r e o f t e n FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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22460 NOTICES m a d e i n o r d e r t o p r o ' h c o s t s i n o r d e r t o c h a r g e t h e s e l l e r f o r p e r i o d h e o w n e d t h e p r o p e r t y ( u p t o s e t t l e m e n t ) a n d t o c h a r g e t h e b u y e r f o r t h e p e r i o d a f t e r s e t t l e ­ m e n t . I t e m 4 s t a t e s a m o u n t s f o r w h i c h t h e b u y e r c o m p e n s a t e s t h e s e ll e r . I t e m 9 s t a t e s a m o u n t s f o r w h i c h t h e s e l l e r c o m p e n s a t e s t h e b u y e r . A s a n e x a m p l e , w h e r e s e t t l e m e n t o c c u r s O c t o b e r 1 , 1 9 7 5 , a n d t h e s e ll e r h a s p a i d t h e r e a l e s t a t e t a x e s i n a d v a n c e f o r t h e e n t i r e y e a r , a t y p i c a l a d j u s t m e n t w o u l d b e f o r t h e b u y e r t o c o m p e n s a t e t h e s e ll e r f o r o n e - f o u r t h o f t h e r e a l e s t a t e t a x e s f o r 1 9 7 5 , t h a t i s , t h e p e r i o d f r o m O c t o b e r 1 t h r o u g h D e c e m b e r 3 1 . T h a t a m o u n t w o u l d b e s h o w n a t I t e m 4 .

5. Gross Amount Due from Borrower. T h i s i s t h e t o t a l a m o u n t o f a l l c h a r g e s t o t h e b u y e r i n c l u d e d i n i t e m s 1, 2 , 3 , a n d 4 . 6 . Deposit or Earnest Money. T h i s i s t h e a m o u n t o f m o n e y d e p o s i t e d b y t h e b u y e r u n d e r t h e c o n t r a c t o f s a le , u s u a l l y a t t h e t i m e i t w a s s ig n e d .

7. principal Amount of Loan(s). T h i s is t h e a m o u n t o f m o r t g a g e m o n e y l o a n e d t o t h e b u y e r t o p u r c h a s e h i s h o m e . 8 . Existing Loan(s) Taken Subject To.

T h i s s p a c e is u s e d f o r c a s e s i n w h i c h t h e b u y e r i s a s s u m i n g o r t a k i n g t i t l e s u b j e c t t o a n e x i s t i n g l o a n o r o t h e r l i e n o n w h i c h h e is e x p e c t e d t o m a k e t h e p a y m e n t s . 1 0 . Total Amounts Paid By or In Behalf of Borrower. T h i s a m o u n t is t h e s u m o f i t e m s 6 , 7 , 8 , a n d 9 a b o v e w h i c h w ill b e a p p l i e d t o r e d u c e t h e a m o u n t o f c h a r g e s t o t h e b u y e r i n i t e m 5 a b o v e .

1 1 . Cash Required From (Payable To) Bor­ rower. T h i s is t h e t o t a l a m o u n t o f c a s h w h i c h t h e b u y e r w ill n e e d a t s e t t l e m e n t ( s u b t r a c t i t e m 10 f r o m i t e m 5 ) . A t t i m e o f a d v a n c e d i s ­ c l o s u r e t h i s is t h e e s t i m a t e d a m o u n t . 12 . Real Estate Broker’s Sales Compensa­ tion. T h i s c h a r g e c o m p e n s a t e s t h e r e a l e s t a t e b r o k e r o r b r o k e r s f o r s e r v i c e s in v o lv e d i n l i s t i n g a n d s e l l i n g t h e p r o p e r t y , a n d i s n o r ­ m a l l y t h e s e l l e r ’s o b l i g a t i o n t o p a y . T h i s c o m m i s s i o n o r f e e m a y b e s p l i t a m o n g m o r e t h a n o n e b r o k e r i f e a c h p e r f o r m e d s e r v i c e s i n c o n n e c t i o n w i t h t h e t r a n s a c t i o n , b u t n o p e r ­ s o n m a y a c c e p t a n y p o r t i o n , s p l i t o r p e r ­ c e n t a g e o f s u c h c o m m i s s i o n o r f e e o t h e r t h a n f o r s e r v i c e s a c t u a l l y p e r f o r m e d . 13. Loan Origination Fee. T h i s c o m p e n s a t e s t h e l e n d e r f o r e x p e n s e s i n c u r r e d i n o r i g i n a t ­ i n g t h e l o a n , p r e p a r i n g d o c u m e n t s , a n d r e ­ l a t e d w o r k . W h e n s u c h a f e e i s c h a r g e d , i t is u s u a l l y a p e r c e n t a g e o f t h e f a c e a m o u n t o f t h e m o r t g a g e . I n F H A - i n s u r e d o r V A g u a r a n t e e d m o r t g a g e t r a n s a c t i o n s i n v o lv i n g e x i s t i n g s t r u c t u r e s , t h e f e e c h a r g e d t h e b o r ­ r o w e r c a n b e n o m o r e t h a n o n e p e r c e n t o f t h e m o r t g a g e a m o u n t . F o r e x a m p l e , if y o u a r e a p p r o v e d f o r a V A - g u a r a n t e e d l o a n o f $ 3 0 ,0 0 0 , t h e o r i g i n a t i o n f e e c h a r g e d t o y o u m a y n o t e x c e e d $ 3 0 0 . H o w e v e r, w h e n t h e l e n d e r m a k e s i n s p e c t i o n s a n d p a r t i a l d i s ­ b u r s e m e n t s d u r i n g c o n s t r u c t i o n o f a n e w h o m e , b o t h P H A a n d V A p e r m i t a h i g h e r o r i g ­ i n a t i o n f e e , b u t n o t m o r e t h a n 2 % % f o r F H A - i n s u r e d l o a n s o r 2 % f o r V A - g u a r a n t e e d l o a n s .

T h e F a r m e r s H o m e A d m i n i s t r a t i o n d o e s n o t p e r m i t a l o a n o r i g i n a t i o n f e e . 14 . Loan Discount Points.

D i s c o u n t s o r “ p o i n t s ” a r e a o n e - t i m e c h a r g e m a d e b y t h e l e n d e r t o i n c r e a s e i t s y i e l d ( t h e e f f e c ti v e i n ­ t e r e s t r e t u r n o r i n c o m e ) o n t h e m o r t g a g e l o a n . E a c h “ p o i n t ” i s o n e p e r c e n t o f t h e m o r t ­ g a g e a m o u n t .

I n F H A a n d V A t r a n s a c t i o n s , t h e b u y e r m a y n o t b e c h a r g e d a d i s c o u n t b y t h e l e n d e r , b u t t h e s e l l e r m a y v o l u n t e e r t o p a y p o i n t s i n o r d e r t o h e l p t h e b u y e r o b t a i n f i n a n c i n g . F o r e x a m p l e , i f a l e n d e r c h a r g e s 4 p o i n t s o n a n F H A - i n s u r e d l o a n o f $ 3 0 ,0 0 0 , t h i s a m o u n t s t o a d i s c o u n t o f $ 1 ,2 0 0 . Y o u , t h e b u y e r , m a y p a y o n l y t h e l o a n o r i g i n a t i o n f e e d e s c r i b e d i n n o t e 1 3 I f i t i s a V A o r F H A t r a n s a c t i o n . D i s c o u n t s a r e n o t p e r m i t t e d o n F a r m e r s H o m e A d m i n i s t r a t i o n l o a n s . 15. Appraisal Fee. T h i s c h a r g e c o m p e n s a t e s t h e l e n d e r f o r a p r o p e r t y a p p r a i s a l m a d e b y a n i n d e p e n d e n t a p p r a i s e r o r b y a m e m b e r o f t h e l e n d e r ’s s ta f f .

16 . Credit Report. T h e b u y e r ’s c r e d i t h i s ­ t o r y is o f t e n o b t a i n e d b y t h e l e n d e r a n d a c h a r g e p a i d t o a c r e d i t b u r e a u f o r a s c e r t a i n ­ i n g t h e s t a t u s o f t h e b u y e r ’s c r e d i t m a y b e c o ll e c te d , u s u a l l y f r o m t h e b u y e r . 17 . Lender’s Inspection Fee. T h i s c h a r g e c o v e r s o n l y i n s p e c t i o n s m a d e b y p e r s o n n e l o f t h e l e n d i n g i n s t i t u t i o n a t i t s d i s c r e t i o n . P e s t o r o t h e r i n s p e c t i o n s m a d e b y c o m p a n i e s o t h e r t h a n t h e l e n d e r a r e d e s c r i b e d i n n o t e 3 1 . 1 8 . Mortgage Insurance Application Fee.

T h i s c o v e r s t h e c o s t o f a n F H A o r V A a p ­ p r a i s a l , w h i c h i n a n F H A l o a n i s i n c l u d e d i n a m o r t g a g e i n s u r a n c e a p p l i c a t i o n f e e . F o r c o n v e n t i o n a l l o a n s i t m a y c o v e r a p p l i c a t i o n f e e s w h e n c h a r g e d b y p r i v a t e m o r t g a g e i n ­ s u r e r s . I n t h e c a s e o f a n F H A - i n s u r e d m o r t ­ g a g e , t h e a m o u n t o f t h i s c h a r g e i s s e t b y H U D R e g u l a t i o n s a n d m a y b e c h a r g e d t o t h e b u y e r . T h e b u y e r i n a V A - g u a r a n t e e d l o a n m a y n o t b e c h a r g e d a n a p p r a i s a l f e e u n l e s s i d e n t i f i e d b y n a m e i n t h e r e q u e s t f o r V A ’s a p p r a i s a l . 1 9 . Assumption Fee. I n a c a s e w h e r e t h e b u y e r a s s u m e s t h e s e l l e r ’s e x i s t i n g m o r t g a g e o n t h e p r o p e r t y , t h e l e n d e r ’s c h a r g e s f o r p r o c e s s i n g t h e a s s u m p t i o n a r e e n t e r e d h e r e . 2 0 . Prepaid Interest.

T h i s c h a r g e c o v e r s i n t e r e s t w h i c h w ill a c c r u e f r o m t h e d a t e o f s e t t l e m e n t t o t h e b e g i n n i n g o f t h e p e r i o d c o v e r e d b y y o u r f i r s t m o n t h l y p a y m e n t . F o r e x a m p l e , if y o u r m o r t g a g e p a y m e n t i s d u e o n t h e 1 s t o f e a c h m o n t h , b u t s e t t l e m e n t o c c u r s o n A p r i l 2 0 , t h e p r e p a i d i n t e r e s t a t s e t t l e m e n t w i l l c o v e r t h e p e r i o d f r o m A p r i l 2 0 t o A p r il 3 0 i f y o u r f i r s t m o n t h l y m o r t g a g e p a y m e n t i s d u e o n J u n e 1 s t. T h u s y o u r J u n e 1 p a y m e n t w i ll n o t h a v e t o i n c l u d e a n e x t r a a m o u n t o f i n t e r e s t f o r t h e p e r i o d b e f o r e M a y 1.

2 1 . Prepaid Mortgage Insurance Premium.

T h i s i s t h e p o r t i o n o f t h e p r e m i u m p r e p a i d b y t h e b u y e r a t s e t t l e m e n t f o r m o r t g a g e i n ­ s u r a n c e . T h i s t y p e o f i n s u r a n c e i s r e q u i r e d w h e n F H A o r a p r i v a t e m o r t g a g e i n s u r a n c e c o m p a n y c o v e r s t h e l e n d e r a g a i n s t l o s s i f t h e b u y e r f a i l s t o m e e t t h e m o r t g a g e o b l i g a t i o n . M o r t g a g e i n s u r a n c e p r e m i u m s a r e r e q u i r e d f o r a l l F H A - i n s u r e d l o a n s ( b u t n o t f o r V A l o a n g u a r a n t e e s ) , a n d m a y b e r e q u i r e d o n a c o n v e n t i o n a l l o a n .

T h i s t y p e o f i n s u r a n c e s h o u l d n o t b e c o n ­ f u s e d w i t h m o r t g a g e l if e , c r e d i t l if e , o r d i s ­ a b i l i t y i n s u r a n c e d e s i g n e d t o p a y o ff a m o r t ­ g a g e i n t h e e v e n t o f p h y s i c a l d i s a b i l i t y o r d e a t h o f t h e b o r r o w e r . S u c h i n s u r a n c e I s a v a i l a b l e b u t u s u a l l y n o t r e q u i r e d b y l e n d e r s . 2 2 . Prepaid Hazard Insurance Premium.

T h i s i s t h e p o r t i o n o f t h e p r e m i u m p r e p a i d b y t h e b u y e r a t s e t t l e m e n t f o r p u r c h a s e f r o m a p r i v a t e c o m p a n y o f i n s u r a n c e a g a i n s t lo s s d u e t o f ir e , w i n d s t o r m , a n d n a t u r a l h a z a r d s . T h i s c o v e r a g e m a y b e i n c l u d e d i n a H o m e ­ o w n e r s P o l ic y w h i c h i n s u r e s a g a i n s t p o s ­ s ib l e a d d i t i o n a l r i s k s , s u c h a s p e r s o n a l l i a b i l ­ i t y a n d t h e f t .

A h a z a r d i n s u r a n c e o r h o m e o w n e r ’s p o lic y d o e s n o t p r o t e c t y o u a g a i n s t l o s s c a u s e d b y f lo o d in g . I n s p e c i a l f l o o d - p r o n e a r e a s i d e n t i ­ f ie d b y H U D , y o u m u s t c a r r y f lo o d i n s u r a n c e o n y o u r h o m e . S u c h i n s u r a n c e m a y b e p u r ­ c h a s e d a t lo w f e d e r a l l y s u b s i d i z e d r a t e s i n c o m m u n i t i e s e li g i b le u n d e r t h e N a t i o n a l F l o o d I n s u r a n c e A c t. C o n t a c t a l o c a l h a z a r d i n s u r a n c e a g e n t c o n c e r n i n g e l i g i b i l i t y i n y o u r c a s e .

2 3 . Reserves Deposited with Lender. T h e s e f u n d s a r e p l a c e d b y t h e b u y e r i n a n “ e s ­ c r o w ” o r “ i m p o u n d ” a c c o u n t m a i n t a i n e d b y t h e l e n d e r t o a s s u r e a n a d e q u a t e a c c u m u l a ­ t i o n o f f u n d s t o m e e t c h a r g e s f o r r e a l e s t a t e t a x e s a n d h a z a r d i n s u r a n c e w h e n t h e y b e ­ c o m e d u e ; a n d a ls o , if a p p li c a b le , f o r m o r t ­ g a g e I n s u r a n c e , a n n u a l a s s e s s m e n t s , h o m e ­ o w n e r s ’ a s s o c i a t i o n f e e s , o r f lo o d i n s u r a n c e . ( T h e s e r e s e r v e s a r e e x p l a i n e d i n m o r e d e t a i l l a t e r . ) T h e s e r e s e r v e s m a y b e h e l d i n n o n - i n t e r e s t b e a r i n g a c c o u n t s . H o w e v e r, c e r t a i n S t a t e s n o w r e q u i r e l e n d e r s t o p a y i n t e r e s t o n t h i s m o n e y , a n d l e n d e r s i n o t h e r S t a t e s m a y b e w i l li n g t o d o t h i s v o l u n t a r i l y .

2 4 . Settlement, Closing, or Escrow Fee. T h i s c h a r g e m a y b e m a d e f o r h a n d l i n g a n d s u p e r ­ v i s i n g t h e s e t t l e m e n t t r a n s a c t i o n . T h e s e t ­ t l e m e n t m a y b e c o n d u c t e d b y t h e l e n d e r , a r e a l e s t a t e b r o k e r , a t i t l e c o m p a n y i n s o m e S t a t e s , a n e s c r o w a g e n t i n s o m e S t a t e s , o r a n a t t o r n e y . T h e s e ll e r a n d b u y e r m a y n e g o t i a t e r e g a r d i n g w h o p a y s o r w h e t h e r t h e c h a r g e is s h a r e d b e t w e e n t h e m . T h e a m o u n t o f t h e c h a r g e m a y b e n e g o t i a t e d w i t h t h e p r o ­ v i d e r o f t h e s e r v i c e . I n a V A - g u a r a n t e e d l o a n , t h i s f e e c a n n o t b e c h a r g e d t o t h e b u y e r w h e n t h e b u y e r is a s s e s s e d t h e 1 % o r i g i n a ­ t i o n f e e .

2 5 . Title Charges. T h e s e c h a r g e s c o v e r t h e c o s ts o f t i t l e s e a r c h a n d e x a m i n a t i o n o f p u b l i c r e c o r d s o f p r e v i o u s o w n e r s h i p a n d s a le s t o e s t a b l i s h t h e r i g h t o f t h e s e ll e r t o c o n v e y t h e p r o p e r t y t o t h e b u y e r . A s e a r c h a n d e x a m i n a t i o n a r e p e r f o r m e d t o d e t e r m i n e w h e t h e r t h e s e l l e r h a s g o o d t i t l e t o t h e p r o p ­ e r t y t h a t h e c a n t r a n s f e r t o t h e b u y e r , a n d t o d is c l o s e a n y m a t t e r s o n r e c o r d t h a t c o u ld a d v e r s e l y a f f e c t t h e b u y e r , t h e l e n d e r , o r o t h e r s w i t h a n i n t e r e s t i n t h e p r o p e r t y . E x ­ a m p l e s o f t h e s e p r o b l e m s a r e u n p a i d m o r t ­ g a g e s , j u d g m e n t o f t a x l ie n s , a p o w e r l i n e e a s e m e n t o r a r o a d r i g h t - o f - w a y t h a t c o u l d l i m i t u s e a n d e n j o y m e n t o f t h e r e a l e s t a t e b y t h e b u y e r .

I n s o m e p a r t s o f t h e n a t i o n , a t i t l e s e a r c h c u s t o m a r i l y t a k e s t h e f o r m o f a n “ a b s t r a c t ” , w h i c h i s a c o m p i l a t i o n i n c l u d i n g c o p ie s o f p e r t i n e n t d o c u m e n t s t h a t p r o v id e s a c o n ­ d e n s e d h i s t o r y o f p r o p e r t y o w n e r s h i p a n d r e l a t e d m a t t e r s . I n o t h e r p la c e s , t i t l e s e a r c h e s a r e p e r f o r m e d b y e x t r a c t i n g r e l a t e d i n f o r m a ­ t i o n f r o m t h e p u b l i c r e c o r d w i t h o u t a s s e m ­ b l i n g a b s t r a c t s . E i t h e r w a y , i t t h e n i s n e c e s ­ s a r y f o r a n e x p e r t e x a m i n a t i o n t o b e m a d e o f t h e e v id e n c e a c c u m u l a t e d i n t h e s e a r c h i n o r d e r t o d e t e r m i n e s t a t u s o f t i t l e a s s h o w n b y t h e p u b l i c r e c o r d .

D e p e n d i n g o n l o c a l c u s t o m , t i t l e e x a m i n a ­ t i o n s n o r m a l l y a r e m a d e b y a t t o r n e y s o r t i t l e c o m p a n y e m p l o y e e s . T h r o u g h a t i t l e s e a r c h a n d e x a m i n a ti o n ; , l a n d t i t l e p r o b l e m s o f r e c o r d a r e d i s c l o s e d i n a d v a n c e s o t h e y c a n b e c l e a r e d u p , w h e n p o s s ib l e , b e f o r e a t r a n s ­ a c t i o n is c o m p l e t e d .

2 6 . Notary Fees. T h i s c h a r g e m a y b e m a d e f o r t h e s e r v ic e s o f a n o t a r y i n a u t h e n t i c a t i n g s i g n a t u r e s t o t h e v a r i o u s d o c u m e n t s i n t h e t r a n s a c t i o n . I n a V A - g u a r a n t e e d l o a n , t h i s f e e c a n n o t b e c h a r g e d t o a b u y e r i n t h e e v e n t t h e b u y e r is c h a r g e d a 1 % o r i g i n a t i o n f e e . 2 7 . Attorney’s Fees. T h e s e i n c l u d e c h a r g e s w h i c h t h e l e n d e r m a y r e q u i r e t h e b u y e r t o p a y f o r l e g a l s e r v i c e s t o t h e l e n d e r i n c o n ­ n e c t i o n w i t h t h e t r a n s a c t i o n .

T h e b u y e r s h o u l d n o t a s s u m e t h a t h e is r e p r e s e n t e d b y a n a t t o r n e y h i r e d b y t h e l e n d e r w h o p r e ­ p a r e s t h e d o c u m e n t s a n d h a n d l e s t h e s e t t l e ­ m e n t . I n a V A - g u a r a n t e e d l o a n , t h i s l e n d e r ’s a t t o r n e y f e e c a n n o t b e c h a r g e d i f t h e b u y e r is c h a r g e d t h e 1 % o r i g i n a t i o n f e e . T h e b u y e r a n d s e ll e r m a y e a c h r e t a i n a t ­ t o r n e y s t o r e p r e s e n t t h e m a n d m a y p a y t h e f e e s a t t h e s e t t l e m e n t , i n w h i c h c a s e t h e s e f e e s a ls o a p p e a r o n t h i s p a r t o f t h e f o r m . I n s o m e S t a t e s , a t t o r n e y s p r o v id e b a r r e l a t e d t i t l e i n s u r a n c e a s p a r t o f t h e i r s e r v ­ ic e s t o t h e b u y e r f o r t r a n s f e r o f t i t l e . T h e a t t o r n e y ’s f e e i n t h i s c a s e m a y i n c l u d e t h e t i t l e i n s u r a n c e p r e m i u m .

2 8 . Title Insurance. A o n e - t i m e p r e m i u m m a y b e c h a r g e d a t s e t t l e m e n t f o r a p o lic y w h i c h p r o t e c t s t h e l e n d e r ’s i n t e r e s t i n t h e p r o p e r t y a g a i n s t l a n d t i t l e p r o b l e m s i n c l u d ­ i n g t h o s e t h a t m i g h t n o t b e d i s c l o s e d b y a t i t l e s e a r c h a n d e x a m i n a t i o n . W h e t h e r t h e b u y e r o r s e l l e r p a y s f o r t h i s v a r i e s w i t h lo c a l c u s t o m .

FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Page 18

NOTICES 22461 T h e b u y e r m u s t r e q u e s t a n d p a y f o r a n a d d i t i o n a l o w n e r ’s p o l ic y i f h e w a n t s t h i s p r o t e c t i o n f o r h i s i n t e r e s t i n t h e p r o p e r t y . T h e r e a r e m a n y a r e a s w h e r e a n o w n e r ’s p o l ­ ic y c a n b e o b t a i n e d a t a m o d e s t a d d i t i o n a l c h a r g e i f i s s u e d s i m u l t a n e o u s l y w i t h a l e n d ­ e r ’s p o lic y . I n s o m e a r e a s , t h e s e l l e r p a y s f o r t h e o w n e r ’s t i t l e i n s u r a n c e p o lic y . 2 9 . Government Transfer Taxes and Charges. T h e f e e s a n d t a x e s i n t h i s s e c t i o n a r e g e n e r a l l y le v i e d b y S t a t e a n d / o r l o c a l g o v e r n m e n t s w h e n p r o p e r t y c h a n g e s h a n d s o r w h e n a m o r t g a g e l o a n is m a d e . D e p e n d i n g o n l o c a l c u s t o m , t h e s e c h a r g e s m a y b e p a i d b y t h e b u y e r , s e lle r , o r o t h e r w i s e s p l i t b e ­ t w e e n t h e m .

3 0 . Survey. T h e l e n d e r o r a p a r t y t o t h e t r a n s a c t i o n m a y r e q u i r e a s u r v e y s h o w i n g t h e p r e c i s e l o c a t i o n o f t h e h o u s e a n d l o t li n e s .

3 1 .

Inspections. T h i s p a r t o f t h e f o r m r e ­ c o r d s c h a r g e s f o r v a r i o u s I n s p e c t i o n s r e ­ q u i r e d b y t h e l e n d e r o r a p a r t y t o t h e t r a n s ­ a c t i o n , s u c h a s t h o s e f o r t e r m i t e a n d o t h e r p e s t i n f e s t a t i o n . I n a V A - g u a r a n t e e d l o a n , t h e b u y e r m a y n o t b e c h a r g e d f o r t h e p e s t i n s p e c t i o n .

T h e r e m a y a l s o b e p r e - s a l e i n s p e c t i o n s f o r t h e b u y e r ’s b e n e f i t t o e v a l u a t e h e a t i n g , p l u m b i n g , a n d e l e c t r i c a l e q u i p m e n t a n d o v e r a l l s t r u c t u r a l s o u n d n e s s . T h e c h a r g e f o r s u c h a n i n s p e c t i o n m a y i n c l u d e a f e e f o r i n s u r a n c e o r w a r r a n t y s e r v i c e s t o b a c k - u p t h e i n s p e c t i o n .

*■ U.S. DEPARTMENT OF HOUSINC AND URBAN DEVELOPMENT DISCLOSURE/SETTLEMENT STATEMENT 3 . T Y P E O F LO A N :

’ • m j 2. 17] FMHA 3.r.1 CONV. UNINS.

4. 1 1 ; v a St Q ; c o n v . in s .

6.

F IL E NUMBER 7. LO AN NUMBER // the Truth-in-Lendini> Act a p p lie s to th is tra n sa ctio n , a T ruth-in-L ending sta tem en t is a tta c h e d a s pa&e 3 of th is lorm. 8. MORTC. INS. CASE NO.

settlement to show the actual costs you have paid. The present copy of the form is. [_ ] ADVANCE DISCLOSURE OF COSTS. Some items are estimated, and are marked "(e)” . Some amounts may c h a n g e if the settlement is held on a date other than the date estimated below. The preparer of this form is not responsible fo r e rro rs or changes in amounts furnished by others. [ . STATEMENT OF ACTUAL COSTS.

Amounts paid to and by the settlement agent are shown. Items marked were paid outside the closing, they are shown here for informational purposes and are not included in totals. OF BORROWER G.

PRO PER TY LO CATIO N S E T TLE M E N T AGENT SETTL EMENT I COMMITMENT SETTLEMENT ADVANCE DISCLOSURE J . SUMMARY O F B O R R O W ER 'S T R A t SA C TIO N K . SUMMARY O F S E L L E R 'S T R A N S A C T IO N 100. CROSS AMOUNT DUE FROM BORROWER: 400.

GROSS AMOUNT DUE TO S E L L E R :

401. Contract soles price 101. Controct sales price 402. Personal property 102. Personal property ^ 3 ^ 403.

10 3. Settlement charges to borrower (from I in .* ItOO. See lion L ) ( 0 404.

Adjustments for items paid by seller in advance: 104.

105.

405. City/town taxes to Adjustments for items paid by seller in advance:^ 406. County taxes to 407. Assessments to 106. City/town taxes to 408.

to 107. County taxes to 409.

to 108. Assessments to 410.

to 109.

,0 r K T / 411.

to 110.

to \ 420. GROSS AMOUNT DU E TO S E L L E R 111.

to 112.

to ) N O T E : T h e fo llo w in g 5 0 0 an d 600 s e r ie s s e c tio n s are not req u ired to b e co m p le te d w hen th is lorm is u se d lor a d va n ce d isc lo s u r e o l s e ttle m e n t c o s ts prior to s e ttle m e n t. 120. CROSS AMOUNT DUE FROM BORROWER: fS) 200.

AMOUNTS PAID BY OR IN B EH A LF OF BORROWER: 500.

REDUCTIONS IN AMOUNT DUE TO S E L L E R 501. Payoff of first mortgage loon 201. Deposit or earnest money 502. Payoff of second mortgoge loan 202. Principal amount of new loon(s) C n ) 503. Settlement charges to seller 203. Existing loan(s) token subject to 204.

UJ 504. Existing loon(s) taken subject to & ■- ___________ • - Credits to borrower for items unpoid by selierA 505.

506.

206. City/town toxes to 507.

207. County taxes to / 508.

208. Assessments to \ (0) 509.

209.

to f \t) Credits to borrower for items unpaid by seller: 210.

to 211.

to 510. City/town toxes to 212.

to 511. County toxes to TO TAL AMOUNTS PAID BY OR IN B EH A LF 0 F ^ * ^ BORROWER (10 s 512. Assessments to 513.

to 300.

CASH A T SETTLEM E N T REO UIRED FROM OR P A Y A B L E TO BORROWER:

514.

to 515.

t<5 301. Gross amount due from borrower {from line 120) 520. TO TA L REDUCTIONS IN AMOUNT DUE TO S E L L E R : 600.

CASH TO S E L L E R FROM SETTLEM EN T: 302. Less amounts paid by or in behalf of borrower (from line 220) { ) 601.

Gross amount doe to seller (from tine 420J 602. Less total reductions in omount due to ( ) 303. CASH REOUIRED FROM; OR O P A Y A B L E t o ; BORROWER:

V 603.

CASH TO S E L L E R FROM SETTLEM EN T HUD-1 (5-75) FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

Page 19

22462 NOTICES l . se t t l e m e n t ch an ges PAID FROM BORROWER’ S FUNDS PAID FROM SELLER'S FUKDS . 7C0. SALEV'BROXER'S COMMISSION bat*ionprlc# $ * % Total commission paid by seller Dltfiston of co.-n.Titssiort os follows:

;o 2 . $ »<> 703. $ * 70.:.

800. ITEMS PAYABLE IN CONNECTION WITH LOAM.

iJt.

Leon Crimination fee 5c 80J.

Aopraiial Fee to SG-t.

Credit Report to 305.

Lender's inspection fee SC5.

Mortgage Insurance application fee to 307.

Assumption/refinancing fee ' ' 802?.

a:?.

8i> ?.

900. ITEMS REQUIRED BY LENDER TO BE PAID IN ADVANCE. 001.

Interest from to ?$ /Joy 902.

Mortgage insuronce premium for mo. to 903.

Hazard insurance premium for yrs. to 904.

yrs. to 905.

1000.

RESERVES DEPOSITED WITH LENDER FOR:

1001. Haiard insurance mo. 0$ /mo.

Mortgage insuronce mo. $$ /mo.

1003. City property taxes mo. g$ /mo.

1004. County property taxes mo. 9$ / mo.

1005. Annual assessments mo. $$ / mo.

1006, mo. (3$ / mo.

1007.

mo. SS /mo.

1008..

mo. tS /mo.

1100. T IT LE CHARGES:

1101.

Settlement or closing Jee to 1102.

Abstract or title search to U03.

Title examination ro 1104.

Title insuronce binder to 1105.

Document preparation to 1106.

Notary fees to 1107.

Attorney’ s Fees to (includes above items i\o.:

) 1108.

Title insurance to fincludes above itrm< !\ro.:

J 1109.

Lender's coverage $ tuO.

Owner’ s coverage $ n n .

1112.

1113.

12'.’0. GOVERNMENT RECOROING AND TRANSFER CHARGES 1201.

Recording fees:

Deed $ ; Mortgage $ Releases $ ’ 103.

Stole i«x/«toniDJ: D*«d S .......

; Marljoje $ ...............

...

- ------------- - ----------- 1300. ADDITIONAL SETTLEMENT CHARGES 1301.

Survey to ' 1303.

' 1301.

1400. TOTAL SETTLEMENT CHARGES 'c n u r c j vn U te t 103 a n l S n j.f r r tim i 1 anil K) N O T E : Under certa in circu m sta n ces th e borrower a n d s e lle r m ay b e p erm itted to w a iv e th e 1 2-day p e rio d w h ich m ust n orm ally occur b etw een a d va n ce d is c lo s ir e a n d se ttle m e n t. In th e e ven t su ch a w a iver is m ade, c o p ie s o f this s ta te m e n ts o l w a iver, e x e c u te d ax p ro vid ed in th e reg u la tio n s o l th e D epartm ent o l H ousing a n d Urban D evelo p m en t, s h a ll b e a tta c h e d Co a n d m ade a p u tt o f I h is form whan th e lortn is u sed a d a s e ttle m e n t sta te m e n t. MJO-f (5-75) ADVANCE DISCLOSURE T h e S e t t l e m e n t / D i s c l o s u r e S t a t e m e n t i t e m i z e s e a c h s e t t l e m e n t c o s t c h a r g e d t o t h e b u y e r a n d e a c h c h a r g e d t o t h e s e ll e r . A d v a n c e d i s c l o s u r e s e r v e s a t w o - f o l d p u r ­ p o s e : ( 1 ) T o p r o v i d e n o t i c e o f t h e c a s h y o u w il l n e e d a t s e t t l e m e n t a n d ( 2 ) t o m a k e p o s ­ s i b l e “ c o m p a r i s o n s h o p p i n g ” o f s e t t l e m e n t c h a r g e s s o t h a t y o u c a n a r r a n g e t e r m s m o s t f a v o r a b l e t o y o u . I f y o u d o n ’t “ s h o p a r o u n d ” y o u w i l l n o t s a v e m o n e y i f t h e s a m e s e r v i c e s a r e o f f e r e d e l s e w h e r e f o r le s s . I t i s i m p o r t a n t t o r e a l i z e t h a t a d v a n c e d i s ­ c l o s u r e p r o v i d e s f o r e a r l i e r a n d m o r e s y s t e m ­ a t i c i n f o r m a t i o n a b o u t t h e c o s t s o f t h e s e t ­ t l e m e n t t r a n s a c t i o n s b u t d o e s n o t a f f e c t a n y c o n t r a c t u a l a g r e e m e n t w h i c h m a y a l r e a d y h a v e b e e n m a d e b e t w e e n b u y e r a n d s e ll e r . T r y t o o b t a i n a s m u c h o f t h i s i n f o r m a t i o n a s p o s s ib l e p r i o r t o s i g n i n g a s a l e s c o n t r a c t f o r t h e h o u s e y o u i n t e n d t o b u y . O r , i f t h e s e l l e r i s a g r e e a b le , y o u m a y w a n t t o m a k e t h e s a le s c o n t r a c t c o n t i n g e n t u p o n y o u r a p ­ p r o v a l o f t h e a d v a n c e d i s c l o s u r e s t a t e m e n t . O n c e y o u h a v e s ig n e d , y o u m a y n o t b e a b le t o r e s c i n d t h e c o n t r a c t i n t h e e v e n t t h a t y o u a r e d i s s a t i s f i e d w i t h s o m e a s p e c t o f t h e t r a n s a c t i o n r e v e a l e d b y d i s c l o s u r e . I t Is i n y o u r I n t e r e s t t o c o n d i t i o n y o u r p u r c h a s e c o n t r a c t o n y o u r a b i l i t y t o o b t a i n a m o r t ­ g a g e l o a n o n s p e c i f ie d t e r m s . T h e l a w r e q u i r e s t h e l e n d e r t o g iv e y o u a c o p y o f t h e c o m p l e t e d a d v a n c e d i s c l o s u r e s t a t e m e n t a t t h e t i m e o f l o a n c o m m i t m e n t . I n m o s t c i r c u m s t a n c e s t h i s s h o u l d b e n o t l a t e r t h a n 12 c a l e n d a r d a y s b e f o r e t h e s e t t l e ­ m e n t d a t e . N o r m a l l y , t h e l o a n c o m m i t m e n t a n d a d v a n c e d i s c l o s u r e o c c u r s e v e r a l w e e k s p r i o r t o s e t t l e m e n t . I n t h e c a s e o f a l o n g ­ t e r m c o m m i t m e n t , s u c h a s t h a t o b t a i n e d b y a b u y e r o f a n e w h o m e u n d e r c o n s t r u c t i o n , d i s c l o s u r e s h o u l d b e m a d e s h o r t l y a f t e r s i g n ­ i n g t h e c o n t r a c t t o b u y t h e h o u s e . T y p i c a l l y , t h i s m i g h t b e i n t h e r a n g e o f 6 0 t o 9 0 d a y s b e f o r e s e t t l e m e n t .

I f t h e e x a c t c o s t o f a n y s e t t l e m e n t s e r v ic e i s n o t k n o w n i n t i m e t o m e e t t h e d e a d l i n e , t h e l e n d e r m u s t p r o v id e a g o o d f a i t h e s t i m a t e o f t h e c h a r g e .

L e n d e r s a r e p r o h i b i t e d f r o m c h a r g i n g a s p e c if ic f e e f o r t h e p r e p a r a t i o n a n d s u b m i s ­ s i o n o f d i s c l o s u r e a n d s e t t l e m e n t c o s t s s t a t e ­ m e n t s o r f o r t h e i n f o r m a t i o n t h e y m u s t p r o ­ v i d e u n d e r t h e T r u t h i n L e n d i n g A c t. I f y o u r c i r c u m s t a n c e s a r e s u c h t h a t y o u w a n t t o s e t t l e a n d t a k e t i t l e t o y o u r n e w h o m e b e f o r e t h e l e n d e r c a n m e e t h i s 1 2 - d a y a d v a n c e d i s c l o s u r e d e a d l i n e , y o u m a y s i g n a w a i v e r o f t h a t r e q u i r e m e n t . A d v a n c e d i s ­ c l o s u r e i s i n t e n d e d t o p r o t e c t y o u r i n t e r e s t s , n o t h a m p e r o r d e la y y o u r p l a n s , s o y o u s h o u l d c a r e f u l l y c o n s i d e r b e f o r e s i g n i n g a w a iv e r . E v e n i f y o u a g r e e t o w a iv e , H T JD R e g u l a t i o n s r e q u i r e t h e l e n d e r t o p r o v id e t h e d i s c l o s u r e s t a t e m e n t t o y o u a t l e a s t t h r e e d a y s p r i o r t o t h e d a t e o f s e t t l e m e n t . E x c e p t i n t h e c a s e o f a w a iv e r , t h e l e n d e r m u s t m e e t t h e a d v a n c e d i s c l o s u r e r e q u i r e ­ m e n t o r b e l i a b l e t o y o u f o r a c t u a l d a m a g e s o r $ 5 0 0 , w h i c h e v e r i s g r e a t e r . I f c o u r t a c t i o n i s n e c e s s a r y t o e n f o r c e t h i s l i a b i l i t y , t h e l e n d e r m a y b e o r d e r e d t o p a y c o u r t c o s t s a n d y o u r a t t o r n e y ’s f e e s a s s e t b y t h e c o u r t i f t h e l e n d e r lo s e s t h e c a s e . Y o u w o u l d p a y a t ­ t o r n e y ’s f e e s i n t h e e v e n t t h a t y o u lo s e t h e c a s e . A l e n d e r w ill n o t b e h e l d l i a b l e f o r a v i o l a t i o n i f h e c a n s h o w t h a t i t w a s n o t i n ­ t e n t i o n a l a n d r e s u l t e d f r o m a b o n a f id e e r r o r i n s p i t e o f m a i n t e n a n c e b y t h e l e n d e r o f p r o ­ c e d u r e s a d o p t e d t o a v o id s u c h e r r o r . U N F A IR PRACTICES AND U N R EASO N AB LE OR U N N E C E SSA R Y CH ARGES TO AVOID A p r i n c i p a l f i n d i n g o f C o n g r e s s i n t h e R e a l E s t a t e S e t t l e m e n t P r o c e d u r e s A c t o f 1 9 7 4 is t h a t c o n s u m e r s n e e d p r o t e c t i o n f r o m " * * * u n n e c e s s a r i l y h i g h s e t t l e m e n t c h a r g e s c a u s e d b y c e r t a i n a b u s i v e p r a c t i c e s t h a t h a v e d e ­ v e lo p e d i n s o m e a r e a s o f t h e c o u n t r y . ” T h e p o t e n t i a l p r o b l e m s d i s c u s s e d b e lo w m a y n o t b e a p p l i c a b l e t o m o s t l o a n s e t t l e m e n t s , a n d t h e d i s c u s s i o n is n o t i n t e n d e d t o d e t e r y o u f r o m b u y i n g a h o m e . M o s t p r o f e s s i o n a l s i n t h e s e t t l e m e n t s e r v i c e b u s i n e s s e s w i ll g iv e y o u g o o d s e r v ic e . N e v e r t h e l e s s , y o u m a y s a v e y o u r s e l f m o n e y o r w o r r y b y k e e p i n g t h e f o l ­ l o w i n g c o n s i d e r a t i o n s i n m i n d . A .

Illegal Practices.

P r a c t i c e s s p e c i f ic a ll y p r o h i b i t e d b y t h i s A c t f a l l i n t o t w o c a t e ­ g o r ie s :

1.

Kickbacks. K i c k b a c k s a n d r e f e r r a l o f b u s i n e s s f o r g a i n m o s t o f t e n a r e t i e d t o ­ g e t h e r , s o t h e l a w p r o h i b i t s a n y o n e f r o m g i v ­ i n g o r t a k i n g a f e e , k i c k b a c k , o r a n y t h i n g o f v a l u e u n d e r a n a g r e e m e n t t h a t b u s i n e s s r e ­ l a t e d t o r e a l e s t a t e s e t t l e m e n t s w i ll b e r e ­ f e r r e d t o a s p e c if ic p e r s o n o r o r g a n i z a t i o n . T h i s r e q u i r e m e n t d o e s n o t , o f c o u r s e , p r e ­ v e n t a g e n t s f o r l e n d e r s a n d t i t l e c o m p a n i e s , a t t o r n e y s , o r o t h e r s a c t u a l l y p e r f o r m i n g a s e r v i c e i n c o n n e c t i o n w i t h t h e m o r t g a g e l o a n o r s e t t l e m e n t t r a n s a c t i o n s , f r o m r e c e i v ­ i n g c o m p e n s a t i o n f o r t h e i r w o r k . T h e p r o h i b i t i o n i s a i m e d p r i m a r i l y a t e l i m i n a t i n g t h e k i n d o f a r r a n g e m e n t i n w h i c h o n e p a r t y a g r e e s t o r e t u r n p a r t o f h i s f e e i n o r d e r t o o b t a i n a v o l u m e o f b u s i n e s s f r o m t h e r e f e r r i n g p a r t y . T h e d a n g e r is t h a t s o m e s e t t l e m e n t f e e s c a n b e i n f l a t e d t o c o v e r t h i s a d d i t i o n a l p a r t y , r e s u l t i n g i n a h i g h e r FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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NOTICES 22463 t o t a l c o s t t o y o u . F o r e x a m p l e , a t i t l e c o m ­ p a n y m i g h t p a y a f e e t o a n o t h e r p a r t y f o r b r i n g i n g i t t i t l e i n s u r a n c e b u s i n e s s e v e n t h o u g h t h e o t h e r p a r t y p e r f o r m s n o w o r k a n d p r o v i d e s n o s e r v i c e i n c o n n e c t i o n w i t h i s s u a n c e o f t h e t i t l e i n s u r a n c e p o lic y . A s a n o t h e r e x a m p l e , a l a w y e r m i g h t g iv e a p a r t o f h i s f e e t o a n o t h e r p a r t y t o t h e t r a n s a c t i o n i n e x c h a n g e f o r t h e r e f e r r a l o f b u s in e s s . I t is a ls o i ll e g a l t o c h a r g e o r a c c e p t a f e e o r p o r t i o n t h e r e o f o t h e r t h a n f o r s e r v ic e s a c t u a l l y p e r f o r m e d .

T h e r e a r e c r i m i n a l p e n a l t i e s o f b o t h f in e a n d i m p r i s o n m e n t f o r a n y v i o l a t i o n o f t h e s e p r o v is i o n s o f la w . T h e r e a r e a ls o p r o v is i o n s f o r y o u t o r e c o v e r t h r e e t i m e s t h e a m o u n t o f t h e f e e i n v o lv e d o r a p o r t i o n t h e r e o f . I n a n y s u c c e s s f u l a c t i o n t o e n f o r c e y o u r r i g h t , t h e c o u r t m a y a w a r d y o u c o u r t c o s t s t o g e t h e r w i t h a f e e f o r y o u r a t t o r n e y . 2 .

Title Companies.

A n o t h e r a b u s e p r o ­ h i b i t e d b y l a w is a n y r e q u i r e m e n t b y t h e h o m e s e ll e r t h a t t i t l e i n s u r a n c e b e p u r c h a s e d f r o m a p a r t i c u l a r c o m p a n y . U n d e r t h e la w , s e ll e r s m a y n o t r e q u i r e , a s a c o n d i t i o n o f s a le , t h a t t i t l e I n s u r a n c e b e p u r c h a s e d b y t h e b u y e r f r o m a n y p a r t i c u l a r t i t l e c o m p a n y . A v i o l a t i o n w o u l d m a k e t h e s e l l e r l i a b l e t o y o u i n a n a m o u n t e q u a l t o t h r e e t i m e s a ll c h a r g e s m a d e f o r t h e t i t l e i n s u r a n c e . B .

Choices Open to the Buyer and Other Points to Remember. B e c a u s e t h e v a r i o u s p a r t i e s t o t h e s e t t l e m e n t t r a n s a c t i o n h a v e d i f f e r e n t i n t e r e s t s , t h e r e w ill b e m a n y s t e p s i n t h e p r o c e s s o f b u y i n g a h o m e w h i c h c a ll f o r c a u t i o n o n y o u r p a r t . A s a h o m e b u y e r , y o u h a v e a n u m b e r o f c h o ic e s o p e n t o y o u c o n c e r n i n g s e t t l e m e n t c o s ts a n d s e r v ic e s .

S o m e p o i n t s t o k e e p i n m i n d a r e : 1. Understand The Role of the Real Estate Broker. A l t h o u g h t h e r e a l e s t a t e a g e n t o r b r o k e r u s u a l l y p r o v id e s h e l p f u l a d v ic e t o y o u o n m a n y a s p e c t s o f h o m e b u y i n g a n d m a y i n s o m e a r e a s s u p e r v i s e t h e s e t t l e m e n t , h e n o r m a l l y s e r v e s a s a g e n t o f t h e s e ll e r . W h ile t h e r e a l e s t a t e l i c e n s i n g l a w s o f m o s t S t a t e s r e q u i r e t h a t t h e b r o k e r t r e a t b o t h b u y e r a n d s e ll e r f a i r l y , y o u s h o u l d n o t e x ­ p e c t t h e b r o k e r t o r e p r e s e n t y o u r i n t e r e s t s t o t h e e x c l u s i o n o f t h o s e o f t h e s e ll e r . T h e b r o k e r ’s b a s i c o b j e c t i v e s a r e t o o b t a i n a s i g n e d c o n t r a c t o f s a le w h i c h p r o p e r l y e x ­ p r e s s e s t h e a g r e e m e n t o f t h e p a r t i e s a n d t o c o m p l e t e t h e s a le a n d e a r n a c o m m i s s i o n o r f e e . B e f o r e y o u s ig n , m a k e s u r e t h a t t h e s a le s c o n t r a c t c o r r e c t l y e x p r e s s e s y o u r a g r e e m e n t w i t h t h e s e ll e r o n s u c h i m p o r t a n t d e t a i l s a s m e t h o d o f p a y i n g t h e s a le s p r ic e o f t h e h o m e , t h e t i m e s e t f o r y o u r m o v e - i n , a n d t h e s t a t u s o f f i x t u r e s a n d o t h e r p e r s o n a l p r o p e r t y i n t h e h o m e .

A b r o k e r m a y r e c o m m e n d t h a t y o u d e a l w i t h a p a r t i c u l a r l e n d e r , t i t l e c o m p a n y , a t ­ t o r n e y , o r p r o v i d e r o f s e t t l e m e n t s e r v ic e s . A l t h o u g h t h i s r e c o m m e n d a t i o n m a y b e b a s e d o n t h e b r o k e r ’s u p - t o - d a t e k n o w l e d g e o f r a t e s a n d q u a l i t y o f s e r v ic e , y o u s h o u l d f e e l c o m p l e te l y f r e e t o c o n s i d e r a l t e r n a t i v e s , c o m ­ p a r e r a t e s a n d f e e s , a n d m a k e y o u r o w n d e c is i o n o n t h e s e m a t t e r s .

I t is u p t o y o u t o r e v i e w t h e d o c u m e n t s c a r e f u l l y .

A l t h o u g h t h e b r o k e r m a y o f fe r h e l p f u l a d v ic e , k e e p i n m i n d t h a t y o u a r e t h e o n e w h o is s p e n d i n g t h e m o n e y t o b u y a h o m e a n d a r e e n t i t l e d t o a f u l l u n d e r s t a n d ­ i n g o f t h e c o s ts . T h e b r o k e r ’s p r i n c i p a l i n ­ t e r e s t a t s e t t l e m e n t is t o g e t t h e t r a n s a c t i o n c lo s e d a n d h i s f e e o r c o m m i s s i o n d i s b u r s e d . 2 . Settlem ent attorneys, escrow and closing agents. I n s o m e p a r t s o f t h e c o u n t r y , s e t t l e ­ m e n t s a r e o f t e n c o n d u c t e d b y a t t o r n e y s w h o s p e c i a li z e i n r e a l e s t a t e t r a n s a c t i o n s . I n o t h e r p a r t s o f t h e c o u n t r y , t h e s e t t l e m e n t m a y b e c o n d u c t e d b y a n e s c r o w o r c lo s i n g a g e n t o r b y t h e l e n d e r o r b r o k e r . T h e i r p r i m a r y c o n ­ c e r n is o r d e r l y c o m p l e t i o n o f a ll t h e d e t a i l s c a ll e d f o r i n t h e s a le s c o n t r a c t a n d i n t h e m o r t g a g e c o m m i t m e n t .

B e c a u s e m o r t g a g e l e n d e r s , u n l i k e b o r r o w ­ e r s , g o t h r o u g h s e t t l e m e n t o f t e n , t h e y o f t e n w ill n o t b e p r e s e n t a t t h e s e t t l e m e n t , p r e ­ f e r r i n g t o s p e ll o u t i n d e t a i l i n a l e t t e r o f i n s t r u c t i o n t o t h e p e r s o n c o n d u c t i n g t h e c lo s i n g t h a t w h i c h t h e y e x p e c t t o b e d o n e b e f o r e l o a n f u n d s c a n b e r e l e a s e d . Y o u , t h e b u y e r , w i l l n o t h a v e a l e t t e r o f i n s t r u c t i o n s . Y o u w ill b e a s k e d a t s e t t l e m e n t t o m a k e a n u m b e r o f d e c i s i o n s i n a r e a s w i t h w h i c h y o u m a y h a v e h a d l i t t l e p r e v i o u s e x ­ p e r i e n c e .

B e f o r e s e t t l e m e n t , y o u s h o u l d a s k t h e b r o k e r , t h e s e t t l e m e n t a t t o r n e y , o r a n a t t o r ­ n e y r e t a i n e d b y y o u w h a t q u e s t i o n s w il l p r o b ­ a b l y c o m e u p . W r i t e t h e m d o w n s o t h a t y o u m a y h a v e t i m e t o t h i n k a b o u t d e c i s i o n s t h a t a r e i m p o r t a n t t o y o u .

S e t t l e m e n t a t t o r n e y s d o n o t m i n d a n s w e r ­ i n g y o u r q u e s t i o n s — t h a t is a p a r t o f t h e i r jo b — b u t a t t h e s a m e t i m e t h e y m a y n o t i n ­ v i t e q u e s t i o n s . I f y o u h a v e d o u b t s , a s k q u e s ­ t i o n s . D o n ’t l e t a n y o n e r u s h y o u . T h e r e a r e l ik e l y t o b e l e n g t h y d o c u m e n t s t o s i g n a t s e t ­ t l e m e n t . I f y o u o r y o u r a t t o r n e y a s k s , y o u c a n u s u a l l y g e t c o p ie s o f t h e f o r m s i n a d ­ v a n c e .

3 . Legal representation. I f y o u f e e l u n f a ­ m i l i a r o r u n s u r e w i t h r e a l e s t a t e s e t t l e m e n t s , a n d m a n y p e o p le d o , c o n s i d e r h i r i n g y o u r o w n a t t o r n e y t o r e p r e s e n t y o u . I f y o u h i r e a n a t ­ t o r n e y , b e c e r t a i n t h a t t h e r e is a c l e a r u n d e r ­ s t a n d i n g i n a d v a n c e a b o u t w h a t s e r v i c e s h e is t o p e r f o r m a n d w h a t h i s f e e w ill b e f o r t h o s e s e r v ic e s . S o m e w i ll q u o t e a f l a t fe e , o t h e r s a n h o u r l y r a t e o r o n e b a s e d o n a p e r ­ c e n t a g e o f t h e s a l e s p r ic e . T h e I m p o r t a n t p o i n t i s t h a t y o u s h o u l d k n o w i n a d v a n c e h o w m u c h y o u s h o u l d e x p e c t t o p a y f o r h i s s e r v i c e s . I f y o u d o n o t k n o w a n a t t o r n e y w h o is w e ll v e r s e d i n r e a l e s t a t e t r a n s a c t i o n s , m a n y lo c a l b a r a s s o c i a t i o n s m a y b e a b l e t o r e f e r y o u t o o n e w h o is .

4 . Discuss with lenders their requirements for settlem ent services. T h e l e n d e r ’s l e g i t i ­ m a t e b u s i n e s s i n t e r e s t is i n m a k i n g a l o a n o n t e r m s w h i c h w ill p r o v id e a g o o d y i e l d w i t h l i t t l e r is k . I n s e l e c t i n g a l e n d i n g i n s t i t u t i o n , a s k a b o u t r e q u i r e m e n t s f o r p r o p e r t y s u r v e y s , a p p r a i s a l s , e s c r o w s f o r t a x e s a n d i n s u r a n c e , a n d o t h e r s e t t l e m e n t s e r v ic e s . Y o u m a y c o m ­ p a r e t h e s e r e q u i r e m e n t s w i t h t h o s e o f o t h e r l e n d e r s .

S o m e l e n d e r s w ill g iv e y o u t h e d i s c r e t i o n t o s h o p a m o n g d i f f e r e n t p r o v i d e r s o f s e t t l e ­ m e n t s e r v i c e s . B u t , m o s t l e n d e r s d e a l r e g u ­ l a r l y w i t h c e r t a i n t i t l e c o m p a n i e s , a t t o r n e y s , a p p r a i s e r s , s u r v e y o r s o r o t h e r s i n w h o m t h e y h a v e c o n f i d e n c e , a n d u s u a l l y w a n t t o a r r a n g e f o r p r o v is i o n o f a l l s e t t l e m e n t s e r v i c e s t h r o u g h t h e s e p a r t i e s a s a c o n v e n i e n c e t o t h e b u y e r a n d l e n d e r . I f y o u w i s h t o b a r g a i n d i ­ r e c t l y t o r e d u c e r a t e s f o r s e t t l e m e n t s e r v i c e s , d i s c u s s t h i s w i t h v a r i o u s l e n d e r s . R e m e m b e r t o c o m p a r e a l s o t h e m o r t g a g e i n t e r e s t r a t e s a n d o t h e r m o r t g a g e t e r m s q u o t e d b y d i f f e r e n t l e n d e r s . A l e n d e r m a y g a i n t h r o u g h h i g h e r m o r t g a g e i n t e r e s t o v e r t h e r e p a y m e n t t e r m w h a t i t g iv e s u p a t t h e “ f r o n t e n d ”

i n r e d u c i n g r e q u i r e m e n t s f o r l o a n o r g i n a t i o n f e e s , d i s c o u n t p o i n t s a n d o t h e r o n e - t i m e c h a r g e s w h i c h m u s t b e p a i d i n c a s h a t s e t t l e m e n t .

O t h e r f e a t u r e s o f a v a i l a b l e l o a n s s h o u l d a ls o b e c o m p a r e d a s y o u s h o p .

F e e l f r e e t o s e l e c t a l e n d e r o t h e r t h a n t h e o n e r e c o m m e n d e d b y t h e b r o k e r o r s e ll e r . I t is e n t i r e l y p o s s i b l e t h a t y o u m a y f i n d f i n a n c ­ i n g w h i c h is m o r e a d v a n t a g e o u s t o y o u . 5 . Title insurance required by the lender protects the lenders. You may buy a separate owner's title insurance policy for your own protection. T i t l e i n s u r a n c e i s o f t e n r e q u i r e d t o p r o t e c t t h e l e n d e r a g a i n s t lo s s i f a f la w i n t i t l e is n o t f o u n d b y t h e t i t l e s e a r c h m a d e w h e n a h o m e is p u r c h a s e d . T h e l e n d e r ’s t i t l e i n s u r a n c e p o l ic y w i ll b e p a i d f o r b y y o u o r b y t h e s e l l e r a c c o r d i n g t o l o c a l c u s t o m o r t h e s a le s c o n t r a c t .

Y o u a n d t h e l e n d e r h a v e d i f f e r e n t i n t e r ­ e s t s i n t h e p r o p e r t y y o u a r e b u y i n g , a n d t h e r e a r e m a n y k i n d s o f t i t l e d e f e c t s t h a t c a n t r o u b l e y o u w i t h o u t c r e a t i n g p r o b l e m s f o r t h e l e n d e r .

Y o u m a y b u y a s e p a r a t e o w n e r ’s t i t l e i n s u r a n c e p o l ic y f o r y o u r o w n p r o t e c t i o n i n a r e a s w h e r e t h i s p o l ic y i s n o t f u r n i s h e d b y t h e s e l l e r a s a m a t t e r o f c u s ­ t o m .

6 .

Try to minimize the performance and cost of repetitive or excessive settlem ent re­ quirements.

S o m e s e t t l e m e n t c o s t s a r e b e y o n d y o u r c o n t r o l , s u c h a s g o v e r n m e n t t r a n s f e r c h a r g e s . O t h e r i t e m s m a y b e n e g o ­ t i a b l e , h o w e v e r , s u c h a s c e r t a i n s e r v i c e s w h i c h t h e l e n d e r r e q u i r e s b u t w h i c h y o u p a y f o r .

a . Title search. T h e r e m a y b e n o n e e d f o r a f u l l h i s t o r i c a l t i t l e s e a r c h “ b a c k t o t h e y e a r o n e ” e a c h t i m e t i t l e t o a h o m e i s t r a n s ­ f e r r e d . I f y o u a r e b u y i n g a h o m e w h i c h h a d r e c e n t l y c h a n g e d h a n d s , i n q u i r e a t t i t l e c o m ­ p a n i e s a b o u t a “ r e i s s u e r a t e . ” I f t h e p o l ic y o f t h e p r e v i o u s o w n e r i s a v a i l a b l e , t a k e i t t o a t i t l e i n s u r e r b e f o r e s e t t l e m e n t . I t m a y h e l p y o u o b t a i n a “ r e i s s u e r a t e . ” G e n e r a l l y t h i s r a t e , w h e n p e r m i t t e d b y S t a t e l a w o r r e g u ­ l a t i o n s , a llo w s a r e d u c t i o n o f t h e u s u a l c h a r g e f o r a n e w p o l ic y i f t h e p r e v i o u s p o l ic y w a s i s s u e d b y t h e s a m e t i t l e i n s u r e r o r b y a n o t h e r r e p u t a b l e c o m p a n y w i t h i n a r e c e n t p e r i o d .

T i t l e s e a r c h r e q u i r e m e n t s a r e s o m e t i m e s s e t b y a g e n c i e s w h i c h i n s u r e o r g u a r a n t e e t h e l o a n , o r b y I n v e s t o r s w h o p u r c h a s e m o r t g a g e s o r i g i n a t e d b y o t h e r l e n d i n g i n s t i t u t i o n s . T h e l e n d e r y o u d e a l w i t h m a y n o t h a v e d i s c r e ­ t i o n o n e l i m i n a t i n g o r r e d u c i n g t h e s e r e q u i r e m e n t s .

b . Survey. T h e s u r v e y o f t h e p r o p e r t y m a y b e s i m p l i f i e d a n d t h e c o s t r e d u c e d i f a f u l l p r o f e s s i o n a l s u r v e y w a s p e r f o r m e d r e c e n t l y . A n e w s u r v e y m a y n o t b e n e e d e d t o s h o w t h a t n o r e c e n t c h a n g e s h a v e o c c u r r e d w h i c h a f ­ f e c t t h e v a l i d i t y o f t h e l a s t s u r v e y . A s u r ­ v e y o r m a y b e a b l e t o a v o id t h e c o s t o f a r e p e t i t i v e c o m p l e t e s u r v e y o f t h e p r o p e r t y i f h e h a s a c c e s s t o a r e c e n t s u r v e y w h i c h h e c a n “ u p d a t e . ” H e r e a g a i n , t h e r e q u i r e m e n t s o f i n v e s t o r s w h o b u y l o a n s o r i g i n a t e d b y y o u r l e n d e r m a y l i m i t t h e l e n d e r ’s d i s c r e t i o n t o n e g o t i a t e t h i s p o i n t .

c . Settlem ent agent. S e t t l e m e n t p r a c t i c e s v a r y f r o m l o c a l i t y t o l o c a l i t y , a n d e v e n w i t h i n t h e s a m e c o u n t y o r c i t y . I n v a r i o u s a r e a s s e t ­ t l e m e n t s a r e c o n d u c t e d b y t h e l e n d i n g i n ­ s t i t u t i o n s , t i t l e i n s u r a n c e c o m p a n i e s , e s c r o w c o m p a n i e s , r e a l e s t a t e b r o k e r s , a n d a t t o r n e y s f o r t h e b u y e r o r s e ll e r . B y i n v e s t i g a t i n g a n d c o m p a r i n g p r a c t i c e s a n d r a t e s , y o u m a y f i n d t h a t t h e f i r s t s u g g e s t e d s e t t l e m e n t a g e n t m a y n o t b e t h e l e a s t e x p e n s i v e . Y o u m i g h t s a v e m o n e y b y t a k i n g t h e i n i t i a t i v e i n a r r a n g i n g f o r s e t t l e m e n t a n d s e l e c t i n g t h e f i r m a n d l o ­ c a t i o n w h i c h b e s t m e e t s y o u r n e e d s . d . Escrows. T h e R e a l E s t a t e S e t t l e m e n t P r o ­ c e d u r e s A c t o f 1 9 7 4 h a s p l a c e d l i m i t s o n t h e a m o u n t o f m o n e y w h i c h t h e l e n d e r c a n r e ­ q u i r e y o u t o p l a c e i n e s c r o w a t s e t t l e m e n t f o r l a t e r p a y m e n t o f p r o p e r t y t a x e s a n d i n s u r a n c e .

K n o w y o u r r i g h t s u n d e r t h i s n e w S e c t i o n 10 p r o v i s i o n o f t h e A c t, a s e x p l a i n e d i n t h e n e x t C h a p t e r .

ESCROW ACCOUNTS I t e m 2 3 o n t h e e n c l o s e d s a m p l e s e t t l e m e n t s t a t e m e n t f o r m c o v e r s p a y m e n t s y o u r l e n d e r m a y r e q u i r e y o u t o m a k e t o a n “ e s c r o w ,” “ r e s e r v e , ” o r “ i m p o u n d ” a c c o u n t f o r i n s u r ­ a n c e p r e m i u m s , r e a l e s t a t e t a x e s , a n d u n p a i d a s s e s s m e n t s .

M a n y l e n d e r s r e q u i r e t h a t e a c h m o n t h l y p a y m e n t o n t h e m o r t g a g e i n c l u d e a m o u n t s f o r t a x e s , a n d h a z a r d i n s u r a n c e . W h e n a p ­ p l i c a b l e , l e n d e r s w il l a l s o c o l l e c t m o r t g a g e i n s u r a n c e p r e m i u m s a n d a s s e s s m e n t s p a y a b le t o h o m e o w n e r a n d o t h e r a s s o c i a t i o n s a s w e ll a s t o s p e c i a l a s s e s s m e n t d i s t r i c t s .

T h e s e FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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22464 NOTiCES f u n d s a r e s e t a s id e e a c h m o n t h i n e s c r o w a c c o u n t s a n d a r e a c c u m u l a t e d t o p a y t h e t a x e s a n d o t h e r b i l l s w h e n t h e y a r e d u e . B y la w , t h e a m o u n t y o u p a y i n t o a n e s ­ c r o w a t s e t t l e m e n t m a y n o t e x c e e d y o u r s h a r e o f t a x e s a n d i n s u r a n c e a c c r u e d p r i o r t o s e t t l e m e n t , p l u s i / b t h o f t h e e s t i m a t e d a m o u n t w h i c h w ill c o m e d u e f o r t a x e s a n d i n s u r a n c e i n t h e 1 2 - m o n t h p e r i o d b e g i n n i n g a t s e t t l e m e n t . I f t a x e s o r i n s u r a n c e c o s t s g o u p p e r i o d i c a l l y o v e r t h e l i f e o f y o u r m o r t ­ g a g e , t h e l e n d e r w i l l n e e d t o c o ll e c t m o r e m o n e y f o r t h e e s c r o w a c c o u n t s t o c o v e r t h e s e i n c r e a s e d c o s ts , r e s u l t i n g i n a l a r g e r m o n t h l y h o u s i n g p a y m e n t f o r y o u . S h o u l d t h e s e c o s ts d e c l i n e p e r i o d i c a l l y , t h e l e n d e r s h o u l d r e d u c e t h e m o n t h l y e s c r o w c o l l e c t i o n a c c o r d i n g ly . T h e e s c r o w s e r v i c e p r o v i d e d b y y o u r l e n d e r is d e s i g n e d t o m e e t o n g o i n g e x p e n s e s o f h o m e o w n e r s h i p . B y s p r e a d i n g p a y m e n t s o v e r t h e y e a r i t e l i m i n a t e s t h e p r o s p e c t o f b e in g f a c e d w i t h l a r g e a n n u a l b i l l s , p e r h a p s a t a n i n o p p o r t u n e t i m e . O n t h e o t h e r h a n d , y o u m a y w a n t t o m a n a g e y o u r o w n p a y m e n t o f t a x e s a n d / o r i n s u r a n c e , i n s t e a d o f p a y i n g i n t o a n e s c r o w h e l d b y t h e l e n d e r . D i s c u s s t h i s p o i n t w h e n s h o p p i n g a m o n g l e n d e r s . B e a w a r e , h o w e v e r , t h a t c e r t a i n e s c r o w a c c o u n t s a r e r e q u i r e d b y F e d e r a l r e g u l a t i o n , a n d i n s o m e S t a t e s b y l a w s a f f e c t i n g S t a t e - c h a r t e r e d s a v i n g s a n d l o a n a s s o c i a t i o n s . P R E V IO U S S E L L IN G P R IC E D ISC LO SU R E T h e l e n d e r is r e q u i r e d b y la w b e f o r e m a k ­ i n g a c o m m i t m e n t t o f i n a n c e a m o r t g a g e o n a h o u s e , w h i c h w a s c o m p l e t e d m o r e t h a n 12 m o n t h s p r i o r t o s e t t l e m e n t , t o c o n f i r m t h a t t h e s e l l e r o r h i s a g e n t h a s d i s c l o s e d i n w r i t ­ i n g t o t h e b u y e r t h e f o ll o w i n g i n f o r m a t i o n : ( 1 ) T h e n a m e a n d a d d r e s s o f t h e p r e s e n t o w n e r :

( 2 ) T h e d a t e t h e p r o p e r t y w a s a c q u i r e d b y t h e p r e s e n t o w n e r ( t h e y e a r o n l y o f a c q u i s i ­ t i o n n e e d b e g i v e n i f t h e p r o p e r t y w a s a c q u i r e d m o r e t h a n t w o y e a r s p r e v i o u s l y ) ; a n d ( 3 ) I f t h e s e ll e r h a s n o t o w n e d t h e p r o p ­ e r t y f o r a t l e a s t t w o y e a r s p r i o r t o t h e d a t e o f y o u r l o a n a p p l i c a t i o n a n d h a s n o t u s e d t h e p r o p e r t y a s a p l a c e o f r e s i d e n c e , t h e d a t e a n d p u r c h a s e p r i c e o f t h e l a s t “ a r m ’s l e n g t h t r a n s f e r ” o f t h e p r o p e r t y , a l i s t o f s u b s e q u e n t i m p r o v e m e n t s o t h e r t h a n m a i n t e n a n c e , a n d t h e c o s t o f t h e i m p r o v e m e n t s . T h e p u r p o s e o f t h i s r e q u i r e m e n t i s t o i n ­ f o r m y o u w h e t h e r t h e h o u s e is b e i n g s o ld b y a n o w n e r - o c c u p a n t o r b y s o m e o n e w h o h a s a c q u i r e d t h e h o u s e a n d p r e p a r e d i t f o r r e ­ s a le . M a n y i n v e s t o r s m a k e a l iv e l i h o o d b y i n v e s t i n g i n e x i s t i n g h o u s i n g , m a k i n g r e ­ p a i r s a n d i m p r o v e m e n t s , a n d r e s e l l i n g a t a f a i r p r o f i t . H o w e v e r , a b u s e s h a v e o c c u r r e d i n w h i c h o n l y s u p e r f i c i a l r e p a i r s h a v e b e e n m a d e a n d h o m e s h a v e b e e n s o l d a t p r ic e s g r e a t l y i n e x c e s s o f t h e i r v a lu e s . A s a b u y e r , y o u r k n o w l e d g e o f t h e p r e v i o u s s e l l i n g p r i c e m a y h e l p y o u d e t e r m i n e t h e p r e s e n t v a lu e o f t h e p r o p e r t y .

T h e l e n d e r ’s o b l i g a t i o n is c o n s i d e r e d m e t i f h e r e c e i v e s a c o p y o f t h e w r i t t e n s t a t e ­ m e n t f r o m t h e s e ll e r t o y o u g i v in g t h e i n ­ f o r m a t i o n d e s c r i b e d a b o v e .

A t t h a t t im e , t h e l e n d e r m a y m a k e t h e m o r t g a g e l o a n c o m m i t m e n t .

T o b a c k u p y o u r r i g h t t o f u l l d i s c l o s u r e c o n c e r n i n g e x i s t i n g p r o p e r t y , a n y p e r s o n ( o r p e r s o n s ) w h o k n o w i n g l y a n d w i l li n g ly p r o ­ v i d e s f a l s e i n f o r m a t i o n o r f a i l s t o c o m p l y w i t h d i s c l o s u r e r e q u i r e m e n t s m a y b e s u b j e c t t o c r i m i n a l p e n a l t i e s o f f in e a n d i m p r i s o n ­ m e n t , a n d c iv il d a m a g e s .

JU R IS D IC T IO N O F C O U R TS I f y o u h a v e s u f f e r e d d a m a g e s t h r o u g h v i o ­ l a t i o n s o f t h e R e a l E s t a t e S e t t l e m e n t P r o c e ­ d u r e s A c t o f 1 9 7 4 a s d e s c r i b e d i n t h e p r e c e d ­ i n g p a g e s , a c t i o n m a y b e b r o u g h t i n t h e U n i t e d S t a t e s D i s t r i c t C o u r t f o r t h e d i s t r i c t i n w h i c h t h e p r o p e r t y i n v o l v e d is l o c a t e d , o r i n a n y o t h e r c o u r t o f c o m p e t e n t j u r i s d i c t i o n , w i t h i n o n e y e a r f r o m t h e d a t e o f t h e o c ­ c u r r e n c e o f t h e v i o l a t i o n . Y o u m a y a ls o h a v e r i g h t s u n d e r o t h e r F e d e r a l o r S t a t e la w s . T R U T H I N L E N D IN G D ISC LO SU R E A t t h e t i m e o f a d v a n c e d i s c l o s u r e , y o u w ill r e c e i v e a T r u t h i n L e n d i n g s t a t e m e n t a s p a r t o f t h e s t a n d a r d s e t t l e m e n t c o s t d i s c l o s u r e f o r m . T h i s T r u t h i n L e n d i n g i n f o r m a t i o n w il l a l s o a p p e a r o n t h e s t a n d a r d s e t t l e m e n t s t a t e m e n t g i v e n t o y o u u p o n c o m p l e t i o n o f t h e s e t t l e m e n t . T h e T r u t h i n L e n d i n g s t a t e ­ m e n t d i s c l o s e s t h e A n n u a l P e r c e n t a g e R a t e ( “ A P R ” ) w h i c h y o u w ill p a y o n y o u r m o r t ­ g a g e l o a n . T h i s r a t e m a y b e h i g h e r t h a n t h e c o n t r a c t i n t e r e s t r a t e q u o t e d o n y o u r m o r t ­ g a g e . T h i s is b e c a u s e t h e c o n t r a c t r a t e i n ­ c l u d e s o n l y i n t e r e s t , b u t t h e A P R e x p r e s s e s t h e t o t a l f i n a n c e c h a r g e i n c l u d i n g c e r t a i n c r e d i t c o s t s b e s id e s i n t e r e s t o n t h e lo a n . T h e T r u t h i n L e n d i n g s t a t e m e n t w i l l a ls o d i s c l o s e a n y a d d i t i o n a l c h a r g e s f o r “ p r e p a y ­ m e n t ” s h o u l d y o u p a y o ff t h e b a l a n c e o f t h e m o r t g a g e i n f u l l b e f o r e i t is d u e . [ F R D o c .75—1 3 2 6 1 F i l e d 5 - 1 9 - 7 5 ; 8 : 4 5 a m ] FEDERAL REGISTER, VOL. 40, NO. 100— THURSDAY, MAY 22, 1975 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis

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Just Released CODE OF FEDERAL REGULATIONS (Revised as of November 1, 1974) Title 49—Transportation (P arts 1200-1299)------------------- $7.55 [4 Cumulative checklist of CFR issuances for 1975 appears in the first issue of the Federal Register each month under Title 1 ] Order from Superintendent of Documents, United States Government Printing Office, Washington, D.C.

20402 Digitized for FRASER http://fraser.stlouisfed.org/ Federal Reserve Bank of St. Louis