78978 Federal Register / Vol. 76, No. 244 / Tuesday, December 20, 2011 / Rules and Regulations 

1 12 U.S.C. 2601. 

2Public Law 101–625, 104 Stat. 4079 (1990), 

Sections 941–42. 

3Public Law 111–203, 124 Stat. 1376 (2010). 

4Public Law 111–203, Section 1098(3). 

Accordingly, pending further Bureau action, the 

Bureau is adopting HUD’s existing booklet on 

settlement costs. 

5 Id. at Section 1032(f). 

BUREAU OF CONSUMER FINANCIAL 

PROTECTION 

12 CFR Part 1024 

[Docket No. CFPB–2011–0030] 

RIN 3170–AA06 

Real Estate Settlement Procedures Act 

(Regulation X) 

AGENCY: Bureau of Consumer Financial 

Protection. 

ACTION: Interim final rule with request 

for public comment. 

SUMMARY: Title X of the Dodd-Frank 

Wall Street Reform and Consumer 

Protection Act (Dodd-Frank Act) 

transferred rulemaking authority for a 

number of consumer financial 

protection laws from seven Federal 

agencies to the Bureau of Consumer 

Financial Protection (Bureau) as of July 

21, 2011. The Bureau is in the process 

of republishing the regulations 

implementing those laws with technical 

and conforming changes to reflect the 

transfer of authority and certain other 

changes made by the Dodd-Frank Act. 

In light of the transfer of the Department 

of Housing and Urban Development’s 

(HUD’s) rulemaking authority for the 

Real Estate Settlement Procedures Act 

(RESPA) to the Bureau, the Bureau is 

publishing for public comment an 

interim final rule establishing a new 

Regulation X (Real Estate Settlement 

Procedures Act). This interim final rule 

does not impose any new substantive 

obligations on persons subject to the 

existing Regulation X, previously 

published by HUD. 

DATES: This interim final rule is 

effective December 30, 2011. Comments 

must be received on or before February 

21, 2012. 

ADDRESSES: You may submit comments, 

identified by Docket No. CFPB–2011– 

0030 or RIN 3170–AA06, by any of the 

following methods: 

• Electronic: http:// 

www.regulations.gov. Follow the 

instructions for submitting comments. 

• Mail: Monica Jackson, Office of the 

Executive Secretary, Bureau of 

Consumer Financial Protection, 1500 

Pennsylvania Ave. NW., (Attn: 1801 L 

Street), Washington, DC 20220. 

• Hand Delivery/Courier in Lieu of 

Mail: Monica Jackson, Office of the 

Executive Secretary, Bureau of 

Consumer Financial Protection, 1700 G 

Street NW., Washington, DC 20006. 

All submissions must include the 

agency name and docket number or 

Regulatory Information Number (RIN) 

for this rulemaking. In general, all 

comments received will be posted 

without change to http:// 

www.regulations.gov. In addition, 

comments will be available for public 

inspection and copying at 1700 G Street 

NW., Washington, DC 20006, on official 

business days between the hours of 

10 a.m. and 5 p.m. Eastern Time. You 

can make an appointment to inspect the 

documents by telephoning (202) 435– 

7275. 

All comments, including attachments 

and other supporting materials, will 

become part of the public record and 

subject to public disclosure. Sensitive 

personal information, such as account 

numbers or social security numbers, 

should not be included. Comments will 

not be edited to remove any identifying 

or contact information. 

FOR FURTHER INFORMATION CONTACT: 

Joseph Devlin or Jane Gao, Office of 

Regulations, at (202) 435–7700. 

SUPPLEMENTARY INFORMATION: 

I. Background 

Congress enacted the Real Estate 

Settlement Procedures Act of 1974 

(RESPA) based on findings that 

significant reforms in the real estate 

settlement process were needed to 

ensure that consumers are provided 

with greater and more timely 

information on the nature and costs of 

the residential real estate settlement 

process and are protected from 

unnecessarily high settlement charges 

caused by certain abusive practices that 

Congress found to have developed. In 

addition to providing consumers with 

appropriate disclosures, the purposes of 

RESPA include effecting certain changes 

in the settlement process for residential 

real estate that will result in (1) the 

elimination of kickbacks or referral fees 

that Congress found to increase 

unnecessarily the costs of certain 

settlement services; and (2) a reduction 

in the amounts home buyers are 

required to place in escrow accounts 

established to insure the payment of real 

estate taxes and insurance.1 RESPA also 

prohibits unearned fees in connection 

with federally related mortgage loans. In 

1990, Congress amended RESPA by 

adding a new section 6 covering persons 

responsible for servicing mortgage loans 

and amending statutory provisions 

related to mortgage servicers’ 

administration of borrowers’ escrow 

accounts.2

Historically, RESPA has been 

implemented in Regulation X of the 

Department of Housing and Urban 

Development (HUD), 24 CFR part 3500. 

The Dodd-Frank Wall Street Reform and 

Consumer Protection Act (Dodd-Frank 

Act) 3 amended a number of consumer 

financial protection laws, including 

RESPA. In addition to various 

substantive amendments, the DoddFrank Act transferred rulemaking 

authority for RESPA to the Bureau, 

effective July 21, 2011. See sections 

1061 and 1098 of the Dodd-Frank Act. 

Pursuant to the Dodd-Frank Act and 

RESPA, as amended, the Bureau is 

publishing for public comment an 

interim final rule establishing a new 

Regulation X (Real Estate Settlement 

Procedures Act), 12 CFR part 1024, 

implementing RESPA. 

II. Summary of the Interim Final Rule 

A. General 

The interim final rule substantially 

duplicates HUD’s Regulation X as the 

Bureau’s new Regulation X, 12 CFR part 

1024, making only certain nonsubstantive, technical, formatting, and 

stylistic changes. To minimize any 

potential confusion, other than 

republishing HUD’s rule (24 CFR part 

3500) with the Bureau’s part number, 

the Bureau is preserving where possible 

the section numbering HUD used in 24 

CFR part 3500. For example, while this 

interim final rule generally incorporates 

HUD’s existing regulatory text and 

appendices (including standardized and 

model forms), the rule has been edited 

as necessary to reflect nomenclature and 

other technical amendments required by 

the Dodd-Frank Act. Notably, this 

interim final rule does not impose any 

new substantive obligations on 

regulated entities. In future 

rulemakings, the Bureau expects to 

amend Regulation X to implement 

certain other changes to RESPA made by 

the Dodd-Frank Act, such as preparing 

and distributing booklets ‘‘jointly 

addressing compliance with the 

requirements of the Truth in Lending 

Act and [RESPA], in order to help 

persons borrowing money to finance the 

purchase of residential real estate better 

to understand the nature and costs of 

real estate settlement services,’’ 4

integrating certain disclosure 

requirements of the Truth in Lending 

Act, 15 U.S.C. 1601 et seq., with certain 

disclosure requirements of RESPA,5

adopting regulations pertaining to 

practices of mortgage servicers, and 

issuing regulations to carry out the 

consumer purposes of RESPA. 

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Federal Register / Vol. 76, No. 244 / Tuesday, December 20, 2011 / Rules and Regulations 78979 

6See Notice of Final Rule and Delay of 

Effectiveness, 61 Fed. Reg. 51782 (October 4, 1996). 

7See Public Law 111–203, Section 1002(12)(M) 

(defining RESPA as an ‘‘enumerated law.’’) An 

enumerated consumer law is a ‘‘Federal consumer 

financial law.’’ Id. at Section 1002(14). 

8 Id. at Sections 1051–1057. 

9See § 3500.14(a) (being recodified as 

§ 1024.14(a)) and § 3500.16 (being recodified as 

§ 1024.16). 

10Public Law 111–203, 1061(b)(7)(A). Effective 

on the designated transfer date, July 21, 2011, the 

Bureau was also granted ‘‘all powers and duties’’ 

that were vested in the HUD Secretary relating to 

RESPA on the date before the designated transfer 

date. Id. at Section 1061(b)(7)(B). Until this and 

other interim final rules take effect, existing 

regulations for which rulemaking authority 

transferred to the Bureau continue to govern 

persons covered by this rule. See 76 FR 43569 (July 

21, 2011). 

11Section 1066 of the Dodd-Frank Act grants the 

Secretary of the Treasury interim authority to 

perform certain functions of the Bureau. Pursuant 

to that authority, Treasury is publishing this interim 

final rule on behalf of the Bureau. 

12Public Law 111–203, Section 1098(11); 12 

U.S.C. 2603–2605, 2607, 2609, 2617. 

B. Specific Changes 

References to HUD and its 

administrative structure, including 

provisions for imposing penalties for 

escrow violations, have been replaced 

with references to the Bureau. 

Conforming edits have been made to 

internal cross-references and addresses 

for filing applications and notices. 

Conforming edits have also been made 

to reflect the scope of the Bureau’s 

authority pursuant to RESPA, as 

amended by the Dodd-Frank Act. 

Historical references that are no longer 

applicable, and references to effective 

dates that have passed, have been 

removed as appropriate. In addition, the 

Bureau is correcting a citation error in 

HUD’s existing § 3500.17(l)(4). As 

adopted by HUD, § 3500.17(l)(4) 

contains a cross-reference to 

§ 3500.21(f). The correct citation should 

be to § 3500.21(e). The Bureau is 

republishing § 3500.17(l)(4) as 

§ 1024.17(l)(4) with the citation 

corrected to read § 1024.21(e). 

References to any ‘‘HUD Public 

Guidance Document’’ throughout HUD’s 

Regulation X have been replaced with 

references to a ‘‘Public Guidance 

Document’’ throughout the Bureau’s 

Regulation X. HUD’s existing Regulation 

X CFR text contains several provisions 

that HUD adopted in 1996 but never 

made effective.6 The Bureau is not 

republishing those provisions with the 

Bureau’s Regulation X. Furthermore, the 

Bureau is clarifying permissible changes 

that covered persons may make to the 

special information booklet without the 

Bureau’s written approval. As adopted 

by HUD, §§ 3500.6(d)(2) and (3) set forth 

the permissible changes that covered 

persons may make in the special 

information booklet without written 

approval from the Secretary of HUD. To 

reflect the transfer of authority from 

HUD to the Bureau, the Bureau is 

recodifying § 3500.6(d)(1) as 

§§ 1024.6(d)(1)(i) and (ii) to clarify 

permissible changes covered persons 

may make to the special information 

booklet without the Bureau’s written 

approval. 

As discussed above, the Dodd-Frank 

Act directed the Bureau to integrate 

certain disclosures required by TILA 

with certain disclosures required by 

RESPA. The Bureau expects the content 

and format of HUD’s existing HUD–1/ 

1A and GFE forms to be significantly 

revised or replaced by such rulemaking. 

The HUD–1/1A and GFE forms 

currently list HUD’s Office of 

Management and Budget (OMB) control 

number, 2502–0265, in order to satisfy 

certain information collection 

requirements of the Paperwork 

Reduction Act. The Bureau believes that 

requiring covered persons to modify 

existing forms solely to replace HUD’s 

OMB control number with the Bureau’s 

OMB control number would impose 

substantial burden on covered persons 

with limited or no net benefit to 

consumers. Accordingly, covered 

persons may continue to list HUD’s 

OMB control number on the HUD–1/1A 

and GFE forms until a final rule to the 

contrary takes effect. Covered persons 

also have the option of replacing HUD’s 

OMB control number with the Bureau’s 

OMB control number on the HUD–1/1A 

and GFE forms until a final rule to the 

contrary takes effect. 

Accordingly, the Bureau is adding 

language in Appendix C to part 1024— 

Instructions for Completing the Good 

Faith Estimate (GFE) Form to clarify that 

covered persons may replace HUD’s 

OMB control number with the Bureau’s 

OMB control number on the form at 

their option. HUD’s existing § 3500.9 

lists the permissible changes allowed 

when the HUD–1/1A settlement changes 

are reproduced. The Bureau is 

recodifying § 3500.9 as § 1024.9 and 

adding language in § 1024.9(c) to clarify 

that covered persons may replace HUD’s 

OMB control number with the Bureau’s 

OMB Control number on the HUD–1/1A 

forms without written approval from the 

Bureau. Furthermore, the Bureau is 

revising language in § 1024.9(a)(5) to 

clarify that covered persons are not 

required to display the expiration date 

that is associated with the OMB control 

number displayed on the HUD–1/1A 

forms. 

The Bureau has certain information 

gathering and investigative authority 

concerning Federal consumer financial 

laws, including RESPA,7 under 

Subtitles B and E of the Dodd-Frank 

Act. RESPA also confers additional 

information gathering and investigative 

authority on the Bureau. Accordingly, 

the Bureau is removing paragraphs (i) 

and (ii) in HUD’s existing § 3500.17(l)(3) 

because the repetition of the RESPAconferred information gathering and 

investigative authority therein is 

unnecessary. 

The Bureau has the authority to 

enforce RESPA and Regulation X 

pursuant to Subtitle E of Title X of the 

Dodd-Frank Act.8 RESPA also confers 

additional enforcement authority on the 

Bureau. The Bureau is removing the 

civil money penalties provisions in 

HUD’s existing § 3500.17(m) and (n) 

because the repetition of this RESPAconferred authority is unnecessary. 

Investigations undertaken by the Bureau 

will be conducted in accordance with 

12 CFR part 1080, and administrative 

adjudications will be conducted in 

accordance with 12 CFR part 1081. Due 

to the removal of paragraphs (m) and (n) 

from § 3500.17, the ‘‘Discretionary 

payments’’ paragraph in HUD’s existing 

§ 3500.17(o) is being recodified as 

§ 1024.17(m) in this interim final rule. 

Finally, the Bureau is removing 

paragraphs (b) and (c) from HUD’s 

existing § 3500.19 because they are 

repetitive in light of other statutory and 

regulatory provisions. See §§ 3500.14– 

16 (being recodified as §§ 1024.14–16). 

Accordingly, corresponding crossreferences to §§ 3500.19(b) and (c) in 

HUD’s existing Regulation X are also 

being removed,9 and § 3500.19(d) is 

being recodified as § 1024.19(b). 

III. Legal Authority 

A. Rulemaking Authority 

The Bureau is issuing this interim 

final rule pursuant to its authority under 

RESPA and the Dodd-Frank Act. 

Effective July 21, 2011, section 1061 of 

the Dodd-Frank Act transferred to the 

Bureau all of the HUD Secretary’s 

consumer protection functions relating 

to RESPA.10 Accordingly, effective July 

21, 2011, the authority of HUD to issue 

regulations pursuant to RESPA 

transferred to the Bureau.11

RESPA, as amended, authorizes the 

Bureau to issue regulations to carry out 

the provisions of RESPA.12 This 

authority allows the Bureau to prescribe 

such rules and regulations, to make 

such interpretations, and to grant such 

reasonable exemptions for classes of 

transactions, as may be necessary to 

achieve the purposes of RESPA. In its 

existing regulation, HUD has used this 

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78980 Federal Register / Vol. 76, No. 244 / Tuesday, December 20, 2011 / Rules and Regulations 

13See HUD’s Regulation X, 24 CFR part 3500. 

14 5 U.S.C. 551 et seq. 

15 5 U.S.C. 553(b), (c). 

16 5 U.S.C. 553(b)(3)(A), (B). 

17This interim final rule is one of 14 companion 

rulemakings that together restate and recodify the 

implementing regulations under 14 existing 

consumer financial laws (part III.C, below, lists the 

14 laws involved). In the interest of proper 

coordination of this overall regulatory framework, 

which includes numerous cross-references among 

some of the regulations, the Bureau is establishing 

the same effective date of December 30, 2011 for 

those rules published on or before that date and 

making those published thereafter (if any) effective 

immediately. 

18Section 1022(b)(2)(A) of the Dodd-Frank Act 

addresses the consideration of the potential benefits 

and costs of regulation to consumers and covered 

persons, including the potential reduction of access 

by consumers to consumer financial products or 

services; the impact on depository institutions and 

credit unions with $10 billion or less in total assets 

as described in Section 1026 of the Dodd-Frank Act; 

and the impact on consumers in rural areas. Section 

1022(b)(2)(B) requires that the Bureau ‘‘consult with 

the appropriate prudential regulators or other 

Federal agencies prior to proposing a rule and 

during the comment process regarding consistency 

with prudential, market, or systemic objectives 

administered by such agencies.’’ The manner and 

extent to which these provisions apply to interim 

final rules and to benefits, costs, and impacts that 

are compelled by statutory changes rather than 

discretionary Bureau action is unclear. 

Nevertheless, to inform this rulemaking more fully, 

the Bureau performed the described analyses and 

consultations. 

19The fourteen laws implemented by this and its 

companion rulemakings are: The Consumer Leasing 

Act, the Electronic Fund Transfer Act (except with 

respect to Section 920 of that Act), the Equal Credit 

Opportunity Act, the Fair Credit Reporting Act 

(except with respect to Sections 615(e) and 628 of 

that act), the Fair Debt Collection Practices Act, 

Subsections (b) through (f) of Section 43 of the 

Federal Deposit Insurance Act, Sections 502 

through 509 of the Gramm-Leach-Bliley Act (except 

RESPA authority to establish extensive 

rules concerning appropriate and timely 

disclosures about the nature and costs of 

the residential real estate settlement 

process, the elimination of kickbacks or 

referral fees with respect to certain 

settlement services, and mortgage 

servicers’ administration of borrowers’ 

escrow accounts, as well as their 

handling of servicing transfers and 

written consumer inquiries.13

B. Authority To Issue an Interim Final 

Rule Without Prior Notice and Comment 

The Administrative Procedure Act 

(APA) 14 generally requires public 

notice and an opportunity to comment 

before promulgation of substantive 

regulations.15 The APA provides 

exceptions to notice-and-comment 

procedures, however, where an agency 

for good cause finds that such 

procedures are impracticable, 

unnecessary, or contrary to the public 

interest or when a rulemaking relates to 

agency organization, procedure, and 

practice.16 The Bureau finds that there 

is good cause to conclude that providing 

notice and opportunity for comment 

would be unnecessary and contrary to 

the public interest under these 

circumstances. In addition, substantially 

all of the changes made by this interim 

final rule, which were necessitated by 

the Dodd-Frank Act’s transfer of RESPA 

authority from HUD to the Bureau, 

relate to agency organization, procedure, 

and practice and are thus exempt from 

the APA’s notice-and-comment 

requirements. 

The Bureau’s good cause findings are 

based on the following considerations. 

As an initial matter, HUD’s existing 

regulation was a result of notice-andcomment rulemaking to the extent 

required. Moreover, the interim final 

rule published today does not impose 

any new, substantive obligations on 

regulated entities. Rather, the interim 

final rule makes only non-substantive, 

technical changes to the existing text of 

the regulation, such as renumbering, 

changing internal cross-references, 

replacing appropriate nomenclature to 

reflect the transfer of authority to the 

Bureau, and changing the address for 

filing applications and notices. Given 

the technical nature of these changes, 

and the fact that the interim final rule 

does not impose any additional 

substantive requirements on covered 

entities, an opportunity for prior public 

comment is unnecessary. In addition, 

recodifying HUD’s regulation to reflect 

the transfer of authority to the Bureau 

will help facilitate compliance with 

RESPA and its implementing 

regulations, and will help reduce 

uncertainty regarding the applicable 

regulatory framework. Using notice-andcomment procedures would delay this 

process and thus be contrary to the 

public interest. 

The APA generally requires that rules 

be published not less than 30 days 

before their effective dates. See 5 U.S.C. 

553(d). As with the notice and comment 

requirement, however, the APA allows 

an exception when ‘‘otherwise provided 

by the agency for good cause found and 

published with the rule.’’ 5 U.S.C. 

553(d)(3). The Bureau finds that there is 

good cause for providing less than 30 

days notice here. A delayed effective 

date would harm consumers and 

regulated entities by needlessly 

perpetuating discrepancies between the 

amended statutory text and the 

implementing regulation, thereby 

hindering compliance and prolonging 

uncertainty regarding the applicable 

regulatory framework.17

In addition, delaying the effective 

date of the interim final rule for 30 days 

would provide no practical benefit to 

regulated entities in this context and in 

fact could operate to their detriment. As 

discussed above, the interim final rule 

published today does not impose any 

new, substantive obligations on 

regulated entities. Instead, the rule 

makes only non-substantive, technical 

changes to the existing text of the 

regulation. Thus, regulated entities that 

are already in compliance with the 

existing rules will not need to modify 

business practices as a result of this 

rule. 

C. Section 1022(b)(2) of the Dodd-Frank 

Act 

In developing the interim final rule, 

the Bureau has conducted an analysis of 

potential benefits, costs, and impacts.18

The Bureau believes that the interim 

final rule will benefit consumers and 

covered persons by updating and 

recodifying Regulation X to reflect the 

transfer of authority to the Bureau and 

certain other changes mandated by the 

Dodd-Frank Act. This will help 

facilitate compliance with RESPA and 

its implementing regulations and help 

reduce any uncertainty regarding the 

applicable regulatory framework. The 

interim final rule will not impose any 

new substantive obligations on 

consumers or covered persons and is 

not expected to have any impact on 

consumers’ access to consumer financial 

products and services. 

Although not required by the interim 

final rule, covered entities may incur 

some costs in updating compliance 

manuals and related materials to reflect 

the new numbering and other technical 

changes reflected in the new Regulation 

X. The Bureau has worked to reduce any 

such burden by preserving the existing 

numbering to the extent possible and 

believes that such costs will likely be 

minimal. These changes could be 

handled in the short term by providing 

a short, standalone summary alerting 

users to the changes and in the long 

term could be combined with other 

updates at the firm’s convenience. The 

Bureau intends to continue investigating 

the possible costs to affected entities of 

updating manuals and related materials 

to reflect these changes and solicits 

comments on this and other issues 

discussed in this section. 

The interim final rule will have no 

unique impact on depository 

institutions or credit unions with $10 

billion or less in assets as described in 

section 1026(a) of the Dodd-Frank Act. 

Also, the interim final rule will have no 

unique impact on rural consumers. 

In undertaking the process of 

recodifying Regulation X, as well as 

regulations implementing thirteen other 

existing consumer financial laws,19 the 

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Federal Register / Vol. 76, No. 244 / Tuesday, December 20, 2011 / Rules and Regulations 78981 

for Section 505 as it applies to Section 501(b)), the 

Home Mortgage Disclosure Act, the Real Estate 

Settlement Procedures Act, the S.A.F.E. Mortgage 

Licensing Act, the Truth in Lending Act, the Truth 

in Savings Act, Section 626 of the Omnibus 

Appropriations Act, 2009, and the Interstate Land 

Sales Full Disclosure Act. 

20 In light of the technical but voluminous nature 

of this recodification project, the Bureau focused 

the consultation process on a representative sample 

of the recodified regulations, while making 

information on the other regulations available. The 

Bureau expects to conduct differently its future 

consultations regarding substantive rulemakings. 

21 5 U.S.C. 601 et seq. 

22 5 U.S.C. 603, 604. 

23 5 U.S.C. 609. 

24 5 U.S.C. 603(a), 604(a); 5 U.S.C. 553(b)(B). 

25 5 U.S.C. 609(b). 

Bureau consulted the Federal Deposit 

Insurance Corporation, the Office of the 

Comptroller of the Currency, the 

National Credit Union Administration, 

the Board of Governors of the Federal 

Reserve System, the Federal Trade 

Commission, and the Department of 

Housing and Urban Development, 

including with respect to consistency 

with any prudential, market, or systemic 

objectives that may be administered by 

such agencies.20 The Bureau also has 

consulted with the Office of 

Management and Budget for technical 

assistance. The Bureau expects to have 

further consultations with the 

appropriate Federal agencies during the 

comment period. 

IV. Request for Comment 

Although notice and comment 

rulemaking procedures are not required, 

the Bureau invites comments on this 

notice. Commenters are specifically 

encouraged to identify any technical 

issues raised by the rule. The Bureau is 

also seeking comment in response to a 

notice published at 76 FR 75825 (Dec. 

5, 2011) concerning its efforts to identify 

priorities for streamlining regulations 

that it has inherited from other Federal 

agencies to address provisions that are 

outdated, unduly burdensome, or 

unnecessary. 

V. Regulatory Flexibility Act 

The Regulatory Flexibility Act (RFA), 

as amended by the Small Business 

Regulatory Enforcement Fairness Act of 

1996, requires each agency to consider 

the potential impact of its regulations on 

small entities, including small 

businesses, small governmental units, 

and small not-for-profit organizations.21

The RFA generally requires an agency to 

conduct an initial regulatory flexibility 

analysis (IRFA) and a final regulatory 

flexibility analysis (FRFA) of any rule 

subject to notice-and-comment 

rulemaking requirements, unless the 

agency certifies that the rule will not 

have a significant economic impact on 

a substantial number of small entities.22

The Bureau also is subject to certain 

additional procedures under the RFA 

involving the convening of a panel to 

consult with small business 

representatives prior to proposing a rule 

for which an IRFA is required.23

The IRFA and FRFA requirements 

described above apply only where a 

notice of proposed rulemaking is 

required,24 and the panel requirement 

applies only when a rulemaking 

requires an IRFA.25 As discussed above 

in part III, a notice of proposed 

rulemaking is not required for this 

rulemaking. 

In addition, as discussed above, this 

interim final rule has only a minor 

impact on entities subject to Regulation 

X. The rule imposes no new, substantive 

obligations on covered entities. 

Accordingly, the undersigned certifies 

that this interim final rule will not have 

a significant economic impact on a 

substantial number of small entities. 

VI. Paperwork Reduction Act 

The Bureau may not conduct or 

sponsor, and a respondent is not 

required to respond to, an information 

collection unless it displays a currently 

valid Office of Management and Budget 

(OMB) control number. This rule 

contains information collection 

requirements under the Paperwork 

Reduction Act (PRA), which have been 

previously approved by OMB, the OMB 

control number for which is 2502–0265, 

and the ongoing PRA burden for which 

is unchanged by this rule. There are no 

new information collection 

requirements in this interim final rule. 

The Bureau’s OMB control number for 

this information collection is: 3170– 

0016. 

List of Subjects in 12 CFR Part 1024 

Consumer protection, Condominiums, 

Housing, Mortgages, Mortgagees, 

Mortgage servicing, Reporting and 

recordkeeping requirements. 

Authority and Issuance 

■ For the reasons set forth above, the 

Bureau of Consumer Financial 

Protection adds part 1024 to Chapter X 

in Title 12 of the Code of Federal 

Regulations to read as follows: 

PART 1024—REAL ESTATE 

SETTLEMENT PROCEDURES ACT 

(REGULATION X) 

Sec. 

1024.1 Designation. 

1024.2 Definitions. 

1024.3 Questions or suggestions from 

public and copies of public guidance 

documents. 

1024.4 Reliance upon rule, regulation or 

interpretation by the Bureau. 

1024.5 Coverage of RESPA. 

1024.6 Special information booklet at time 

of loan application. 

1024.7 Good faith estimate. 

1024.8 Use of HUD–1 or HUD–1A 

settlement statements. 

1024.9 Reproduction of settlement 

statements. 

1024.10 One-day advance inspection of 

HUD–1 or HUD–1A settlement 

statement; delivery; recordkeeping. 

1024.11 Mailing. 

1024.12 No fee. 

1024.13 Relation to state laws. 

1024.14 Prohibition against kickbacks and 

unearned fees. 

1024.15 Affiliated business arrangements. 

1024.16 Title companies. 

1024.17 Escrow accounts. 

1024.18 Validity of contracts and liens. 

1024.19 Enforcement. 

1024.20 [Reserved] 

1024.21 Mortgage servicing transfers. 

1024.22 Severability. 

1024.23 ESIGN applicability. 

Appendix A to Part 1024—Instructions for 

Completing HUD–1 and HUD–1A 

Settlement Statements; Sample HUD–1 

and HUD–1A Statements 

Appendix B to Part 1024—Illustrations of 

Requirements of RESPA 

Appendix C to Part 1024—Instructions for 

Completing Good Faith Estimate (GFE) 

Form 

Appendix D to Part 1024—Affiliated 

Business Arrangement Disclosure 

Statement Format 

Appendix E to Part 1024—Arithmetic Steps 

Appendix MS–1 to Part 1024—Servicing 

Disclosure Statement 

Appendix MS–2 to Part 1024—Notice of 

Assignment, Sale, or Transfer of 

Servicing Rights 

Authority: 12 U.S.C. 2603–2605, 2607, 

2609, 2617, 5512, 5581. 

§ 1024.1 Designation. 

This part, known as Regulation X, is 

issued by the Bureau of Consumer 

Financial Protection to implement the 

Real Estate Settlement Procedures Act of 

1974, as amended, 12 U.S.C. 2601 et. 

seq. 

§ 1024.2 Definitions. 

(a) Statutory terms. All terms defined 

in RESPA (12 U.S.C. 2602) are used in 

accordance with their statutory meaning 

unless otherwise defined in paragraph 

(b) of this section or elsewhere in this 

part. 

(b) Other terms. As used in this part: 

Application means the submission of 

a borrower’s financial information in 

anticipation of a credit decision relating 

to a federally related mortgage loan, 

which shall include the borrower’s 

name, the borrower’s monthly income, 

the borrower’s social security number to 

obtain a credit report, the property 

address, an estimate of the value of the 

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property, the mortgage loan amount 

sought, and any other information 

deemed necessary by the loan 

originator. An application may either be 

in writing or electronically submitted, 

including a written record of an oral 

application. 

Balloon payment has the same 

meaning as ‘‘balloon payment’’ under 

Regulation Z (12 CFR part 1026). 

Bureau means the Bureau of 

Consumer Financial Protection. 

Business day means a day on which 

the offices of the business entity are 

open to the public for carrying on 

substantially all of the entity’s business 

functions. 

Changed circumstances means: 

(1)(i) Acts of God, war, disaster, or 

other emergency; 

(ii) Information particular to the 

borrower or transaction that was relied 

on in providing the GFE and that 

changes or is found to be inaccurate 

after the GFE has been provided. This 

may include information about the 

credit quality of the borrower, the 

amount of the loan, the estimated value 

of the property, or any other information 

that was used in providing the GFE; 

(iii) New information particular to the 

borrower or transaction that was not 

relied on in providing the GFE; or 

(iv) Other circumstances that are 

particular to the borrower or 

transaction, including boundary 

disputes, the need for flood insurance, 

or environmental problems. 

(2) Changed circumstances do not 

include: 

(i) The borrower’s name, the 

borrower’s monthly income, the 

property address, an estimate of the 

value of the property, the mortgage loan 

amount sought, and any information 

contained in any credit report obtained 

by the loan originator prior to providing 

the GFE, unless the information changes 

or is found to be inaccurate after the 

GFE has been provided; or 

(ii) Market price fluctuations by 

themselves. 

Dealer means, in the case of property 

improvement loans, a seller, contractor, 

or supplier of goods or services. In the 

case of manufactured home loans, 

‘‘dealer’’ means one who engages in the 

business of manufactured home retail 

sales. 

Dealer loan or dealer consumer credit 

contract means, generally, any 

arrangement in which a dealer assists 

the borrower in obtaining a federally 

related mortgage loan from the funding 

lender and then assigns the dealer’s 

legal interests to the funding lender and 

receives the net proceeds of the loan. 

The funding lender is the lender for the 

purposes of the disclosure requirements 

of this part. If a dealer is a ‘‘creditor’’ as 

defined under the definition of 

‘‘federally related mortgage loan’’ in this 

part, the dealer is the lender for 

purposes of this part. 

Effective date of transfer is defined in 

section 6(i)(1) of RESPA (12 U.S.C. 

2605(i)(1)). In the case of a home equity 

conversion mortgage or reverse 

mortgage as referenced in this section, 

the effective date of transfer is the 

transfer date agreed upon by the 

transferee servicer and the transferor 

servicer. 

Federally related mortgage loan or 

mortgage loan means as follows: 

(1) Any loan (other than temporary 

financing, such as a construction loan): 

(i) That is secured by a first or 

subordinate lien on residential real 

property, including a refinancing of any 

secured loan on residential real property 

upon which there is either: 

(A) Located or, following settlement, 

will be constructed using proceeds of 

the loan, a structure or structures 

designed principally for occupancy of 

from one to four families (including 

individual units of condominiums and 

cooperatives and including any related 

interests, such as a share in the 

cooperative or right to occupancy of the 

unit); or 

(B) Located or, following settlement, 

will be placed using proceeds of the 

loan, a manufactured home; and 

(ii) For which one of the following 

paragraphs applies. The loan: 

(A) Is made in whole or in part by any 

lender that is either regulated by or 

whose deposits or accounts are insured 

by any agency of the Federal 

Government; 

(B) Is made in whole or in part, or is 

insured, guaranteed, supplemented, or 

assisted in any way: 

(1) By the Secretary of the Department 

of Housing and Urban Development 

(HUD) or any other officer or agency of 

the Federal Government; or 

(2) Under or in connection with a 

housing or urban development program 

administered by the Secretary of HUD or 

a housing or related program 

administered by any other officer or 

agency of the Federal Government; 

(C) Is intended to be sold by the 

originating lender to the Federal 

National Mortgage Association, the 

Government National Mortgage 

Association, the Federal Home Loan 

Mortgage Corporation (or its successors), 

or a financial institution from which the 

loan is to be purchased by the Federal 

Home Loan Mortgage Corporation (or its 

successors); 

(D) Is made in whole or in part by a 

‘‘creditor’’, as defined in section 103(g) 

of the Consumer Credit Protection Act 

(15 U.S.C. 1602(g)), that makes or 

invests in residential real estate loans 

aggregating more than $1,000,000 per 

year. For purposes of this definition, the 

term ‘‘creditor’’ does not include any 

agency or instrumentality of any State, 

and the term ‘‘residential real estate 

loan’’ means any loan secured by 

residential real property, including 

single-family and multifamily 

residential property; 

(E) Is originated either by a dealer or, 

if the obligation is to be assigned to any 

maker of mortgage loans specified in 

paragraphs (1)(ii)(A) through (D) of this 

definition, by a mortgage broker; or 

(F) Is the subject of a home equity 

conversion mortgage, also frequently 

called a ‘‘reverse mortgage,’’ issued by 

any maker of mortgage loans specified 

in paragraphs (1)(ii) (A) through (D) of 

this definition. 

(2) Any installment sales contract, 

land contract, or contract for deed on 

otherwise qualifying residential 

property is a federally related mortgage 

loan if the contract is funded in whole 

or in part by proceeds of a loan made 

by any maker of mortgage loans 

specified in paragraphs (1)(ii) (A) 

through (D) of this definition. 

(3) If the residential real property 

securing a mortgage loan is not located 

in a State, the loan is not a federally 

related mortgage loan. 

Good faith estimate or GFE means an 

estimate of settlement charges a 

borrower is likely to incur, as a dollar 

amount, and related loan information, 

based upon common practice and 

experience in the locality of the 

mortgaged property, as provided on the 

form prescribed in § 1024.7 and 

prepared in accordance with the 

Instructions in Appendix C to this part. 

HUD means the Department of 

Housing and Urban Development. 

HUD–1 or HUD–1A settlement 

statement (also HUD–1 or HUD–1A) 

means the statement that is prescribed 

in this part for setting forth settlement 

charges in connection with either the 

purchase or the refinancing (or other 

subordinate lien transaction) of 1- to 

4-family residential property. 

Lender means, generally, the secured 

creditor or creditors named in the debt 

obligation and document creating the 

lien. For loans originated by a mortgage 

broker that closes a federally related 

mortgage loan in its own name in a table 

funding transaction, the lender is the 

person to whom the obligation is 

initially assigned at or after settlement. 

A lender, in connection with dealer 

loans, is the lender to whom the loan is 

assigned, unless the dealer meets the 

definition of creditor as defined under 

‘‘federally related mortgage loan’’ in this 

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section. See also § 1024.5(b)(7), 

secondary market transactions. 

Loan originator means a lender or 

mortgage broker. 

Manufactured home is defined in 

HUD regulation 24 CFR 3280.2. 

Mortgage broker means a person (not 

an employee of a lender) or entity that 

renders origination services and serves 

as an intermediary between a borrower 

and a lender in a transaction involving 

a federally related mortgage loan, 

including such a person or entity that 

closes the loan in its own name in a 

table funded transaction. A loan 

correspondent approved under HUD 

regulation 24 CFR 202.8 for Federal 

Housing Administration programs is a 

mortgage broker for purposes of this 

part. 

Mortgaged property means the real 

property that is security for the federally 

related mortgage loan. 

Origination service means any service 

involved in the creation of a mortgage 

loan, including but not limited to the 

taking of the loan application, loan 

processing, the underwriting and 

funding of the loan, and the processing 

and administrative services required to 

perform these functions. 

Person is defined in section 3(5) of 

RESPA (12 U.S.C. 2602(5)). 

Prepayment penalty has the same 

meaning as ‘‘prepayment penalty’’ 

under Regulation Z (12 CFR part 1026). 

Public Guidance Documents means 

Federal Register documents adopted or 

published, that the Bureau may amend 

from time-to-time by publication in the 

Federal Register. These documents are 

also available from the Bureau at the 

address indicated in § 1024.3. 

Refinancing means a transaction in 

which an existing obligation that was 

subject to a secured lien on residential 

real property is satisfied and replaced 

by a new obligation undertaken by the 

same borrower and with the same or a 

new lender. The following shall not be 

treated as a refinancing, even when the 

existing obligation is satisfied and 

replaced by a new obligation with the 

same lender (this definition of 

‘‘refinancing’’ as to transactions with the 

same lender is similar to Regulation Z, 

12 CFR 1026.20(a)): 

(1) A renewal of a single payment 

obligation with no change in the 

original terms; 

(2) A reduction in the annual 

percentage rate as computed under the 

Truth in Lending Act with a 

corresponding change in the payment 

schedule; 

(3) An agreement involving a court 

proceeding; 

(4) A workout agreement, in which a 

change in the payment schedule or 

change in collateral requirements is 

agreed to as a result of the consumer’s 

default or delinquency, unless the rate 

is increased or the new amount financed 

exceeds the unpaid balance plus earned 

finance charges and premiums for 

continuation of allowable insurance; 

and 

(5) The renewal of optional insurance 

purchased by the consumer that is 

added to an existing transaction, if 

disclosures relating to the initial 

purchase were provided. 

Regulation Z means the regulations 

issued by the Bureau (12 CFR part 1026) 

to implement the Federal Truth in 

Lending Act (15 U.S.C. 1601 et seq.), 

and includes the Commentary on 

Regulation Z. 

Required use means a situation in 

which a person must use a particular 

provider of a settlement service in order 

to have access to some distinct service 

or property, and the person will pay for 

the settlement service of the particular 

provider or will pay a charge 

attributable, in whole or in part, to the 

settlement service. However, the 

offering of a package (or combination of 

settlement services) or the offering of 

discounts or rebates to consumers for 

the purchase of multiple settlement 

services does not constitute a required 

use. Any package or discount must be 

optional to the purchaser. The discount 

must be a true discount below the prices 

that are otherwise generally available, 

and must not be made up by higher 

costs elsewhere in the settlement 

process. 

RESPA means the Real Estate 

Settlement Procedures Act of 1974 (12 

U.S.C. 2601 et seq.). 

Servicer means the person responsible 

for the servicing of a mortgage loan 

(including the person who makes or 

holds a mortgage loan if such person 

also services the mortgage loan). The 

term does not include: 

(1) The Federal Deposit Insurance 

Corporation (FDIC), in connection with 

assets acquired, assigned, sold, or 

transferred pursuant to section 13(c) of 

the Federal Deposit Insurance Act or as 

receiver or conservator of an insured 

depository institution; and 

(2) The Federal National Mortgage 

Corporation (FNMA); the Federal Home 

Loan Mortgage Corporation (Freddie 

Mac); the FDIC; HUD, including the 

Government National Mortgage 

Association (GNMA) and the Federal 

Housing Administration (FHA) 

(including cases in which a mortgage 

insured under the National Housing Act 

(12 U.S.C. 1701 et seq.) is assigned to 

HUD); the National Credit Union 

Administration (NCUA); the Farm 

Service Agency; and the Department of 

Veterans Affairs (VA), in any case in 

which the assignment, sale, or transfer 

of the servicing of the mortgage loan is 

preceded by termination of the contract 

for servicing the loan for cause, 

commencement of proceedings for 

bankruptcy of the servicer, or 

commencement of proceedings by the 

FDIC for conservatorship or receivership 

of the servicer (or an entity by which the 

servicer is owned or controlled). 

Servicing means receiving any 

scheduled periodic payments from a 

borrower pursuant to the terms of any 

mortgage loan, including amounts for 

escrow accounts under section 10 of 

RESPA (12 U.S.C. 2609), and making the 

payments to the owner of the loan or 

other third parties of principal and 

interest and such other payments with 

respect to the amounts received from 

the borrower as may be required 

pursuant to the terms of the mortgage 

servicing loan documents or servicing 

contract. In the case of a home equity 

conversion mortgage or reverse 

mortgage as referenced in this section, 

servicing includes making payments to 

the borrower. 

Settlement means the process of 

executing legally binding documents 

regarding a lien on property that is 

subject to a federally related mortgage 

loan. This process may also be called 

‘‘closing’’ or ‘‘escrow’’ in different 

jurisdictions. 

Settlement service means any service 

provided in connection with a 

prospective or actual settlement, 

including, but not limited to, any one or 

more of the following: 

(1) Origination of a federally related 

mortgage loan (including, but not 

limited to, the taking of loan 

applications, loan processing, and the 

underwriting and funding of such 

loans); 

(2) Rendering of services by a 

mortgage broker (including counseling, 

taking of applications, obtaining 

verifications and appraisals, and other 

loan processing and origination 

services, and communicating with the 

borrower and lender); 

(3) Provision of any services related to 

the origination, processing or funding of 

a federally related mortgage loan; 

(4) Provision of title services, 

including title searches, title 

examinations, abstract preparation, 

insurability determinations, and the 

issuance of title commitments and title 

insurance policies; 

(5) Rendering of services by an 

attorney; 

(6) Preparation of documents, 

including notarization, delivery, and 

recordation; 

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(7) Rendering of credit reports and 

appraisals; 

(8) Rendering of inspections, 

including inspections required by 

applicable law or any inspections 

required by the sales contract or 

mortgage documents prior to transfer of 

title; 

(9) Conducting of settlement by a 

settlement agent and any related 

services; 

(10) Provision of services involving 

mortgage insurance; 

(11) Provision of services involving 

hazard, flood, or other casualty 

insurance or homeowner’s warranties; 

(12) Provision of services involving 

mortgage life, disability, or similar 

insurance designed to pay a mortgage 

loan upon disability or death of a 

borrower, but only if such insurance is 

required by the lender as a condition of 

the loan; 

(13) Provision of services involving 

real property taxes or any other 

assessments or charges on the real 

property; 

(14) Rendering of services by a real 

estate agent or real estate broker; and 

(15) Provision of any other services 

for which a settlement service provider 

requires a borrower or seller to pay. 

Special information booklet means 

the booklet adopted pursuant to section 

5 of RESPA (12 U.S.C. 2604) to help 

persons understand the nature and costs 

of settlement services. The Bureau 

publishes the form of the special 

information booklet in the Federal 

Register or by other public notice. The 

Bureau may issue or approve additional 

booklets or alternative booklets by 

publication of a Notice in the Federal 

Register. 

State means any state of the United 

States, the District of Columbia, the 

Commonwealth of Puerto Rico, and any 

territory or possession of the United 

States. 

Table funding means a settlement at 

which a loan is funded by a 

contemporaneous advance of loan funds 

and an assignment of the loan to the 

person advancing the funds. A tablefunded transaction is not a secondary 

market transaction (see § 1024.5(b)(7)). 

Third party means a settlement 

service provider other than a loan 

originator. 

Title company means any institution, 

or its duly authorized agent, that is 

qualified to issue title insurance. 

Title service means any service 

involved in the provision of title 

insurance (lender’s or owner’s policy), 

including but not limited to: Title 

examination and evaluation; 

preparation and issuance of title 

commitment; clearance of underwriting 

objections; preparation and issuance of 

a title insurance policy or policies; and 

the processing and administrative 

services required to perform these 

functions. The term also includes the 

service of conducting a settlement. 

Tolerance means the maximum 

amount by which the charge for a 

category or categories of settlement costs 

may exceed the amount of the estimate 

for such category or categories on a GFE. 

§ 1024.3 Questions or suggestions from 

public and copies of public guidance 

documents. 

Any questions or suggestions from the 

public regarding RESPA, or requests for 

copies of Public Guidance Documents, 

should be directed to the Associate 

Director, Research, Markets, and 

Regulations, Bureau of Consumer 

Financial Protection, 1700 G Street NW., 

Washington, DC 20006. Legal questions 

concerning the interpretation of this 

part may be directed to the same 

address. 

§ 1024.4 Reliance upon rule, regulation or 

interpretation by the Bureau. 

(a) Rule, regulation or interpretation. 

(1) For purposes of sections 19(a) and 

(b) of RESPA (12 U.S.C. 2617(a) and (b)), 

only the following constitute a rule, 

regulation or interpretation of the 

Bureau: 

(i) All provisions, including 

appendices, of this part. Any other 

document referred to in this part is not 

incorporated in this part unless it is 

specifically set out in this part; 

(ii) Any other document that is 

published in the Federal Register by the 

Bureau and states that it is an 

‘‘interpretation,’’ ‘‘interpretive rule,’’ 

‘‘commentary,’’ or a ‘‘statement of 

policy’’ for purposes of section 19(a) of 

RESPA. Such documents will be 

prepared by Bureau staff and counsel. 

Such documents may be revoked or 

amended by a subsequent document 

published in the Federal Register by the 

Bureau. 

(2) A ‘‘rule, regulation, or 

interpretation thereof by the Bureau’’ for 

purposes of section 19(b) of RESPA (12 

U.S.C. 2617(b)) shall not include the 

special information booklet prescribed 

by the Bureau or any other statement or 

issuance, whether oral or written, by an 

officer or representative of the Bureau, 

letter or memorandum by the Director, 

General Counsel, or other officer or 

employee of the Bureau, preamble to a 

regulation or other issuance of the 

Bureau, Public Guidance Document, 

report to Congress, pleading, affidavit or 

other document in litigation, pamphlet, 

handbook, guide, telegraphic 

communication, explanation, 

instructions to forms, speech or other 

material of any nature which is not 

specifically included in paragraph (a)(1) 

of this section. 

(b) Unofficial interpretations; staff 

discretion. In response to requests for 

interpretation of matters not adequately 

covered by this part or by an official 

interpretation issued under paragraph 

(a)(1)(ii) of this section, unofficial staff 

interpretations may be provided at the 

discretion of Bureau staff or counsel. 

Written requests for such interpretations 

should be directed to the address 

indicated in § 1024.3. Such 

interpretations provide no protection 

under section 19(b) of RESPA (12 U.S.C. 

2617(b)). Ordinarily, staff or counsel 

will not issue unofficial interpretations 

on matters adequately covered by this 

part or by official interpretations or 

commentaries issued under paragraph 

(a)(1)(ii) of this section. 

(c) All informal counsel’s opinions 

and staff interpretations issued by HUD 

before November 2, 1992, were 

withdrawn as of that date. Courts and 

administrative agencies, however, may 

use previous opinions to determine the 

validity of conduct under the previous 

Regulation X. 

§ 1024.5 Coverage of RESPA. 

(a) Applicability. RESPA and this part 

apply to all federally related mortgage 

loans, except for the exemptions 

provided in paragraph (b) of this 

section. 

(b) Exemptions. (1) A loan on 

property of 25 acres or more. 

(2) Business purpose loans. An 

extension of credit primarily for a 

business, commercial, or agricultural 

purpose, as defined by 12 CFR 

1026.3(a)(1) of Regulation Z. Persons 

may rely on Regulation Z in 

determining whether the exemption 

applies. 

(3) Temporary financing. Temporary 

financing, such as a construction loan. 

The exemption for temporary financing 

does not apply to a loan made to finance 

construction of 1- to 4-family residential 

property if the loan is used as, or may 

be converted to, permanent financing by 

the same lender or is used to finance 

transfer of title to the first user. If a 

lender issues a commitment for 

permanent financing, with or without 

conditions, the loan is covered by this 

part. Any construction loan for new or 

rehabilitated 1- to 4-family residential 

property, other than a loan to a bona 

fide builder (a person who regularly 

constructs 1- to 4-family residential 

structures for sale or lease), is subject to 

this part if its term is for two years or 

more. A ‘‘bridge loan’’ or ‘‘swing loan’’ 

in which a lender takes a security 

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interest in otherwise covered 1- to 4- 

family residential property is not 

covered by RESPA and this part. 

(4) Vacant land. Any loan secured by 

vacant or unimproved property, unless 

within two years from the date of the 

settlement of the loan, a structure or a 

manufactured home will be constructed 

or placed on the real property using the 

loan proceeds. If a loan for a structure 

or manufactured home to be placed on 

vacant or unimproved property will be 

secured by a lien on that property, the 

transaction is covered by this part. 

(5) Assumption without lender 

approval. Any assumption in which the 

lender does not have the right expressly 

to approve a subsequent person as the 

borrower on an existing federally related 

mortgage loan. Any assumption in 

which the lender’s permission is both 

required and obtained is covered by 

RESPA and this part, whether or not the 

lender charges a fee for the assumption. 

(6) Loan conversions. Any conversion 

of a federally related mortgage loan to 

different terms that are consistent with 

provisions of the original mortgage 

instrument, as long as a new note is not 

required, even if the lender charges an 

additional fee for the conversion. 

(7) Secondary market transactions. A 

bona fide transfer of a loan obligation in 

the secondary market is not covered by 

RESPA and this part, except as set forth 

in section 6 of RESPA (12 U.S.C. 2605) 

and § 1024.21. In determining what 

constitutes a bona fide transfer, the 

Bureau will consider the real source of 

funding and the real interest of the 

funding lender. Mortgage broker 

transactions that are table-funded are 

not secondary market transactions. 

Neither the creation of a dealer loan or 

dealer consumer credit contract, nor the 

first assignment of such loan or contract 

to a lender, is a secondary market 

transaction (see § 1024.2). 

§ 1024.6 Special information booklet at 

time of loan application. 

(a) Lender to provide special 

information booklet. Subject to the 

exceptions set forth in this paragraph, 

the lender shall provide a copy of the 

special information booklet to a person 

from whom the lender receives, or for 

whom the lender prepares, a written 

application for a federally related 

mortgage loan. When two or more 

persons apply together for a loan, the 

lender is in compliance if the lender 

provides a copy of the booklet to one of 

the persons applying. 

(1) The lender shall provide the 

special information booklet by 

delivering it or placing it in the mail to 

the applicant not later than three 

business days (as that term is defined in 

§ 1024.2) after the application is 

received or prepared. However, if the 

lender denies the borrower’s application 

for credit before the end of the threebusiness-day period, then the lender 

need not provide the booklet to the 

borrower. If a borrower uses a mortgage 

broker, the mortgage broker shall 

distribute the special information 

booklet and the lender need not do so. 

The intent of this provision is that the 

applicant receive the special 

information booklet at the earliest 

possible date. 

(2) In the case of a federally related 

mortgage loan involving an open-ended 

credit plan, as defined in Regulation Z, 

12 CFR 1026.2(a)(20), a lender or 

mortgage broker that provides the 

borrower with a copy of the brochure 

entitled ‘‘When Your Home is On the 

Line: What You Should Know About 

Home Equity Lines of Credit’’, or any 

successor brochure issued by the 

Bureau, is deemed to be in compliance 

with this section. 

(3) In the categories of transactions set 

forth at the end of this paragraph, the 

lender or mortgage broker does not have 

to provide the booklet to the borrower. 

Under the authority of section 19(a) of 

RESPA (12 U.S.C. 2617(a)), the Bureau 

may issue a revised or separate special 

information booklet that deals with 

these transactions, or the Bureau may 

choose to endorse the forms or booklets 

of other Federal agencies. In such an 

event, the requirements for delivery by 

lenders and the availability of the 

booklet or alternate materials for these 

transactions will be set forth in a Notice 

in the Federal Register. This paragraph 

shall apply to the following 

transactions: 

(i) Refinancing transactions; 

(ii) Closed-end loans, as defined in 12 

CFR 1026.2(a)(10) of Regulation Z, when 

the lender takes a subordinate lien; 

(iii) Reverse mortgages; and 

(iv) Any other federally related 

mortgage loan whose purpose is not the 

purchase of a 1- to 4-family residential 

property. 

(b) Revision. The Bureau may from 

time to time revise the special 

information booklet, publishing a notice 

in the Federal Register. 

(c) Reproduction. The special 

information booklet may be reproduced 

in any form, provided that no change is 

made other than as provided under 

paragraph (d) of this section. The 

special information booklet may not be 

made a part of a larger document for 

purposes of distribution under RESPA 

and this section. Any color, size and 

quality of paper, type of print, and 

method of reproduction may be used so 

long as the booklet is clearly legible. 

(d) Permissible changes. (1)(i) No 

changes to, deletions from, or additions 

to the special information booklet 

currently prescribed by the Bureau shall 

be made other than the permissible 

changes specified in paragraphs 

(d)(1)(ii) through (d)(3) of this section or 

changes as otherwise approved in 

writing by the Bureau in accordance 

with the procedures described in this 

paragraph. A request to the Bureau for 

approval of any changes other than the 

permissible changes specified in 

paragraphs (d)(1)(ii) through (d)(3) of 

this section shall be submitted in 

writing to the address indicated in 

§ 1024.3, stating the reasons why the 

applicant believes such changes, 

deletions or additions are necessary. 

(ii)(A) In the Complaints section of 

the booklet, it is a permissible change to 

substitute ‘‘the Bureau of Consumer 

Financial Protection’’ for ‘‘HUD’s Office 

of RESPA’’ and ‘‘the RESPA office.’’ 

(B) In the Avoiding Foreclosure 

section of the booklet, it is a permissible 

change to inform homeowners that they 

may find information on and assistance 

in avoiding foreclosures at http:// 

www.consumerfinance.gov. The 

deletion of the reference to the HUD 

Web page, http://www.hud.gov/ 

foreclosure/, in the Avoiding 

Foreclosure section of the booklet is not 

a permissible change. 

(C) In the Appendix to the booklet, it 

is a permissible change to substitute 

‘‘the Bureau of Consumer Financial 

Protection’’ for the reference to the 

‘‘Board of Governors of the Federal 

Reserve System’’ in the No 

Discrimination section of the Appendix 

to the booklet. In the Contact 

Information section of the Appendix to 

the booklet, it is a permissible change to 

add the following contact information 

for the Bureau: ‘‘Bureau of Consumer 

Financial Protection, 1700 G Street NW., 

Washington, DC 20006; 

www.consumerfinance.gov/learnmore’’. 

It is also a permissible change to remove 

the contact information for HUD’s Office 

of RESPA and Interstate Land Sales 

from the Contact Information section of 

the Appendix to the booklet. 

(2) The cover of the booklet may be 

in any form and may contain any 

drawings, pictures or artwork, provided 

that the words ‘‘settlement costs’’ are 

used in the title. Names, addresses and 

telephone numbers of the lender or 

others and similar information may 

appear on the cover, but no discussion 

of the matters covered in the booklet 

shall appear on the cover. References to 

HUD on the cover of the booklet may be 

changed to references to the Bureau. 

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78986 Federal Register / Vol. 76, No. 244 / Tuesday, December 20, 2011 / Rules and Regulations 

(3) The special information booklet 

may be translated into languages other 

than English. 

§ 1024.7 Good faith estimate. 

(a) Lender to provide. (1) Except as 

otherwise provided in paragraphs (a), 

(b), or (h) of this section, not later than 

3 business days after a lender receives 

an application, or information sufficient 

to complete an application, the lender 

must provide the applicant with a GFE. 

In the case of dealer loans, the lender 

must either provide the GFE or ensure 

that the dealer provides the GFE. 

(2) The lender must provide the GFE 

to the loan applicant by hand delivery, 

by placing it in the mail, or, if the 

applicant agrees, by fax, email, or other 

electronic means. 

(3) The lender is not required to 

provide the applicant with a GFE if, 

before the end of the 3-business-day 

period: 

(i) The lender denies the application; 

or 

(ii) The applicant withdraws the 

application. 

(4) The lender is not permitted to 

charge, as a condition for providing a 

GFE, any fee for an appraisal, 

inspection, or other similar settlement 

service. The lender may, at its option, 

charge a fee limited to the cost of a 

credit report. The lender may not charge 

additional fees until after the applicant 

has received the GFE and indicated an 

intention to proceed with the loan 

covered by that GFE. If the GFE is 

mailed to the applicant, the applicant is 

considered to have received the GFE 3 

calendar days after it is mailed, not 

including Sundays and the legal public 

holidays specified in 5 U.S.C. 6103(a). 

(5) The lender may at any time collect 

from the loan applicant any information 

that it requires in addition to the 

required application information. 

However, the lender is not permitted to 

require, as a condition for providing a 

GFE, that an applicant submit 

supplemental documentation to verify 

the information provided on the 

application. 

(b) Mortgage broker to provide. (1) 

Except as otherwise provided in 

paragraphs (a), (b), or (h) of this section, 

either the lender or the mortgage broker 

must provide a GFE not later than 3 

business days after a mortgage broker 

receives either an application or 

information sufficient to complete an 

application. The lender is responsible 

for ascertaining whether the GFE has 

been provided. If the mortgage broker 

has provided a GFE, the lender is not 

required to provide an additional GFE. 

(2) The mortgage broker must provide 

the GFE by hand delivery, by placing it 

in the mail, or, if the applicant agrees, 

by fax, email, or other electronic means. 

(3) The mortgage broker is not 

required to provide the applicant with 

a GFE if, before the end of the 3- 

business-day period: 

(i) The mortgage broker or lender 

denies the application; or 

(ii) The applicant withdraws the 

application. 

(4) The mortgage broker is not 

permitted to charge, as a condition for 

providing a GFE, any fee for an 

appraisal, inspection, or other similar 

settlement service. The mortgage broker 

may, at its option, charge a fee limited 

to the cost of a credit report. The 

mortgage broker may not charge 

additional fees until after the applicant 

has received the GFE and indicated an 

intention to proceed with the loan 

covered by that GFE. If the GFE is 

mailed to the applicant, the applicant is 

considered to have received the GFE 3 

calendar days after it is mailed, not 

including Sundays and the legal public 

holidays specified in 5 U.S.C. 6103(a). 

(5) The mortgage broker may at any 

time collect from the loan applicant any 

information that it requires in addition 

to the required application information. 

However, the mortgage broker is not 

permitted to require, as a condition for 

providing a GFE, that an applicant 

submit supplemental documentation to 

verify the information provided on the 

application. 

(c) Availability of GFE terms. Except 

as provided in this paragraph, the 

estimate of the charges and terms for all 

settlement services must be available for 

at least 10 business days from when the 

GFE is provided, but it may remain 

available longer, if the loan originator 

extends the period of availability. The 

estimate for the following charges are 

excepted from this requirement: the 

interest rate, charges and terms 

dependent upon the interest rate, which 

includes the charge or credit for the 

interest rate chosen, the adjusted 

origination charges, and per diem 

interest. 

(d) Content and form of GFE. The GFE 

form is set out in Appendix C to this 

part. The loan originator must prepare 

the GFE in accordance with the 

requirements of this section and the 

Instructions in Appendix C to this part. 

The instructions in Appendix C to this 

part allow for flexibility in the 

preparation and distribution of the GFE 

in hard copy and electronic format. 

(e) Tolerances for amounts included 

on GFE. (1) Except as provided in 

paragraph (f) of this section, the actual 

charges at settlement may not exceed 

the amounts included on the GFE for: 

(i) The origination charge; 

(ii) While the borrower’s interest rate 

is locked, the credit or charge for the 

interest rate chosen; 

(iii) While the borrower’s interest rate 

is locked, the adjusted origination 

charge; and 

(iv) Transfer taxes. 

(2) Except as provided in paragraph (f) 

of this section, the sum of the charges 

at settlement for the following services 

may not be greater than 10 percent 

above the sum of the amounts included 

on the GFE: 

(i) Lender-required settlement 

services, where the lender selects the 

third party settlement service provider; 

(ii) Lender-required services, title 

services and required title insurance, 

and owner’s title insurance, when the 

borrower uses a settlement service 

provider identified by the loan 

originator; and 

(iii) Government recording charges. 

(3) The amounts charged for all other 

settlement services included on the GFE 

may change at settlement. 

(f) Binding GFE. The loan originator is 

bound, within the tolerances provided 

in paragraph (e) of this section, to the 

settlement charges and terms listed on 

the GFE provided to the borrower, 

unless a revised GFE is provided prior 

to settlement consistent with this 

paragraph (f) or the GFE expires in 

accordance with paragraph (f)(4) of this 

section. If a loan originator provides a 

revised GFE consistent with this 

paragraph, the loan originator must 

document the reason that a revised GFE 

was provided. Loan originators must 

retain documentation of any reason for 

providing a revised GFE for no less than 

3 years after settlement. 

(1) Changed circumstances affecting 

settlement costs. If changed 

circumstances result in increased costs 

for any settlement services such that the 

charges at settlement would exceed the 

tolerances for those charges, the loan 

originator may provide a revised GFE to 

the borrower. If a revised GFE is to be 

provided, the loan originator must do so 

within 3 business days of receiving 

information sufficient to establish 

changed circumstances. The revised 

GFE may increase charges for services 

listed on the GFE only to the extent that 

the changed circumstances actually 

resulted in higher charges. 

(2) Changed circumstances affecting 

loan. If changed circumstances result in 

a change in the borrower’s eligibility for 

the specific loan terms identified in the 

GFE, the loan originator may provide a 

revised GFE to the borrower. If a revised 

GFE is to be provided, the loan 

originator must do so within 3 business 

days of receiving information sufficient 

to establish changed circumstances. The 

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revised GFE may increase charges for 

services listed on the GFE only to the 

extent that the changed circumstances 

affecting the loan actually resulted in 

higher charges. 

(3) Borrower-requested changes. If a 

borrower requests changes to the 

mortgage loan identified in the GFE that 

change the settlement charges or the 

terms of the loan, the loan originator 

may provide a revised GFE to the 

borrower. If a revised GFE is to be 

provided, the loan originator must do so 

within 3 business days of the borrower’s 

request. The revised GFE may increase 

charges for services listed on the GFE 

only to the extent that the borrowerrequested changes to the mortgage loan 

identified on the GFE actually resulted 

in higher charges. 

(4) Expiration of GFE. If a borrower 

does not express an intent to continue 

with an application within 10 business 

days after the GFE is provided, or such 

longer time specified by the loan 

originator pursuant to paragraph (c) of 

this section, the loan originator is no 

longer bound by the GFE. 

(5) Interest rate-dependent charges 

and terms. If the interest rate has not 

been locked, or a locked interest rate has 

expired, the charge or credit for the 

interest rate chosen, the adjusted 

origination charges, per diem interest, 

and loan terms related to the interest 

rate may change. When the interest rate 

is later locked, a revised GFE must be 

provided showing the revised interest 

rate-dependent charges and terms. The 

loan originator must provide the revised 

GFE within 3 business days of the 

interest rate being locked or, for an 

expired interest rate, re-locked. All 

other charges and terms must remain 

the same as on the original GFE, except 

as otherwise provided in paragraph (f) 

of this section. 

(6) New construction home purchases. 

In transactions involving new 

construction home purchases, where 

settlement is anticipated to occur more 

than 60 calendar days from the time a 

GFE is provided, the loan originator 

may provide the GFE to the borrower 

with a clear and conspicuous disclosure 

stating that at any time up until 60 

calendar days prior to closing, the loan 

originator may issue a revised GFE. If no 

such separate disclosure is provided, 

the loan originator cannot issue a 

revised GFE, except as otherwise 

provided in paragraph (f) of this section. 

(g) GFE is not a loan commitment. 

Nothing in this section shall be 

interpreted to require a loan originator 

to make a loan to a particular borrower. 

The loan originator is not required to 

provide a GFE if the loan originator does 

not have available a loan for which the 

borrower is eligible. 

(h) Open-end lines of credit (homeequity plans) under Truth in Lending 

Act. In the case of a federally related 

mortgage loan involving an open-end 

line of credit (home-equity plan) 

covered under the Truth in Lending Act 

and Regulation Z, a lender or mortgage 

broker that provides the borrower with 

the disclosures required by 12 CFR 

1026.40 of Regulation Z at the time the 

borrower applies for such loan shall be 

deemed to satisfy the requirements of 

this section. 

(i) Violations of section 5 of RESPA 

(12 U.S.C. 2604). A loan originator that 

violates the requirements of this section 

shall be deemed to have violated section 

5 of RESPA. If any charges at settlement 

exceed the charges listed on the GFE by 

more than the permitted tolerances, the 

loan originator may cure the tolerance 

violation by reimbursing to the borrower 

the amount by which the tolerance was 

exceeded, at settlement or within 30 

calendar days after settlement. A 

borrower will be deemed to have 

received timely reimbursement if the 

loan originator delivers or places the 

payment in the mail within 30 calendar 

days after settlement. 

§ 1024.8 Use of HUD–1 or HUD–1A 

settlement statements. 

(a) Use by settlement agent. The 

settlement agent shall use the HUD–1 

settlement statement in every settlement 

involving a federally related mortgage 

loan in which there is a borrower and 

a seller. For transactions in which there 

is a borrower and no seller, such as 

refinancing loans or subordinate lien 

loans, the HUD–1 may be utilized by 

using the borrower’s side of the HUD– 

1 statement. Alternatively, the form 

HUD–1A may be used for these 

transactions. The HUD–1 or HUD–1A 

may be modified as permitted under 

this part. Either the HUD–1 or the HUD– 

1A, as appropriate, shall be used for 

every RESPA-covered transaction, 

unless its use is specifically exempted. 

The use of the HUD–1 or HUD–1A is 

exempted for open-end lines of credit 

(home-equity plans) covered by the 

Truth in Lending Act and Regulation Z. 

(b) Charges to be stated. The 

settlement agent shall complete the 

HUD–1 or HUD–1A, in accordance with 

the instructions set forth in Appendix A 

to this part. The loan originator must 

transmit to the settlement agent all 

information necessary to complete the 

HUD–1 or HUD–1A. 

(1) In general. The settlement agent 

shall state the actual charges paid by the 

borrower and seller on the HUD–1, or by 

the borrower on the HUD–1A. The 

settlement agent must separately itemize 

each third party charge paid by the 

borrower and seller. All origination 

services performed by or on behalf of 

the loan originator must be included in 

the loan originator’s own charge. 

Administrative and processing services 

related to title services must be included 

in the title underwriter’s or title agent’s 

own charge. The amount stated on the 

HUD–1 or HUD–1A for any itemized 

service cannot exceed the amount 

actually received by the settlement 

service provider for that itemized 

service, unless the charge is an average 

charge in accordance with paragraph 

(b)(2) of this section. 

(2) Use of average charge. (i) The 

average charge for a settlement service 

shall be no more than the average 

amount paid for a settlement service by 

one settlement service provider to 

another settlement service provider on 

behalf of borrowers and sellers for a 

particular class of transactions involving 

federally related mortgage loans. The 

total amounts paid by borrowers and 

sellers for a settlement service based on 

the use of an average charge may not 

exceed the total amounts paid to the 

providers of that service for the 

particular class of transactions. 

(ii) The settlement service provider 

shall define the particular class of 

transactions for purposes of calculating 

the average charge as all transactions 

involving federally related mortgage 

loans for: 

(A) A period of time as determined by 

the settlement service provider, but not 

less than 30 calendar days and not more 

than 6 months; 

(B) A geographic area as determined 

by the settlement service provider; and 

(C) A type of loan as determined by 

the settlement service provider. 

(iii) A settlement service provider 

may use an average charge in the same 

class of transactions for which the 

charge was calculated. If the settlement 

service provider uses the average charge 

for any transaction in the class, the 

settlement service provider must use the 

same average charge in every 

transaction within that class for which 

a GFE was provided. 

(iv) The use of an average charge is 

not permitted for any settlement service 

if the charge for the service is based on 

the loan amount or property value. For 

example, an average charge may not be 

used for transfer taxes, interest charges, 

reserves or escrow, or any type of 

insurance, including mortgage 

insurance, title insurance, or hazard 

insurance. 

(v) The settlement service provider 

must retain all documentation used to 

calculate the average charge for a 

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particular class of transactions for at 

least 3 years after any settlement for 

which that average charge was used. 

(c) Violations of section 4 of RESPA 

(12 U.S.C. 2603). A violation of any of 

the requirements of this section will be 

deemed to be a violation of section 4 of 

RESPA. An inadvertent or technical 

error in completing the HUD–1 or HUD– 

1A shall not be deemed a violation of 

section 4 of RESPA if a revised HUD– 

1 or HUD–1A is provided in accordance 

with the requirements of this section 

within 30 calendar days after 

settlement. 

§ 1024.9 Reproduction of settlement 

statements. 

(a) Permissible changes—HUD–1. The 

following changes and insertions are 

permitted when the HUD–1 settlement 

statement is reproduced: 

(1) The person reproducing the HUD– 

1 may insert its business name and logo 

in section A and may rearrange, but not 

delete, the other information that 

appears in section A. 

(2) The name, address, and other 

information regarding the lender and 

settlement agent may be printed in 

sections F and H, respectively. 

(3) Reproduction of the HUD–1 must 

conform to the terminology, sequence, 

and numbering of line items as 

presented in lines 100–1400. However, 

blank lines or items listed in lines 100– 

1400 that are not used locally or in 

connection with mortgages by the 

lender may be deleted, except for the 

following: Lines 100, 120, 200, 220, 300, 

301, 302, 303, 400, 420, 500, 520, 600, 

601, 602, 603, 700, 800, 900, 1000, 1100, 

1200, 1300, and 1400. The form may be 

shortened correspondingly. The number 

of a deleted item shall not be used for 

a substitute or new item, but the number 

of a blank space on the HUD–1 may be 

used for a substitute or new item. 

(4) Charges not listed on the HUD–1, 

but that are customary locally or 

pursuant to the lender’s practice, may 

be inserted in blank spaces. Where 

existing blank spaces on the HUD–1 are 

insufficient, additional lines and spaces 

may be added and numbered in 

sequence with spaces on the HUD–1. 

(5) The following variations in layout 

and format are within the discretion of 

persons reproducing the HUD–1 and do 

not require prior HUD approval: size of 

pages; tint or color of pages; size and 

style of type or print; vertical spacing 

between lines or provision for 

additional horizontal space on lines (for 

example, to provide sufficient space for 

recording time periods used in 

prorations); printing of the HUD–1 

contents on separate pages, on the front 

and back of a single page, or on one 

continuous page; use of multicopy tearout sets; printing on rolls for computer 

purposes; reorganization of sections B 

through I, when necessary to 

accommodate computer printing; and 

manner of placement of the HUD 

number, but not the OMB approval 

number, neither of which may be 

deleted. The expiration date associated 

with the OMB number listed on the 

form may be deleted. Any changes in 

the HUD number or OMB approval 

number may be announced by notice in 

the Federal Register, rather than by 

amendment of this part. 

(6) The borrower’s information and 

the seller’s information may be provided 

on separate pages. 

(7) Signature lines may be added. 

(8) The HUD–1 may be translated into 

languages other than English. 

(9) An additional page may be 

attached to the HUD–1 for the purpose 

of including customary recitals and 

information used locally in real estate 

settlements; for example, breakdown of 

payoff figures, a breakdown of the 

borrower’s total monthly mortgage 

payments, check disbursements, a 

statement indicating receipt of funds, 

applicable special stipulations between 

buyer and seller, and the date funds are 

transferred. If space permits, such 

information may be added at the end of 

the HUD–1. 

(10) As required by HUD/FHA in 

FHA-insured loans. 

(11) As allowed by § 1024.17, relating 

to an initial escrow account statement. 

(b) Permissible changes—HUD–1A. 

The changes and insertions on the 

HUD–1 permitted under paragraph (a) of 

this section are also permitted when the 

HUD–1A settlement statement is 

reproduced, except the changes 

described in paragraphs (a)(3) and (6) of 

this section. 

(c) Written approval. Any other 

deviation in the HUD–1 or HUD–1A 

forms is permissible only upon receipt 

of written approval of the Bureau; 

provided, however, that 

notwithstanding contrary instructions in 

this section or Appendix A, reproducing 

the HUD–1 or HUD–1A forms with the 

Bureau’s OMB approval number 

displayed in place of HUD’s OMB 

approval number does not require the 

written approval of the Bureau. A 

request to the Bureau for approval shall 

be submitted in writing to the address 

indicated in § 1024.3 and shall state the 

reasons why the applicant believes such 

deviation is needed. The prescribed 

form(s) must be used until approval is 

received. 

§ 1024.10 One-day advance inspection of 

HUD–1 or HUD–1A settlement statement; 

delivery; recordkeeping. 

(a) Inspection one day prior to 

settlement upon request by the 

borrower. The settlement agent shall 

permit the borrower to inspect the 

HUD–1 or HUD–1A settlement 

statement, completed to set forth those 

items that are known to the settlement 

agent at the time of inspection, during 

the business day immediately preceding 

settlement. Items related only to the 

seller’s transaction may be omitted from 

the HUD–1. 

(b) Delivery. The settlement agent 

shall provide a completed HUD–1 or 

HUD–1A to the borrower, the seller (if 

there is one), the lender (if the lender is 

not the settlement agent), and/or their 

agents. When the borrower’s and seller’s 

copies of the HUD–1 or HUD–1A differ 

as permitted by the instructions in 

Appendix A to this part, both copies 

shall be provided to the lender (if the 

lender is not the settlement agent). The 

settlement agent shall deliver the 

completed HUD–1 or HUD–1A at or 

before the settlement, except as 

provided in paragraphs (c) and (d) of 

this section. 

(c) Waiver. The borrower may waive 

the right to delivery of the completed 

HUD–1 or HUD–1A no later than at 

settlement by executing a written waiver 

at or before settlement. In such case, the 

completed HUD–1 or HUD–1A shall be 

mailed or delivered to the borrower, 

seller, and lender (if the lender is not 

the settlement agent) as soon as 

practicable after settlement. 

(d) Exempt transactions. When the 

borrower or the borrower’s agent does 

not attend the settlement, or when the 

settlement agent does not conduct a 

meeting of the parties for that purpose, 

the transaction shall be exempt from the 

requirements of paragraphs (a) and (b) of 

this section, except that the HUD–1 or 

HUD–1A shall be mailed or delivered as 

soon as practicable after settlement. 

(e) Recordkeeping. The lender shall 

retain each completed HUD–1 or HUD– 

1A and related documents for five years 

after settlement, unless the lender 

disposes of its interest in the mortgage 

and does not service the mortgage. In 

that case, the lender shall provide its 

copy of the HUD–1 or HUD–1A to the 

owner or servicer of the mortgage as a 

part of the transfer of the loan file. Such 

owner or servicer shall retain the HUD– 

1 or HUD–1A for the remainder of the 

five-year period. The Bureau shall have 

the right to inspect or require copies of 

records covered by this paragraph (e). 

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§ 1024.11 Mailing. 

The provisions of this part requiring 

or permitting mailing of documents 

shall be deemed to be satisfied by 

placing the document in the mail 

(whether or not received by the 

addressee) addressed to the addresses 

stated in the loan application or in other 

information submitted to or obtained by 

the lender at the time of loan 

application or submitted or obtained by 

the lender or settlement agent, except 

that a revised address shall be used 

where the lender or settlement agent has 

been expressly informed in writing of a 

change in address. 

§ 1024.12 No fee. 

No fee shall be imposed or charge 

made upon any other person, as a part 

of settlement costs or otherwise, by a 

lender in connection with a federally 

related mortgage loan made by it (or a 

loan for the purchase of a manufactured 

home), or by a servicer (as that term is 

defined under 12 U.S.C. 2605(i)(2)) for 

or on account of the preparation and 

distribution of the HUD–1 or HUD–1A 

settlement statement, escrow account 

statements required pursuant to section 

10 of RESPA (12 U.S.C. 2609), or 

statements required by the Truth in 

Lending Act (15 U.S.C. 1601 et seq.). 

§ 1024.13 Relation to state laws. 

(a) State laws that are inconsistent 

with RESPA or this part are preempted 

to the extent of the inconsistency. 

However, RESPA and these regulations 

do not annul, alter, affect, or exempt any 

person subject to their provisions from 

complying with the laws of any state 

with respect to settlement practices, 

except to the extent of the 

inconsistency. 

(b) Upon request by any person, the 

Bureau is authorized to determine if 

inconsistencies with state law exist; in 

doing so, the Bureau shall consult with 

appropriate Federal agencies. 

(1) The Bureau may not determine 

that a state law or regulation is 

inconsistent with any provision of 

RESPA or this part, if the Bureau 

determines that such law or regulation 

gives greater protection to the consumer. 

(2) In determining whether provisions 

of state law or regulations concerning 

affiliated business arrangements are 

inconsistent with RESPA or this part, 

the Bureau may not construe those 

provisions that impose more stringent 

limitations on affiliated business 

arrangements as inconsistent with 

RESPA so long as they give more 

protection to consumers and/or 

competition. 

(c) Any person may request the 

Bureau to determine whether an 

inconsistency exists by submitting to 

the address indicated in § 1024.3, a copy 

of the state law in question, any other 

law or judicial or administrative 

opinion that implements, interprets or 

applies the relevant provision, and an 

explanation of the possible 

inconsistency. A determination by the 

Bureau that an inconsistency with state 

law exists will be made by publication 

of a notice in the Federal Register. 

‘‘Law’’ as used in this section includes 

regulations and any enactment which 

has the force and effect of law and is 

issued by a state or any political 

subdivision of a State. 

(d) A specific preemption of 

conflicting state laws regarding notices 

and disclosures of mortgage servicing 

transfers is set forth in § 1024.21(h). 

§ 1024.14 Prohibition against kickbacks 

and unearned fees. 

(a) Section 8 violation. Any violation 

of this section is a violation of section 

8 of RESPA (12 U.S.C. 2607). 

(b) No referral fees. No person shall 

give and no person shall accept any fee, 

kickback or other thing of value 

pursuant to any agreement or 

understanding, oral or otherwise, that 

business incident to or part of a 

settlement service involving a federally 

related mortgage loan shall be referred 

to any person. Any referral of a 

settlement service is not a compensable 

service, except as set forth in 

§ 1024.14(g)(1). A company may not pay 

any other company or the employees of 

any other company for the referral of 

settlement service business. 

(c) No split of charges except for 

actual services performed. No person 

shall give and no person shall accept 

any portion, split, or percentage of any 

charge made or received for the 

rendering of a settlement service in 

connection with a transaction involving 

a federally related mortgage loan other 

than for services actually performed. A 

charge by a person for which no or 

nominal services are performed or for 

which duplicative fees are charged is an 

unearned fee and violates this section. 

The source of the payment does not 

determine whether or not a service is 

compensable. Nor may the prohibitions 

of this part be avoided by creating an 

arrangement wherein the purchaser of 

services splits the fee. 

(d) Thing of value. This term is 

broadly defined in section 3(2) of 

RESPA (12 U.S.C. 2602(2)). It includes, 

without limitation, monies, things, 

discounts, salaries, commissions, fees, 

duplicate payments of a charge, stock, 

dividends, distributions of partnership 

profits, franchise royalties, credits 

representing monies that may be paid at 

a future date, the opportunity to 

participate in a money-making program, 

retained or increased earnings, 

increased equity in a parent or 

subsidiary entity, special bank deposits 

or accounts, special or unusual banking 

terms, services of all types at special or 

free rates, sales or rentals at special 

prices or rates, lease or rental payments 

based in whole or in part on the amount 

of business referred, trips and payment 

of another person’s expenses, or 

reduction in credit against an existing 

obligation. The term ‘‘payment’’ is used 

throughout §§ 1024.14 and 1024.15 as 

synonymous with the giving or 

receiving of any ‘‘thing of value’’ and 

does not require transfer of money. 

(e) Agreement or understanding. An 

agreement or understanding for the 

referral of business incident to or part of 

a settlement service need not be written 

or verbalized but may be established by 

a practice, pattern or course of conduct. 

When a thing of value is received 

repeatedly and is connected in any way 

with the volume or value of the business 

referred, the receipt of the thing of value 

is evidence that it is made pursuant to 

an agreement or understanding for the 

referral of business. 

(f) Referral. (1) A referral includes any 

oral or written action directed to a 

person which has the effect of 

affirmatively influencing the selection 

by any person of a provider of a 

settlement service or business incident 

to or part of a settlement service when 

such person will pay for such settlement 

service or business incident thereto or 

pay a charge attributable in whole or in 

part to such settlement service or 

business. 

(2) A referral also occurs whenever a 

person paying for a settlement service or 

business incident thereto is required to 

use (see § 1024.2, ‘‘required use’’) a 

particular provider of a settlement 

service or business incident thereto. 

(g) Fees, salaries, compensation, or 

other payments. (1) Section 8 of RESPA 

permits: 

(i) A payment to an attorney at law for 

services actually rendered; 

(ii) A payment by a title company to 

its duly appointed agent for services 

actually performed in the issuance of a 

policy of title insurance; 

(iii) A payment by a lender to its duly 

appointed agent or contractor for 

services actually performed in the 

origination, processing, or funding of a 

loan; 

(iv) A payment to any person of a 

bona fide salary or compensation or 

other payment for goods or facilities 

actually furnished or for services 

actually performed; 

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(v) A payment pursuant to 

cooperative brokerage and referral 

arrangements or agreements between 

real estate agents and real estate brokers. 

(The statutory exemption restated in 

this paragraph refers only to fee 

divisions within real estate brokerage 

arrangements when all parties are acting 

in a real estate brokerage capacity, and 

has no applicability to any fee 

arrangements between real estate 

brokers and mortgage brokers or 

between mortgage brokers.); 

(vi) Normal promotional and 

educational activities that are not 

conditioned on the referral of business 

and that do not involve the defraying of 

expenses that otherwise would be 

incurred by persons in a position to 

refer settlement services or business 

incident thereto; or 

(vii) An employer’s payment to its 

own employees for any referral 

activities. 

(2) The Bureau may investigate high 

prices to see if they are the result of a 

referral fee or a split of a fee. If the 

payment of a thing of value bears no 

reasonable relationship to the market 

value of the goods or services provided, 

then the excess is not for services or 

goods actually performed or provided. 

These facts may be used as evidence of 

a violation of section 8 and may serve 

as a basis for a RESPA investigation. 

High prices standing alone are not proof 

of a RESPA violation. The value of a 

referral (i.e., the value of any additional 

business obtained thereby) is not to be 

taken into account in determining 

whether the payment exceeds the 

reasonable value of such goods, 

facilities or services. The fact that the 

transfer of the thing of value does not 

result in an increase in any charge made 

by the person giving the thing of value 

is irrelevant in determining whether the 

act is prohibited. 

(3) Multiple services. When a person 

in a position to refer settlement service 

business, such as an attorney, mortgage 

lender, real estate broker or agent, or 

developer or builder, receives a 

payment for providing additional 

settlement services as part of a real 

estate transaction, such payment must 

be for services that are actual, necessary 

and distinct from the primary services 

provided by such person. For example, 

for an attorney of the buyer or seller to 

receive compensation as a title agent, 

the attorney must perform core title 

agent services (for which liability arises) 

separate from attorney services, 

including the evaluation of the title 

search to determine the insurability of 

the title, the clearance of underwriting 

objections, the actual issuance of the 

policy or policies on behalf of the title 

insurance company, and, where 

customary, issuance of the title 

commitment, and the conducting of the 

title search and closing. 

(h) Recordkeeping. Any documents 

provided pursuant to this section shall 

be retained for five (5) years from the 

date of execution. 

(i) Appendix B of this part. 

Illustrations in Appendix B of this part 

demonstrate some of the requirements 

of this section. 

§ 1024.15 Affiliated business 

arrangements. 

(a) General. An affiliated business 

arrangement is defined in section 3(7) of 

RESPA (12 U.S.C. 2602(7)). 

(b) Violation and exemption. An 

affiliated business arrangement is not a 

violation of section 8 of RESPA (12 

U.S.C. 2607) and of § 1024.14 if the 

conditions set forth in this section are 

satisfied. Paragraph (b)(1) of this section 

shall not apply to the extent it is 

inconsistent with section 8(c)(4)(A) of 

RESPA (12 U.S.C. 2607(c)(4)(A)). 

(1) The person making each referral 

has provided to each person whose 

business is referred a written disclosure, 

in the format of the Affiliated Business 

Arrangement Disclosure Statement set 

forth in Appendix D of this part, of the 

nature of the relationship (explaining 

the ownership and financial interest) 

between the provider of settlement 

services (or business incident thereto) 

and the person making the referral and 

of an estimated charge or range of 

charges generally made by such 

provider (which describes the charge 

using the same terminology, as far as 

practical, as section L of the HUD–1 

settlement statement). The disclosures 

must be provided on a separate piece of 

paper no later than the time of each 

referral or, if the lender requires use of 

a particular provider, the time of loan 

application, except that: 

(i) Where a lender makes the referral 

to a borrower, the condition contained 

in paragraph (b)(1) of this section may 

be satisfied at the time that the good 

faith estimate or a statement under 

§ 1024.7(d) is provided; and 

(ii) Whenever an attorney or law firm 

requires a client to use a particular title 

insurance agent, the attorney or law firm 

shall provide the disclosures no later 

than the time the attorney or law firm 

is engaged by the client. 

(iii) Failure to comply with the 

disclosure requirements of this section 

may be overcome if the person making 

a referral can prove by a preponderance 

of the evidence that procedures 

reasonably adopted to result in 

compliance with these conditions have 

been maintained and that any failure to 

comply with these conditions was 

unintentional and the result of a bona 

fide error. An error of legal judgment 

with respect to a person’s obligations 

under RESPA is not a bona fide error. 

Administrative and judicial 

interpretations of section 130(c) of the 

Truth in Lending Act shall not be 

binding interpretations of the preceding 

sentence or section 8(d)(3) of RESPA (12 

U.S.C. 2607(d)(3)). 

(2) No person making a referral has 

required (as defined in § 1024.2, 

‘‘required use’’) any person to use any 

particular provider of settlement 

services or business incident thereto, 

except if such person is a lender, for 

requiring a buyer, borrower or seller to 

pay for the services of an attorney, 

credit reporting agency, or real estate 

appraiser chosen by the lender to 

represent the lender’s interest in a real 

estate transaction, or except if such 

person is an attorney or law firm for 

arranging for issuance of a title 

insurance policy for a client, directly as 

agent or through a separate corporate 

title insurance agency that may be 

operated as an adjunct to the law 

practice of the attorney or law firm, as 

part of representation of that client in a 

real estate transaction. 

(3) The only thing of value that is 

received from the arrangement other 

than payments listed in § 1024.14(g) is 

a return on an ownership interest or 

franchise relationship. 

(i) In an affiliated business 

arrangement: 

(A) Bona fide dividends, and capital 

or equity distributions, related to 

ownership interest or franchise 

relationship, between entities in an 

affiliate relationship, are permissible; 

and 

(B) Bona fide business loans, 

advances, and capital or equity 

contributions between entities in an 

affiliate relationship (in any direction), 

are not prohibited—so long as they are 

for ordinary business purposes and are 

not fees for the referral of settlement 

service business or unearned fees. 

(ii) A return on an ownership interest 

does not include: 

(A) Any payment which has as a basis 

of calculation no apparent business 

motive other than distinguishing among 

recipients of payments on the basis of 

the amount of their actual, estimated or 

anticipated referrals; 

(B) Any payment which varies 

according to the relative amount of 

referrals by the different recipients of 

similar payments; or 

(C) A payment based on an 

ownership, partnership or joint venture 

share which has been adjusted on the 

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basis of previous relative referrals by 

recipients of similar payments. 

(iii) Neither the mere labeling of a 

thing of value, nor the fact that it may 

be calculated pursuant to a corporate or 

partnership organizational document or 

a franchise agreement, will determine 

whether it is a bona fide return on an 

ownership interest or franchise 

relationship. Whether a thing of value is 

such a return will be determined by 

analyzing facts and circumstances on a 

case by case basis. 

(iv) A return on franchise relationship 

may be a payment to or from a 

franchisee but it does not include any 

payment which is not based on the 

franchise agreement, nor any payment 

which varies according to the number or 

amount of referrals by the franchisor or 

franchisee or which is based on a 

franchise agreement which has been 

adjusted on the basis of a previous 

number or amount of referrals by the 

franchiser or franchisees. A franchise 

agreement may not be constructed to 

insulate against kickbacks or referral 

fees. 

(c) Definitions. As used in this 

section: 

Associate is defined in section 3(8) of 

RESPA (12 U.S.C. 2602(8)). 

Affiliate relationship means the 

relationship among business entities 

where one entity has effective control 

over the other by virtue of a partnership 

or other agreement or is under common 

control with the other by a third entity 

or where an entity is a corporation 

related to another corporation as parent 

to subsidiary by an identity of stock 

ownership. 

Beneficial ownership means the 

effective ownership of an interest in a 

provider of settlement services or the 

right to use and control the ownership 

interest involved even though legal 

ownership or title may be held in 

another person’s name. 

Control, as used in the definitions of 

‘‘associate’’ and ‘‘affiliate relationship,’’ 

means that a person: 

(i) Is a general partner, officer, 

director, or employer of another person; 

(ii) Directly or indirectly or acting in 

concert with others, or through one or 

more subsidiaries, owns, holds with 

power to vote, or holds proxies 

representing, more than 20 percent of 

the voting interests of another person; 

(iii) Affirmatively influences in any 

manner the election of a majority of the 

directors of another person; or 

(iv) Has contributed more than 20 

percent of the capital of the other 

person. 

Direct ownership means the holding 

of legal title to an interest in a provider 

of settlement service except where title 

is being held for the beneficial owner. 

Franchise is defined in FTC 

regulation 16 CFR 436.1(h). 

Franchisor is defined in FTC 

regulation 16 CFR 436.1(k). 

Franchisee is defined in FTC 

regulation 16 CFR 436.1(i). 

FTC means the Federal Trade 

Commission. 

Person who is in a position to refer 

settlement service business means any 

real estate broker or agent, lender, 

mortgage broker, builder or developer, 

attorney, title company, title agent, or 

other person deriving a significant 

portion of his or her gross income from 

providing settlement services. 

(d) Recordkeeping. Any documents 

provided pursuant to this section shall 

be retained for 5 years after the date of 

execution. 

(e) Appendix B of this part. 

Illustrations in Appendix B of this part 

demonstrate some of the requirements 

of this section. 

§ 1024.16 Title companies. 

No seller of property that will be 

purchased with the assistance of a 

federally related mortgage loan shall 

violate section 9 of RESPA (12 U.S.C. 

2608). Section 1024.2 defines ‘‘required 

use’’ of a provider of a settlement 

service. 

§ 1024.17 Escrow accounts. 

(a) General. This section sets out the 

requirements for an escrow account that 

a lender establishes in connection with 

a federally related mortgage loan. It sets 

limits for escrow accounts using 

calculations based on monthly 

payments and disbursements within a 

calendar year. If an escrow account 

involves biweekly or any other payment 

period, the requirements in this section 

shall be modified accordingly. A Public 

Guidance Document entitled ‘‘Biweekly 

Payments—Example’’ provides 

examples of biweekly accounting and a 

Public Guidance Document entitled 

‘‘Annual Escrow Account Disclosure 

Statement—Example’’ provides 

examples of a 3-year accounting cycle 

that may be used in accordance with 

paragraph (c)(9) of this section. A Public 

Guidance Document entitled 

‘‘Consumer Disclosure for Voluntary 

Escrow Account Payments’’ provides a 

model disclosure format that originators 

and servicers are encouraged, but not 

required, to provide to consumers when 

the originator or servicer anticipates a 

substantial increase in disbursements 

from the escrow account after the first 

year of the loan. The disclosures in that 

model format may be combined with or 

included in the Initial Escrow Account 

Statement required in § 1024.17(g). 

(b) Definitions. As used in this 

section: 

Aggregate (or) composite analysis, 

hereafter called aggregate analysis, 

means an accounting method a servicer 

uses in conducting an escrow account 

analysis by computing the sufficiency of 

escrow account funds by analyzing the 

account as a whole. Appendix E to this 

part sets forth examples of aggregate 

escrow account analyses. 

Annual escrow account statement 

means a statement containing all of the 

information set forth in § 1024.17(i). As 

noted in § 1024.17(i), a servicer shall 

submit an annual escrow account 

statement to the borrower within 30 

calendar days of the end of the escrow 

account computation year, after 

conducting an escrow account analysis. 

Cushion or reserve (hereafter cushion) 

means funds that a servicer may require 

a borrower to pay into an escrow 

account to cover unanticipated 

disbursements or disbursements made 

before the borrower’s payments are 

available in the account, as limited by 

§ 1024.17(c). 

Deficiency is the amount of a negative 

balance in an escrow account. As noted 

in § 1024.17(f), if a servicer advances 

funds for a borrower, then the servicer 

must perform an escrow account 

analysis before seeking repayment of the 

deficiency. 

Delivery means the placing of a 

document in the United States mail, 

first-class postage paid, addressed to the 

last known address of the recipient. 

Hand delivery also constitutes delivery. 

Disbursement date means the date on 

which the servicer actually pays an 

escrow item from the escrow account. 

Escrow account means any account 

that a servicer establishes or controls on 

behalf of a borrower to pay taxes, 

insurance premiums (including flood 

insurance), or other charges with respect 

to a federally related mortgage loan, 

including charges that the borrower and 

servicer have voluntarily agreed that the 

servicer should collect and pay. The 

definition encompasses any account 

established for this purpose, including a 

‘‘trust account’’, ‘‘reserve account’’, 

‘‘impound account’’, or other term in 

different localities. An ‘‘escrow 

account’’ includes any arrangement 

where the servicer adds a portion of the 

borrower’s payments to principal and 

subsequently deducts from principal the 

disbursements for escrow account items. 

For purposes of this section, the term 

‘‘escrow account’’ excludes any account 

that is under the borrower’s total 

control. 

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Escrow account analysis means the 

accounting that a servicer conducts in 

the form of a trial running balance for 

an escrow account to: 

(1) Determine the appropriate target 

balances; 

(2) Compute the borrower’s monthly 

payments for the next escrow account 

computation year and any deposits 

needed to establish or maintain the 

account; and 

(3) Determine whether shortages, 

surpluses or deficiencies exist. 

Escrow account computation year is a 

12-month period that a servicer 

establishes for the escrow account 

beginning with the borrower’s initial 

payment date. The term includes each 

12-month period thereafter, unless a 

servicer chooses to issue a short year 

statement under the conditions stated in 

§ 1024.17(i)(4). 

Escrow account item or separate item 

means any separate expenditure 

category, such as ‘‘taxes’’ or 

‘‘insurance’’, for which funds are 

collected in the escrow account for 

disbursement. An escrow account item 

with installment payments, such as 

local property taxes, remains one 

escrow account item regardless of 

multiple disbursement dates to the tax 

authority. 

Initial escrow account statement 

means the first disclosure statement that 

the servicer delivers to the borrower 

concerning the borrower’s escrow 

account. The initial escrow account 

statement shall meet the requirements of 

§ 1024.17(g) and be in substantially the 

format set forth in § 1024.17(h). 

Installment payment means one of 

two or more payments payable on an 

escrow account item during an escrow 

account computation year. An example 

of an installment payment is where a 

jurisdiction bills quarterly for taxes. 

Payment due date means the date 

each month when the borrower’s 

monthly payment to an escrow account 

is due to the servicer. The initial 

payment date is the borrower’s first 

payment due date to an escrow account. 

Penalty means a late charge imposed 

by the payee for paying after the 

disbursement is due. It does not include 

any additional charge or fee imposed by 

the payee associated with choosing 

installment payments as opposed to 

annual payments or for choosing one 

installment plan over another. 

Pre-accrual is a practice some 

servicers use to require borrowers to 

deposit funds, needed for disbursement 

and maintenance of a cushion, in the 

escrow account some period before the 

disbursement date. Pre-accrual is 

subject to the limitations of § 1024.17(c). 

Shortage means an amount by which 

a current escrow account balance falls 

short of the target balance at the time of 

escrow analysis. 

Single-item analysis means an 

accounting method servicers use in 

conducting an escrow account analysis 

by computing the sufficiency of escrow 

account funds by considering each 

escrow item separately. Appendix E to 

this part sets forth examples of singleitem analysis. 

Submission (of an escrow account 

statement) means the delivery of the 

statement. 

Surplus means an amount by which 

the current escrow account balance 

exceeds the target balance for the 

account. 

System of recordkeeping means the 

servicer’s method of keeping 

information that reflects the facts 

relating to that servicer’s handling of the 

borrower’s escrow account, including, 

but not limited to, the payment of 

amounts from the escrow account and 

the submission of initial and annual 

escrow account statements to borrowers. 

Target balance means the estimated 

month end balance in an escrow 

account that is just sufficient to cover 

the remaining disbursements from the 

escrow account in the escrow account 

computation year, taking into account 

the remaining scheduled periodic 

payments, and a cushion, if any. 

Trial running balance means the 

accounting process that derives the 

target balances over the course of an 

escrow account computation year. 

Section 1024.17(d) provides a 

description of the steps involved in 

performing a trial running balance. 

(c) Limits on payments to escrow 

accounts. (1) A lender or servicer 

(hereafter servicer) shall not require a 

borrower to deposit into any escrow 

account, created in connection with a 

federally related mortgage loan, more 

than the following amounts: 

(i) Charges at settlement or upon 

creation of an escrow account. At the 

time a servicer creates an escrow 

account for a borrower, the servicer may 

charge the borrower an amount 

sufficient to pay the charges respecting 

the mortgaged property, such as taxes 

and insurance, which are attributable to 

the period from the date such 

payment(s) were last paid until the 

initial payment date. The ‘‘amount 

sufficient to pay’’ is computed so that 

the lowest month end target balance 

projected for the escrow account 

computation year is zero (–0–) (see Step 

2 in Appendix E to this part). In 

addition, the servicer may charge the 

borrower a cushion that shall be no 

greater than one-sixth (1⁄6) of the 

estimated total annual payments from 

the escrow account. 

(ii) Charges during the life of the 

escrow account. Throughout the life of 

an escrow account, the servicer may 

charge the borrower a monthly sum 

equal to one-twelfth (1⁄12) of the total 

annual escrow payments which the 

servicer reasonably anticipates paying 

from the account. In addition, the 

servicer may add an amount to maintain 

a cushion no greater than one-sixth (1⁄6) 

of the estimated total annual payments 

from the account. However, if a servicer 

determines through an escrow account 

analysis that there is a shortage or 

deficiency, the servicer may require the 

borrower to pay additional deposits to 

make up the shortage or eliminate the 

deficiency, subject to the limitations set 

forth in § 1024.17(f). 

(2) Escrow analysis at creation of 

escrow account. Before establishing an 

escrow account, the servicer must 

conduct an escrow account analysis to 

determine the amount the borrower 

must deposit into the escrow account 

(subject to the limitations of paragraph 

(c)(1)(i) of this section), and the amount 

of the borrower’s periodic payments 

into the escrow account (subject to the 

limitations of paragraph (c)(1)(ii) of this 

section). In conducting the escrow 

account analysis, the servicer must 

estimate the disbursement amounts 

according to paragraph (c)(7) of this 

section. Pursuant to paragraph (k) of this 

section, the servicer must use a date on 

or before the deadline to avoid a penalty 

as the disbursement date for the escrow 

item and comply with any other 

requirements of paragraph (k) of this 

section. Upon completing the initial 

escrow account analysis, the servicer 

must prepare and deliver an initial 

escrow account statement to the 

borrower, as set forth in paragraph (g) of 

this section. The servicer must use the 

escrow account analysis to determine 

whether a surplus, shortage, or 

deficiency exists and must make any 

adjustments to the account pursuant to 

paragraph (f) of this section. 

(3) Subsequent escrow account 

analyses. For each escrow account, the 

servicer must conduct an escrow 

account analysis at the completion of 

the escrow account computation year to 

determine the borrower’s monthly 

escrow account payments for the next 

computation year, subject to the 

limitations of paragraph (c)(1)(ii) of this 

section. In conducting the escrow 

account analysis, the servicer must 

estimate the disbursement amounts 

according to paragraph (c)(7) of this 

section. Pursuant to paragraph (k) of this 

section, the servicer must use a date on 

or before the deadline to avoid a penalty 

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as the disbursement date for the escrow 

item and comply with any other 

requirements of paragraph (k) of this 

section. The servicer must use the 

escrow account analysis to determine 

whether a surplus, shortage, or 

deficiency exists, and must make any 

adjustments to the account pursuant to 

paragraph (f) of this section. Upon 

completing an escrow account analysis, 

the servicer must prepare and submit an 

annual escrow account statement to the 

borrower, as set forth in paragraph (i) of 

this section. 

(4) Aggregate accounting required. All 

servicers must use the aggregate 

accounting method in conducting 

escrow account analyses. 

(5) Cushion. The cushion must be no 

greater than one-sixth (1⁄6) of the 

estimated total annual disbursements 

from the escrow account. 

(6) Restrictions on pre-accrual. A 

servicer must not practice pre-accrual. 

(7) Servicer estimates of disbursement 

amounts. To conduct an escrow account 

analysis, the servicer shall estimate the 

amount of escrow account items to be 

disbursed. If the servicer knows the 

charge for an escrow item in the next 

computation year, then the servicer 

shall use that amount in estimating 

disbursement amounts. If the charge is 

unknown to the servicer, the servicer 

may base the estimate on the preceding 

year’s charge, or the preceding year’s 

charge as modified by an amount not 

exceeding the most recent year’s change 

in the national Consumer Price Index 

for all urban consumers (CPI, all items). 

In cases of unassessed new 

construction, the servicer may base an 

estimate on the assessment of 

comparable residential property in the 

market area. 

(8) Provisions in mortgage documents. 

The servicer must examine the mortgage 

loan documents to determine the 

applicable cushion for each escrow 

account. If the mortgage loan documents 

provide for lower cushion limits, then 

the terms of the loan documents apply. 

Where the terms of any mortgage loan 

document allow greater payments to an 

escrow account than allowed by this 

section, then this section controls the 

applicable limits. Where the mortgage 

loan documents do not specifically 

establish an escrow account, whether a 

servicer may establish an escrow 

account for the loan is a matter for 

determination by other Federal or state 

law. If the mortgage loan document is 

silent on the escrow account limits and 

a servicer establishes an escrow account 

under other Federal or state law, then 

the limitations of this section apply 

unless applicable Federal or state law 

provides for a lower amount. If the loan 

documents provide for escrow accounts 

up to the RESPA limits, then the 

servicer may require the maximum 

amounts consistent with this section, 

unless an applicable Federal or state law 

sets a lesser amount. 

(9) Assessments for periods longer 

than one year. Some escrow account 

items may be billed for periods longer 

than one year. For example, servicers 

may need to collect flood insurance or 

water purification escrow funds for 

payment every three years. In such 

cases, the servicer shall estimate the 

borrower’s payments for a full cycle of 

disbursements. For a flood insurance 

premium payable every 3 years, the 

servicer shall collect the payments 

reflecting 36 equal monthly amounts. 

For two out of the three years, however, 

the account balance may not reach its 

low monthly balance because the low 

point will be on a three-year cycle, as 

compared to an annual one. The annual 

escrow account statement shall explain 

this situation (see example in the Public 

Guidance Document entitled ‘‘Annual 

Escrow Account Disclosure Statement— 

Example’’, available in accordance with 

§ 1024.3). 

(d) Methods of escrow account 

analysis. (1) The following sets forth the 

steps servicers must use to determine 

whether their use of aggregate analysis 

conforms with the limitations in 

§ 1024.17(c)(1). The steps set forth in 

this section result in maximum limits. 

Servicers may use accounting 

procedures that result in lower target 

balances. In particular, servicers may 

use a cushion less than the permissible 

cushion or no cushion at all. This 

section does not require the use of a 

cushion. 

(2) Aggregate analysis. (i) In 

conducting the escrow account analysis 

using aggregate analysis, the target 

balances may not exceed the balances 

computed according to the following 

arithmetic operations: 

(A) The servicer first projects a trial 

balance for the account as a whole over 

the next computation year (a trial 

running balance). In doing so the 

servicer assumes that it will make 

estimated disbursements on or before 

the earlier of the deadline to take 

advantage of discounts, if available, or 

the deadline to avoid a penalty. The 

servicer does not use pre-accrual on 

these disbursement dates. The servicer 

also assumes that the borrower will 

make monthly payments equal to onetwelfth of the estimated total annual 

escrow account disbursements. 

(B) The servicer then examines the 

monthly trial balances and adds to the 

first monthly balance an amount just 

sufficient to bring the lowest monthly 

trial balance to zero, and adjusts all 

other monthly balances accordingly. 

(C) The servicer then adds to the 

monthly balances the permissible 

cushion. The cushion is two months of 

the borrower’s escrow payments to the 

servicer or a lesser amount specified by 

state law or the mortgage document (net 

of any increases or decreases because of 

prior year shortages or surpluses, 

respectively). 

(ii) Lowest monthly balance. Under 

aggregate analysis, the lowest monthly 

target balance for the account shall be 

less than or equal to one-sixth of the 

estimated total annual escrow account 

disbursements or a lesser amount 

specified by state law or the mortgage 

document. The target balances that the 

servicer derives using these steps yield 

the maximum limit for the escrow 

account. Appendix E to this part 

illustrates these steps. 

(e) Transfer of servicing. (1) If the new 

servicer changes either the monthly 

payment amount or the accounting 

method used by the transferor (old) 

servicer, then the new servicer shall 

provide the borrower with an initial 

escrow account statement within 60 

days of the date of servicing transfer. 

(i) Where a new servicer provides an 

initial escrow account statement upon 

the transfer of servicing, the new 

servicer shall use the effective date of 

the transfer of servicing to establish the 

new escrow account computation year. 

(ii) Where the new servicer retains the 

monthly payments and accounting 

method used by the transferor servicer, 

then the new servicer may continue to 

use the escrow account computation 

year established by the transferor 

servicer or may choose to establish a 

different computation year using a 

short-year statement. At the completion 

of the escrow account computation year 

or any short year, the new servicer shall 

perform an escrow analysis and provide 

the borrower with an annual escrow 

account statement. 

(2) The new servicer shall treat 

shortages, surpluses and deficiencies in 

the transferred escrow account 

according to the procedures set forth in 

§ 1024.17(f). 

(f) Shortages, surpluses, and 

deficiencies requirements. (1) Escrow 

account analysis. For each escrow 

account, the servicer shall conduct an 

escrow account analysis to determine 

whether a surplus, shortage or 

deficiency exists. 

(i) As noted in § 1024.17(c)(2) and (3), 

the servicer shall conduct an escrow 

account analysis upon establishing an 

escrow account and at completion of the 

escrow account computation year. 

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(ii) The servicer may conduct an 

escrow account analysis at other times 

during the escrow computation year. If 

a servicer advances funds in paying a 

disbursement, which is not the result of 

a borrower’s payment default under the 

underlying mortgage document, then 

the servicer shall conduct an escrow 

account analysis to determine the extent 

of the deficiency before seeking 

repayment of the funds from the 

borrower under this paragraph (f). 

(2) Surpluses. (i) If an escrow account 

analysis discloses a surplus, the servicer 

shall, within 30 days from the date of 

the analysis, refund the surplus to the 

borrower if the surplus is greater than or 

equal to 50 dollars ($50). If the surplus 

is less than 50 dollars ($50), the servicer 

may refund such amount to the 

borrower, or credit such amount against 

the next year’s escrow payments. 

(ii) These provisions regarding 

surpluses apply if the borrower is 

current at the time of the escrow 

account analysis. A borrower is current 

if the servicer receives the borrower’s 

payments within 30 days of the 

payment due date. If the servicer does 

not receive the borrower’s payment 

within 30 days of the payment due date, 

then the servicer may retain the surplus 

in the escrow account pursuant to the 

terms of the mortgage loan documents. 

(iii) After an initial or annual escrow 

analysis has been performed, the 

servicer and the borrower may enter 

into a voluntary agreement for the 

forthcoming escrow accounting year for 

the borrower to deposit funds into the 

escrow account for that year greater than 

the limits established under paragraph 

(c) of this section. Such an agreement 

shall cover only one escrow accounting 

year, but a new voluntary agreement 

may be entered into after the next 

escrow analysis is performed. The 

voluntary agreement may not alter how 

surpluses are to be treated when the 

next escrow analysis is performed at the 

end of the escrow accounting year 

covered by the voluntary agreement. 

(3) Shortages. (i) If an escrow account 

analysis discloses a shortage of less than 

one month’s escrow account payment, 

then the servicer has three possible 

courses of action: 

(A) The servicer may allow a shortage 

to exist and do nothing to change it; 

(B) The servicer may require the 

borrower to repay the shortage amount 

within 30 days; or 

(C) The servicer may require the 

borrower to repay the shortage amount 

in equal monthly payments over at least 

a 12-month period. 

(ii) If an escrow account analysis 

discloses a shortage that is greater than 

or equal to one month’s escrow account 

payment, then the servicer has two 

possible courses of action: 

(A) The servicer may allow a shortage 

to exist and do nothing to change it; or 

(B) The servicer may require the 

borrower to repay the shortage in equal 

monthly payments over at least a 

12-month period. 

(4) Deficiency. If the escrow account 

analysis confirms a deficiency, then the 

servicer may require the borrower to pay 

additional monthly deposits to the 

account to eliminate the deficiency. 

(i) If the deficiency is less than one 

month’s escrow account payment, then 

the servicer: 

(A) May allow the deficiency to exist 

and do nothing to change it; 

(B) May require the borrower to repay 

the deficiency within 30 days; or 

(C) May require the borrower to repay 

the deficiency in 2 or more equal 

monthly payments. 

(ii) If the deficiency is greater than or 

equal to 1 month’s escrow payment, the 

servicer may allow the deficiency to 

exist and do nothing to change it or may 

require the borrower to repay the 

deficiency in two or more equal 

monthly payments. 

(iii) These provisions regarding 

deficiencies apply if the borrower is 

current at the time of the escrow 

account analysis. A borrower is current 

if the servicer receives the borrower’s 

payments within 30 days of the 

payment due date. If the servicer does 

not receive the borrower’s payment 

within 30 days of the payment due date, 

then the servicer may recover the 

deficiency pursuant to the terms of the 

mortgage loan documents. 

(5) Notice of shortage or deficiency in 

escrow account. The servicer shall 

notify the borrower at least once during 

the escrow account computation year if 

there is a shortage or deficiency in the 

escrow account. The notice may be part 

of the annual escrow account statement 

or it may be a separate document. 

(g) Initial escrow account statement. 

(1) Submission at settlement, or within 

45 calendar days of settlement. As noted 

in § 1024.17(c)(2), the servicer shall 

conduct an escrow account analysis 

before establishing an escrow account to 

determine the amount the borrower 

shall deposit into the escrow account, 

subject to the limitations of 

§ 1024.17(c)(1)(i). After conducting the 

escrow account analysis for each escrow 

account, the servicer shall submit an 

initial escrow account statement to the 

borrower at settlement or within 45 

calendar days of settlement for escrow 

accounts that are established as a 

condition of the loan. 

(i) The initial escrow account 

statement shall include the amount of 

the borrower’s monthly mortgage 

payment and the portion of the monthly 

payment going into the escrow account 

and shall itemize the estimated taxes, 

insurance premiums, and other charges 

that the servicer reasonably anticipates 

to be paid from the escrow account 

during the escrow account computation 

year and the anticipated disbursement 

dates of those charges. The initial 

escrow account statement shall indicate 

the amount that the servicer selects as 

a cushion. The statement shall include 

a trial running balance for the account. 

(ii) Pursuant to § 1024.17(h)(2), the 

servicer may incorporate the initial 

escrow account statement into the 

HUD–1 or HUD–1A settlement 

statement. If the servicer does not 

incorporate the initial escrow account 

statement into the HUD–1 or HUD–1A 

settlement statement, then the servicer 

shall submit the initial escrow account 

statement to the borrower as a separate 

document. 

(2) Time of submission of initial 

escrow account statement for an escrow 

account established after settlement. For 

escrow accounts established after 

settlement (and which are not a 

condition of the loan), a servicer shall 

submit an initial escrow account 

statement to a borrower within 45 

calendar days of the date of 

establishment of the escrow account. 

(h) Format for initial escrow account 

statement. (1) The format and a 

completed example for an initial escrow 

account statement are set out in Public 

Guidance Documents entitled ‘‘Initial 

Escrow Account Disclosure Statement— 

Format’’ and ‘‘Initial Escrow Account 

Disclosure Statement—Example’’, 

available in accordance with § 1024.3. 

(2) Incorporation of initial escrow 

account statement into HUD–1 or HUD– 

1A settlement statement. Pursuant to 

§ 1024.9(a)(11), a servicer may add the 

initial escrow account statement to the 

HUD–1 or HUD–1A settlement 

statement. The servicer may include the 

initial escrow account statement in the 

basic text or may attach the initial 

escrow account statement as an 

additional page to the HUD–1 or HUD– 

1A settlement statement. 

(3) Identification of payees. The initial 

escrow account statement need not 

identify a specific payee by name if it 

provides sufficient information to 

identify the use of the funds. For 

example, appropriate entries include: 

county taxes, hazard insurance, 

condominium dues, etc. If a particular 

payee, such as a taxing body, receives 

more than one payment during the 

escrow account computation year, the 

statement shall indicate each payment 

and disbursement date. If there are 

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several taxing authorities or insurers, 

the statement shall identify each taxing 

body or insurer (e.g., ‘‘City Taxes’’, 

‘‘School Taxes’’, ‘‘Hazard Insurance’’, or 

‘‘Flood Insurance,’’ etc.). 

(i) Annual escrow account statements. 

For each escrow account, a servicer 

shall submit an annual escrow account 

statement to the borrower within 30 

days of the completion of the escrow 

account computation year. The servicer 

shall also submit to the borrower the 

previous year’s projection or initial 

escrow account statement. The servicer 

shall conduct an escrow account 

analysis before submitting an annual 

escrow account statement to the 

borrower. 

(1) Contents of annual escrow account 

statement. The annual escrow account 

statement shall provide an account 

history, reflecting the activity in the 

escrow account during the escrow 

account computation year, and a 

projection of the activity in the account 

for the next year. In preparing the 

statement, the servicer may assume 

scheduled payments and disbursements 

will be made for the final 2 months of 

the escrow account computation year. 

The annual escrow account statement 

must include, at a minimum, the 

following (the items in paragraphs 

(i)(1)(i) through (i)(1)(iv) must be clearly 

itemized): 

(i) The amount of the borrower’s 

current monthly mortgage payment and 

the portion of the monthly payment 

going into the escrow account; 

(ii) The amount of the past year’s 

monthly mortgage payment and the 

portion of the monthly payment that 

went into the escrow account; 

(iii) The total amount paid into the 

escrow account during the past 

computation year; 

(iv) The total amount paid out of the 

escrow account during the same period 

for taxes, insurance premiums, and 

other charges (as separately identified); 

(v) The balance in the escrow account 

at the end of the period; 

(vi) An explanation of how any 

surplus is being handled by the servicer; 

(vii) An explanation of how any 

shortage or deficiency is to be paid by 

the borrower; and 

(viii) If applicable, the reason(s) why 

the estimated low monthly balance was 

not reached, as indicated by noting 

differences between the most recent 

account history and last year’s 

projection. Public Guidance Documents 

entitled ‘‘Annual Escrow Account 

Disclosure Statement—Format’’ and 

‘‘Annual Escrow Account Disclosure 

Statement—Example’’ set forth an 

acceptable format and methodology for 

conveying this information. 

(2) No annual statements in the case 

of default, foreclosure, or bankruptcy. 

This paragraph (i)(2) contains an 

exemption from the provisions of 

§ 1024.17(i)(1). If at the time the servicer 

conducts the escrow account analysis 

the borrower is more than 30 days 

overdue, then the servicer is exempt 

from the requirements of submitting an 

annual escrow account statement to the 

borrower under § 1024.17(i). This 

exemption also applies in situations 

where the servicer has brought an action 

for foreclosure under the underlying 

mortgage loan, or where the borrower is 

in bankruptcy proceedings. If the 

servicer does not issue an annual 

statement pursuant to this exemption 

and the loan subsequently is reinstated 

or otherwise becomes current, the 

servicer shall provide a history of the 

account since the last annual statement 

(which may be longer than 1 year) 

within 90 days of the date the account 

became current. 

(3) Delivery with other material. The 

servicer may deliver the annual escrow 

account statement to the borrower with 

other statements or materials, including 

the Substitute 1098, which is provided 

for Federal income tax purposes. 

(4) Short year statements. A servicer 

may issue a short year annual escrow 

account statement (‘‘short year 

statement’’) to change one escrow 

account computation year to another. By 

using a short year statement a servicer 

may adjust its production schedule or 

alter the escrow account computation 

year for the escrow account. 

(i) Effect of short year statement. The 

short year statement shall end the 

‘‘escrow account computation year’’ for 

the escrow account and establish the 

beginning date of the new escrow 

account computation year. The servicer 

shall deliver the short year statement to 

the borrower within 60 days from the 

end of the short year. 

(ii) Short year statement upon 

servicing transfer. Upon the transfer of 

servicing, the transferor (old) servicer 

shall submit a short year statement to 

the borrower within 60 days of the 

effective date of transfer. 

(iii) Short year statement upon loan 

payoff. If a borrower pays off a mortgage 

loan during the escrow account 

computation year, the servicer shall 

submit a short year statement to the 

borrower within 60 days after receiving 

the pay-off funds. 

(j) Formats for annual escrow account 

statement. The formats and completed 

examples for annual escrow account 

statements using single-item analysis 

(pre-rule accounts) and aggregate 

analysis are set out in Public Guidance 

Documents entitled ‘‘Annual Escrow 

Account Disclosure Statement— 

Format’’ and ‘‘Annual Escrow Account 

Disclosure Statement—Example’’. 

(k) Timely payments. (1) If the terms 

of any federally related mortgage loan 

require the borrower to make payments 

to an escrow account, the servicer must 

pay the disbursements in a timely 

manner, that is, on or before the 

deadline to avoid a penalty, as long as 

the borrower’s payment is not more than 

30 days overdue. 

(2) The servicer must advance funds 

to make disbursements in a timely 

manner as long as the borrower’s 

payment is not more than 30 days 

overdue. Upon advancing funds to pay 

a disbursement, the servicer may seek 

repayment from the borrower for the 

deficiency pursuant to paragraph (f) of 

this section. 

(3) For the payment of property taxes 

from the escrow account, if a taxing 

jurisdiction offers a servicer a choice 

between annual and installment 

disbursements, the servicer must also 

comply with this paragraph (k)(3). If the 

taxing jurisdiction neither offers a 

discount for disbursements on a lump 

sum annual basis nor imposes any 

additional charge or fee for installment 

disbursements, the servicer must make 

disbursements on an installment basis. 

If, however, the taxing jurisdiction 

offers a discount for disbursements on a 

lump sum annual basis or imposes any 

additional charge or fee for installment 

disbursements, the servicer may, at the 

servicer’s discretion (but is not required 

by RESPA to), make lump sum annual 

disbursements in order to take 

advantage of the discount for the 

borrower or avoid the additional charge 

or fee for installments, as long as such 

method of disbursement complies with 

paragraphs (k)(1) and (k)(2) of this 

section. The Bureau encourages, but 

does not require, the servicer to follow 

the preference of the borrower, if such 

preference is known to the servicer. 

(4) Notwithstanding paragraph (k)(3) 

of this section, a servicer and borrower 

may mutually agree, on an individual 

case basis, to a different disbursement 

basis (installment or annual) or 

disbursement date for property taxes 

from that required under paragraph 

(k)(3) of this section, so long as the 

agreement meets the requirements of 

paragraphs (k)(1) and (k)(2) of this 

section. The borrower must voluntarily 

agree; neither loan approval nor any 

term of the loan may be conditioned on 

the borrower’s agreeing to a different 

disbursement basis or disbursement 

date. 

(l) System of recordkeeping. (1) Each 

servicer shall keep records, which may 

involve electronic storage, microfiche 

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storage, or any method of computerized 

storage, so long as the information is 

easily retrievable, reflecting the 

servicer’s handling of each borrower’s 

escrow account. The servicer’s records 

shall include, but not be limited to, the 

payment of amounts into and from the 

escrow account and the submission of 

initial and annual escrow account 

statements to the borrower. 

(2) The servicer responsible for 

servicing the borrower’s escrow account 

shall maintain the records for that 

account for a period of at least five years 

after the servicer last serviced the 

escrow account. 

(3) A servicer shall provide the 

Bureau with information contained in 

the servicer’s records for a specific 

escrow account, or for a number or class 

of escrow accounts, within 30 days of 

the Bureau’s written request for the 

information. At the Bureau’s request, 

the servicer shall convert any 

information contained in electronic 

storage, microfiche or computerized 

storage to paper copies for review by the 

Bureau. 

(4) Borrowers may seek information 

contained in the servicer’s records by 

complying with the provisions set forth 

in 12 U.S.C. 2605(e) and § 1024.21(e). 

(5) After receiving a request from the 

Bureau for information relating to 

whether a servicer submitted an escrow 

account statement to the borrower, the 

servicer shall respond within 30 days. If 

the servicer is unable to provide the 

Bureau with such information, the 

Bureau shall deem that lack of 

information to be evidence of the 

servicer’s failure to submit the statement 

to the borrower. 

(m) Discretionary payments. Any 

borrower’s discretionary payment (such 

as credit life or disability insurance) 

made as part of a monthly mortgage 

payment is to be noted on the initial and 

annual statements. If a discretionary 

payment is established or terminated 

during the escrow account computation 

year, this change should be noted on the 

next annual statement. A discretionary 

payment is not part of the escrow 

account unless the payment is required 

by the lender, in accordance with the 

definition of ‘‘settlement service’’ in 

§ 1024.2, or the servicer chooses to place 

the discretionary payment in the escrow 

account. If a servicer has not established 

an escrow account for a federally related 

mortgage loan and only receives 

payments for discretionary items, this 

section is not applicable. 

§ 1024.18 Validity of contracts and liens. 

Section 17 of RESPA (12 U.S.C. 2615) 

governs the validity of contracts and 

liens under RESPA. 

§ 1024.19 Enforcement. 

(a) Enforcement policy. It is the policy 

of the Bureau regarding RESPA 

enforcement matters to cooperate with 

Federal, state, or local agencies having 

supervisory powers over lenders or 

other persons with responsibilities 

under RESPA. Federal agencies with 

supervisory powers over lenders may 

use their powers to require compliance 

with RESPA. In addition, failure to 

comply with RESPA may be grounds for 

administrative action by HUD under 

HUD regulation 2 CFR part 2424 

concerning debarment, suspension, 

ineligibility of contractors and grantees, 

or under HUD regulation 24 CFR part 25 

concerning the HUD Mortgagee Review 

Board. Nothing in this paragraph is a 

limitation on any other form of 

enforcement that may be legally 

available. 

(b) Investigations. The procedures for 

investigations and investigational 

proceedings are set forth in part 1080 of 

this title. 

§ 1024.20 [Reserved] 

§ 1024.21 Mortgage servicing transfers. 

(a) Definitions. As used in this 

section: 

Master servicer means the owner of 

the right to perform servicing, which 

may actually perform the servicing itself 

or may do so through a subservicer. 

Mortgage servicing loan means a 

federally related mortgage loan, as that 

term is defined in § 1024.2, subject to 

the exemptions in § 1024.5, when the 

mortgage loan is secured by a first lien. 

The definition does not include 

subordinate lien loans or open-end lines 

of credit (home equity plans) covered by 

the Truth in Lending Act and 

Regulation Z, including open-end lines 

of credit secured by a first lien. 

Qualified written request means a 

written correspondence from the 

borrower to the servicer prepared in 

accordance with paragraph (e)(2) of this 

section. 

Subservicer means a servicer who 

does not own the right to perform 

servicing, but who does so on behalf of 

the master servicer. 

Transferee servicer means a servicer 

who obtains or who will obtain the right 

to perform servicing functions pursuant 

to an agreement or understanding. 

Transferor servicer means a servicer, 

including a table funding mortgage 

broker or dealer on a first lien dealer 

loan, who transfers or will transfer the 

right to perform servicing functions 

pursuant to an agreement or 

understanding. 

(b) Servicing Disclosure Statement; 

Requirements. (1) At the time an 

application for a mortgage servicing 

loan is submitted, or within 3 business 

days after submission of the application, 

the lender, mortgage broker who 

anticipates using table funding, or 

dealer who anticipates a first lien dealer 

loan shall provide to each person who 

applies for such a loan a Servicing 

Disclosure Statement. A format for the 

Servicing Disclosure Statement appears 

as Appendix MS–1 to this part. The 

specific language of the Servicing 

Disclosure Statement is not required to 

be used. The information set forth in 

‘‘Instructions to Preparer’’ on the 

Servicing Disclosure Statement need not 

be included with the information given 

to applicants, and material in square 

brackets is optional or alternative 

language. The model format may be 

annotated with additional information 

that clarifies or enhances the model 

language. The lender, table funding 

mortgage broker, or dealer should use 

the language that best describes the 

particular circumstances. 

(2) The Servicing Disclosure 

Statement must indicate whether the 

servicing of the loan may be assigned, 

sold, or transferred to any other person 

at any time while the loan is 

outstanding. If the lender, table funding 

mortgage broker, or dealer in a first lien 

dealer loan will engage in the servicing 

of the mortgage loan for which the 

applicant has applied, the disclosure 

may consist of a statement that the 

entity will service such loan and does 

not intend to sell, transfer, or assign the 

servicing of the loan. If the lender, table 

funding mortgage broker, or dealer in a 

first lien dealer loan will not engage in 

the servicing of the mortgage loan for 

which the applicant has applied, the 

disclosure may consist of a statement 

that such entity intends to assign, sell, 

or transfer servicing of such mortgage 

loan before the first payment is due. In 

all other instances, the disclosure must 

state that the servicing of the loan may 

be assigned, sold or transferred while 

the loan is outstanding. 

(c) Servicing Disclosure Statement; 

Delivery. The lender, table funding 

mortgage broker, or dealer that 

anticipates a first lien dealer loan shall 

deliver the Servicing Disclosure 

Statement within 3 business days from 

receipt of the application by hand 

delivery, by placing it in the mail, or, if 

the applicant agrees, by fax, email, or 

other electronic means. In the event the 

borrower is denied credit within the 3 

business-day period, no servicing 

disclosure statement is required to be 

delivered. If co-applicants indicate the 

same address on their application, one 

copy delivered to that address is 

sufficient. If different addresses are 

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shown by co-applicants on the 

application, a copy must be delivered to 

each of the co-applicants. 

(d) Notices of Transfer; loan servicing. 

(1) Requirement for notice. (i) Except as 

provided in this paragraph (d)(1)(i) or 

paragraph (d)(1)(ii) of this section, each 

transferor servicer and transferee 

servicer of any mortgage servicing loan 

shall deliver to the borrower a written 

Notice of Transfer, containing the 

information described in paragraph 

(d)(3) of this section, of any assignment, 

sale, or transfer of the servicing of the 

loan. The following transfers are not 

considered an assignment, sale, or 

transfer of mortgage loan servicing for 

purposes of this requirement if there is 

no change in the payee, address to 

which payment must be delivered, 

account number, or amount of payment 

due: 

(A) Transfers between affiliates; 

(B) Transfers resulting from mergers 

or acquisitions of servicers or 

subservicers; and 

(C) Transfers between master 

servicers, where the subservicer remains 

the same. 

(ii) The Federal Housing 

Administration (FHA) is not required 

under paragraph (d) of this section to 

submit to the borrower a Notice of 

Transfer in cases where a mortgage 

insured under the National Housing Act 

is assigned to FHA. 

(2) Time of notice. (i) Except as 

provided in paragraph (d)(2)(ii) of this 

section: 

(A) The transferor servicer shall 

deliver the Notice of Transfer to the 

borrower not less than 15 days before 

the effective date of the transfer of the 

servicing of the mortgage servicing loan; 

(B) The transferee servicer shall 

deliver the Notice of Transfer to the 

borrower not more than 15 days after 

the effective date of the transfer; and 

(C) The transferor and transferee 

servicers may combine their notices into 

one notice, which shall be delivered to 

the borrower not less than 15 days 

before the effective date of the transfer 

of the servicing of the mortgage 

servicing loan. 

(ii) The Notice of Transfer shall be 

delivered to the borrower by the 

transferor servicer or the transferee 

servicer not more than 30 days after the 

effective date of the transfer of the 

servicing of the mortgage servicing loan 

in any case in which the transfer of 

servicing is preceded by: 

(A) Termination of the contract for 

servicing the loan for cause; 

(B) Commencement of proceedings for 

bankruptcy of the servicer; or 

(C) Commencement of proceedings by 

the Federal Deposit Insurance 

Corporation (FDIC) for conservatorship 

or receivership of the servicer or an 

entity that owns or controls the servicer. 

(iii) Notices of Transfer delivered at 

settlement by the transferor servicer and 

transferee servicer, whether as separate 

notices or as a combined notice, will 

satisfy the timing requirements of 

paragraph (d)(2) of this section. 

(3) Notices of Transfer; contents. The 

Notices of Transfer required under 

paragraph (d) of this section shall 

include the following information: 

(i) The effective date of the transfer of 

servicing; 

(ii) The name, consumer inquiry 

addresses (including, at the option of 

the servicer, a separate address where 

qualified written requests must be sent), 

and a toll-free or collect-call telephone 

number for an employee or department 

of the transferee servicer; 

(iii) A toll-free or collect-call 

telephone number for an employee or 

department of the transferor servicer 

that can be contacted by the borrower 

for answers to servicing transfer 

inquiries; 

(iv) The date on which the transferor 

servicer will cease to accept payments 

relating to the loan and the date on 

which the transferee servicer will begin 

to accept such payments. These dates 

shall either be the same or consecutive 

days; 

(v) Information concerning any effect 

the transfer may have on the terms or 

the continued availability of mortgage 

life or disability insurance, or any other 

type of optional insurance, and any 

action the borrower must take to 

maintain coverage; 

(vi) A statement that the transfer of 

servicing does not affect any other term 

or condition of the mortgage documents, 

other than terms directly related to the 

servicing of the loan; and 

(vii) A statement of the borrower’s 

rights in connection with complaint 

resolution, including the information set 

forth in paragraph (e) of this section. 

Appendix MS–2 of this part illustrates 

a statement satisfactory to the Bureau. 

(4) Notices of Transfer; sample notice. 

Sample language that may be used to 

comply with the requirements of 

paragraph (d) of this section is set out 

in Appendix MS–2 of this part. Minor 

modifications to the sample language 

may be made to meet the particular 

circumstances of the servicer, but the 

substance of the sample language shall 

not be omitted or substantially altered. 

(5) Consumer protection during 

transfer of servicing. During the 60-day 

period beginning on the effective date of 

transfer of the servicing of any mortgage 

servicing loan, if the transferor servicer 

(rather than the transferee servicer that 

should properly receive payment on the 

loan) receives payment on or before the 

applicable due date (including any grace 

period allowed under the loan 

documents), a late fee may not be 

imposed on the borrower with respect to 

that payment and the payment may not 

be treated as late for any other purposes. 

(e) Duty of loan servicer to respond to 

borrower inquiries. (1) Notice of receipt 

of inquiry. Within 20 business days of 

a servicer of a mortgage servicing loan 

receiving a qualified written request 

from the borrower for information 

relating to the servicing of the loan, the 

servicer shall provide to the borrower a 

written response acknowledging receipt 

of the qualified written request. This 

requirement shall not apply if the action 

requested by the borrower is taken 

within that period and the borrower is 

notified of that action in accordance 

with the paragraph (f)(3) of this section. 

By notice either included in the Notice 

of Transfer or separately delivered by 

first-class mail, postage prepaid, a 

servicer may establish a separate and 

exclusive office and address for the 

receipt and handling of qualified 

written requests. 

(2) Qualified written request; defined. 

(i) For purposes of paragraph (e) of this 

section, a qualified written request 

means a written correspondence (other 

than notice on a payment coupon or 

other payment medium supplied by the 

servicer) that includes, or otherwise 

enables the servicer to identify, the 

name and account of the borrower, and 

includes a statement of the reasons that 

the borrower believes the account is in 

error, if applicable, or that provides 

sufficient detail to the servicer regarding 

information relating to the servicing of 

the loan sought by the borrower. 

(ii) A written request does not 

constitute a qualified written request if 

it is delivered to a servicer more than 1 

year after either the date of transfer of 

servicing or the date that the mortgage 

servicing loan amount was paid in full, 

whichever date is applicable. 

(3) Action with respect to the inquiry. 

Not later than 60 business days after 

receiving a qualified written request 

from the borrower, and, if applicable, 

before taking any action with respect to 

the inquiry, the servicer shall: 

(i) Make appropriate corrections in 

the account of the borrower, including 

the crediting of any late charges or 

penalties, and transmit to the borrower 

a written notification of the correction. 

This written notification shall include 

the name and telephone number of a 

representative of the servicer who can 

provide assistance to the borrower; or 

(ii) After conducting an investigation, 

provide the borrower with a written 

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explanation or clarification that 

includes: 

(A) To the extent applicable, a 

statement of the servicer’s reasons for 

concluding the account is correct and 

the name and telephone number of an 

employee, office, or department of the 

servicer that can provide assistance to 

the borrower; or 

(B) Information requested by the 

borrower, or an explanation of why the 

information requested is unavailable or 

cannot be obtained by the servicer, and 

the name and telephone number of an 

employee, office, or department of the 

servicer that can provide assistance to 

the borrower. 

(4) Protection of credit rating. (i) 

During the 60-business day period 

beginning on the date of the servicer 

receiving from a borrower a qualified 

written request relating to a dispute on 

the borrower’s payments, a servicer may 

not provide adverse information 

regarding any payment that is the 

subject of the qualified written request 

to any consumer reporting agency (as 

that term is defined in section 603 of the 

Fair Credit Reporting Act, 15 U.S.C. 

1681a). 

(ii) In accordance with section 17 of 

RESPA (12 U.S.C. 2615), the protection 

of credit rating provision of paragraph 

(e)(4)(i) of this section does not impede 

a lender or servicer from pursuing any 

of its remedies, including initiating 

foreclosure, allowed by the underlying 

mortgage loan instruments. 

(f) Damages and costs. (1) Whoever 

fails to comply with any provision of 

this section shall be liable to the 

borrower for each failure in the 

following amounts: 

(i) Individuals. In the case of any 

action by an individual, an amount 

equal to the sum of any actual damages 

sustained by the individual as the result 

of the failure and, when there is a 

pattern or practice of noncompliance 

with the requirements of this section, 

any additional damages in an amount 

not to exceed $1,000. 

(ii) Class actions. In the case of a class 

action, an amount equal to the sum of 

any actual damages to each borrower in 

the class that result from the failure and, 

when there is a pattern or practice of 

noncompliance with the requirements 

of this section, any additional damages 

in an amount not greater than $1,000 for 

each class member. However, the total 

amount of any additional damages in a 

class action may not exceed the lesser 

of $500,000 or 1 percent of the net 

worth of the servicer. 

(iii) Costs. In addition, in the case of 

any successful action under paragraph 

(f) of this section, the costs of the action 

and any reasonable attorneys’ fees 

incurred in connection with the action. 

(2) Nonliability. A transferor or 

transferee servicer shall not be liable for 

any failure to comply with the 

requirements of this section, if within 

60 days after discovering an error 

(whether pursuant to a final written 

examination report or the servicer’s own 

procedures) and before commencement 

of an action under this section and the 

receipt of written notice of the error 

from the borrower, the servicer notifies 

the person concerned of the error and 

makes whatever adjustments are 

necessary in the appropriate account to 

ensure that the person will not be 

required to pay an amount in excess of 

any amount that the person otherwise 

would have paid. 

(g) Timely payments by servicer. If the 

terms of any mortgage servicing loan 

require the borrower to make payments 

to the servicer of the loan for deposit 

into an escrow account for the purpose 

of assuring payment of taxes, insurance 

premiums, and other charges with 

respect to the mortgaged property, the 

servicer shall make payments from the 

escrow account in a timely manner for 

the taxes, insurance premiums, and 

other charges as the payments become 

due, as governed by the requirements in 

§ 1024.17(k). 

(h) Preemption of state laws. A lender 

who makes a mortgage servicing loan or 

a servicer shall be considered to have 

complied with the provisions of any 

state law or regulation requiring notice 

to a borrower at the time of application 

for a loan or transfer of servicing of a 

loan if the lender or servicer complies 

with the requirements of this section. 

Any state law requiring notice to the 

borrower at the time of application or at 

the time of transfer of servicing of the 

loan is preempted, and there shall be no 

additional borrower disclosure 

requirements. Provisions of state law, 

such as those requiring additional 

notices to insurance companies or 

taxing authorities, are not preempted by 

section 6 of RESPA or this section, and 

this additional information may be 

added to a notice prepared under this 

section, if the procedure is allowable 

under state law. 

§ 1024.22 Severability. 

If any particular provision of this part 

or the application of any particular 

provision to any person or circumstance 

is held invalid, the remainder of this 

part and the application of such 

provisions to other persons or 

circumstances shall not be affected by 

such holding. 

§ 1024.23 ESIGN applicability. 

The Electronic Signatures in Global 

and National Commerce Act (‘‘ESIGN’’), 

15 U.S.C. 7001–7031, shall apply to this 

part. 

Appendix A to Part 1024—Instructions 

for Completing HUD–1 and HUD–1a 

Settlement Statements; Sample HUD–1 

and HUD–1a Statements 

The following are instructions for 

completing the HUD–1 settlement statement, 

required under section 4 of RESPA and 12 

CFR part 1024 (Regulation X) of the Bureau 

of Consumer Financial Protection (Bureau) 

regulations. This form is to be used as a 

statement of actual charges and adjustments 

paid by the borrower and the seller, to be 

given to the parties in connection with the 

settlement. The instructions for completion 

of the HUD–1 are primarily for the benefit of 

the settlement agents who prepare the 

statements and need not be transmitted to the 

parties as an integral part of the HUD–1. 

There is no objection to the use of the HUD– 

1 in transactions in which its use is not 

legally required. Refer to the definitions 

section of the regulations (12 CFR 1024.2) for 

specific definitions of many of the terms that 

are used in these instructions. 

General Instructions 

Information and amounts may be filled in 

by typewriter, hand printing, computer 

printing, or any other method producing 

clear and legible results. Refer to the Bureau’s 

regulations (Regulation X) regarding rules 

applicable to reproduction of the HUD–1 for 

the purpose of including customary recitals 

and information used locally in settlements; 

for example, a breakdown of payoff figures, 

a breakdown of the Borrower’s total monthly 

mortgage payments, check disbursements, a 

statement indicating receipt of funds, 

applicable special stipulations between 

Borrower and Seller, and the date funds are 

transferred. 

The settlement agent shall complete the 

HUD–1 to itemize all charges imposed upon 

the Borrower and the Seller by the loan 

originator and all sales commissions, 

whether to be paid at settlement or outside 

of settlement, and any other charges which 

either the Borrower or the Seller will pay at 

settlement. Charges for loan origination and 

title services should not be itemized except 

as provided in these instructions. For each 

separately identified settlement service in 

connection with the transaction, the name of 

the person ultimately receiving the payment 

must be shown together with the total 

amount paid to such person. Items paid to 

and retained by a loan originator are 

disclosed as required in the instructions for 

lines in the 800-series of the HUD–1 (and for 

per diem interest, in the 900-series of the 

HUD–1). 

As a general rule, charges that are paid for 

by the seller must be shown in the seller’s 

column on page 2 of the HUD–1 (unless paid 

outside closing), and charges that are paid for 

by the borrower must be shown in the 

borrower’s column (unless paid outside 

closing). However, in order to promote 

comparability between the charges on the 

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GFE and the charges on the HUD–1, if a seller 

pays for a charge that was included on the 

GFE, the charge should be listed in the 

borrower’s column on page 2 of the HUD–1. 

That charge should also be offset by listing 

a credit in that amount to the borrower on 

lines 204–209 on page 1 of the HUD–1, and 

by a charge to the seller in lines 506–509 on 

page 1 of the HUD–1. If a loan originator 

(other than for no-cost loans), real estate 

agent, other settlement service provider, or 

other person pays for a charge that was 

included on the GFE, the charge should be 

listed in the borrower’s column on page 2 of 

the HUD–1, with an offsetting credit reported 

on page 1 of the HUD–1, identifying the party 

paying the charge. 

Charges paid outside of settlement by the 

borrower, seller, loan originator, real estate 

agent, or any other person, must be included 

on the HUD–1 but marked ‘‘P.O.C.’’ for ‘‘Paid 

Outside of Closing’’ (settlement) and must 

not be included in computing totals. 

However, indirect payments from a lender to 

a mortgage broker may not be disclosed as 

P.O.C., and must be included as a credit on 

Line 802. P.O.C. items must not be placed in 

the Borrower or Seller columns, but rather on 

the appropriate line outside the columns. 

The settlement agent must indicate whether 

P.O.C. items are paid for by the Borrower, 

Seller, or some other party by marking the 

items paid for by whoever made the payment 

as ‘‘P.O.C.’’ with the party making the 

payment identified in parentheses, such as 

‘‘P.O.C. (borrower)’’ or ‘‘P.O.C. (seller)’’. 

In the case of ‘‘no cost’’ loans where ‘‘no 

cost’’ encompasses third party fees as well as 

the upfront payment to the loan originator, 

the third party services covered by the ‘‘no 

cost’’ provisions must be itemized and listed 

in the borrower’s column on the HUD–1/1A 

with the charge for the third party service. 

These itemized charges must be offset with 

a negative adjusted origination charge on 

Line 803 and recorded in the columns. 

Blank lines are provided in section L for 

any additional settlement charges. Blank 

lines are also provided for additional 

insertions in sections J and K. The names of 

the recipients of the settlement charges in 

section L and the names of the recipients of 

adjustments described in section J or K 

should be included on the blank lines. 

Lines and columns in section J which 

relate to the Borrower’s transaction may be 

left blank on the copy of the HUD–1 which 

will be furnished to the Seller. Lines and 

columns in section K which relate to the 

Seller’s transaction may be left blank on the 

copy of the HUD–1 which will be furnished 

to the Borrower. 

Line Item Instructions 

Instructions for completing the individual 

items on the HUD–1 follow. 

Section A. This section requires no entry 

of information. 

Section B. Check appropriate loan type and 

complete the remaining items as applicable. 

Section C. This section provides a notice 

regarding settlement costs and requires no 

additional entry of information. 

Sections D and E. Fill in the names and 

current mailing addresses and zip codes of 

the Borrower and the Seller. Where there is 

more than one Borrower or Seller, the name 

and address of each one is required. Use a 

supplementary page if needed to list multiple 

Borrowers or Sellers. 

Section F. Fill in the name, current mailing 

address and zip code of the Lender. 

Section G. The street address of the 

property being sold should be listed. If there 

is no street address, a brief legal description 

or other location of the property should be 

inserted. In all cases give the zip code of the 

property. 

Section H. Fill in name, address, zip code 

and telephone number of settlement agent, 

and address and zip code of ‘‘place of 

settlement.’’ 

Section I. Fill in date of settlement. 

Section J. Summary of Borrower’s 

Transaction. Line 101 is for the contract sales 

price of the property being sold, excluding 

the price of any items of tangible personal 

property if Borrower and Seller have agreed 

to a separate price for such items. 

Line 102 is for the sales price of any items 

of tangible personal property excluded from 

Line 101. Personal property could include 

such items as carpets, drapes, stoves, 

refrigerators, etc. What constitutes personal 

property varies from state to state. 

Manufactured homes are not considered 

personal property for this purpose. 

Line 103 is used to record the total charges 

to Borrower detailed in section L and totaled 

on Line 1400. 

Lines 104 and 105 are for additional 

amounts owed by the Borrower, such as 

charges that were not listed on the GFE or 

items paid by the Seller prior to settlement 

but reimbursed by the Borrower at 

settlement. For example, the balance in the 

Seller’s reserve account held in connection 

with an existing loan, if assigned to the 

Borrower in a loan assumption case, will be 

entered here. These lines will also be used 

when a tenant in the property being sold has 

not yet paid the rent, which the Borrower 

will collect, for a period of time prior to the 

settlement. The lines will also be used to 

indicate the treatment for any tenant security 

deposit. The Seller will be credited on Lines 

404–405. 

Lines 106 through 112 are for items which 

the Seller had paid in advance, and for which 

the Borrower must therefore reimburse the 

Seller. Examples of items for which 

adjustments will be made may include taxes 

and assessments paid in advance for an 

entire year or other period, when settlement 

occurs prior to the expiration of the year or 

other period for which they were paid. 

Additional examples include flood and 

hazard insurance premiums, if the Borrower 

is being substituted as an insured under the 

same policy; mortgage insurance in loan 

assumption cases; planned unit development 

or condominium association assessments 

paid in advance; fuel or other supplies on 

hand, purchased by the Seller, which the 

Borrower will use when Borrower takes 

possession of the property; and ground rent 

paid in advance. 

Line 120 is for the total of Lines 101 

through 112. 

Line 201 is for any amount paid against the 

sales price prior to settlement. 

Line 202 is for the amount of the new loan 

made by the Lender when a loan to finance 

construction of a new structure constructed 

for sale is used as or converted to a loan to 

finance purchase. Line 202 should also be 

used for the amount of the first user loan, 

when a loan to purchase a manufactured 

home for resale is converted to a loan to 

finance purchase by the first user. For other 

loans covered by 12 CFR part 1024 

(Regulation X) which finance construction of 

a new structure or purchase of a 

manufactured home, list the sales price of the 

land on Line 104, the construction cost or 

purchase price of manufactured home on 

Line 105 (Line 101 would be left blank in this 

instance) and amount of the loan on Line 

202. The remainder of the form should be 

completed taking into account adjustments 

and charges related to the temporary 

financing and permanent financing and 

which are known at the date of settlement. 

Line 203 is used for cases in which the 

Borrower is assuming or taking title subject 

to an existing loan or lien on the property. 

Lines 204–209 are used for other items 

paid by or on behalf of the Borrower. Lines 

204–209 should be used to indicate any 

financing arrangements or other new loan not 

listed in Line 202. For example, if the 

Borrower is using a second mortgage or note 

to finance part of the purchase price, whether 

from the same lender, another lender or the 

Seller, insert the principal amount of the loan 

with a brief explanation on Lines 204–209. 

Lines 204–209 should also be used where the 

Borrower receives a credit from the Seller for 

closing costs, including seller-paid GFE 

charges. They may also be used in cases in 

which a Seller (typically a builder) is making 

an ‘‘allowance’’ to the Borrower for items that 

the Borrower is to purchase separately. 

Lines 210 through 219 are for items which 

have not yet been paid, and which the 

Borrower is expected to pay, but which are 

attributable in part to a period of time prior 

to the settlement. In jurisdictions in which 

taxes are paid late in the tax year, most cases 

will show the proration of taxes in these 

lines. Other examples include utilities used 

but not paid for by the Seller, rent collected 

in advance by the Seller from a tenant for a 

period extending beyond the settlement date, 

and interest on loan assumptions. 

Line 220 is for the total of Lines 201 

through 219. 

Lines 301 and 302 are summary lines for 

the Borrower. Enter total in Line 120 on Line 

301. Enter total in Line 220 on Line 302. 

Line 303 must indicate either the cash 

required from the Borrower at settlement (the 

usual case in a purchase transaction), or cash 

payable to the Borrower at settlement (if, for 

example, the Borrower’s earnest money 

exceeds the Borrower’s cash obligations in 

the transaction or there is a cash-out 

refinance). Subtract Line 302 from Line 301 

and enter the amount of cash due to or from 

the Borrower at settlement on Line 303. The 

appropriate box should be checked. If the 

Borrower’s earnest money is applied toward 

the charge for a settlement service, the 

amount so applied should not be included on 

Line 303 but instead should be shown on the 

appropriate line for the settlement service, 

marked ‘‘P.O.C. (Borrower)’’, and must not be 

included in computing totals. 

Section K. Summary of Seller’s 

Transaction. Instructions for the use of Lines 

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101 and 102 and 104–112 above, apply also 

to Lines 401–412. Line 420 is for the total of 

Lines 401 through 412. 

Line 501 is used if the Seller’s real estate 

broker or other party who is not the 

settlement agent has received and holds a 

deposit against the sales price (earnest 

money) which exceeds the fee or commission 

owed to that party. If that party will render 

the excess deposit directly to the Seller, 

rather than through the settlement agent, the 

amount of excess deposit should be entered 

on Line 501 and the amount of the total 

deposit (including commissions) should be 

entered on Line 201. 

Line 502 is used to record the total charges 

to the Seller detailed in section L and totaled 

on Line 1400. 

Line 503 is used if the Borrower is 

assuming or taking title subject to existing 

liens which are to be deducted from sales 

price. 

Lines 504 and 505 are used for the amounts 

(including any accrued interest) of any first 

and/or second loans which will be paid as 

part of the settlement. 

Line 506 is used for deposits paid by the 

Borrower to the Seller or other party who is 

not the settlement agent. Enter the amount of 

the deposit in Line 201 on Line 506 unless 

Line 501 is used or the party who is not the 

settlement agent transfers all or part of the 

deposit to the settlement agent, in which case 

the settlement agent will note in parentheses 

on Line 507 the amount of the deposit that 

is being disbursed as proceeds and enter in 

the column for Line 506 the amount retained 

by the above-described party for settlement 

services. If the settlement agent holds the 

deposit, insert a note in Line 507 which 

indicates that the deposit is being disbursed 

as proceeds. 

Lines 506 through 509 may be used to list 

additional liens which must be paid off 

through the settlement to clear title to the 

property. Other Seller obligations should be 

shown on Lines 506–509, including charges 

that were disclosed on the GFE but that are 

actually being paid for by the Seller. These 

Lines may also be used to indicate funds to 

be held by the settlement agent for the 

payment of either repairs, or water, fuel, or 

other utility bills that cannot be prorated 

between the parties at settlement because the 

amounts used by the Seller prior to 

settlement are not yet known. Subsequent 

disclosure of the actual amount of these postsettlement items to be paid from settlement 

funds is optional. Any amounts entered on 

Lines 204–209 including Seller financing 

arrangements should also be entered on Lines 

506–509. 

Instructions for the use of Lines 510 

through 519 are the same as those for Lines 

210 to 219 above. 

Line 520 is for the total of Lines 501 

through 519. 

Lines 601 and 602 are summary lines for 

the Seller. Enter the total in Line 420 on Line 

601. Enter the total in Line 520 on Line 602. 

Line 603 must indicate either the cash 

required to be paid to the Seller at settlement 

(the usual case in a purchase transaction), or 

the cash payable by the Seller at settlement. 

Subtract Line 602 from Line 601 and enter 

the amount of cash due to or from the Seller 

at settlement on Line 603. The appropriate 

box should be checked. 

Section L. Settlement Charges 

Line 700 is used to enter the sales 

commission charged by the sales agent or real 

estate broker. 

Lines 701–702 are to be used to state the 

split of the commission where the settlement 

agent disburses portions of the commission 

to two or more sales agents or real estate 

brokers. 

Line 703 is used to enter the amount of 

sales commission disbursed at settlement. If 

the sales agent or real estate broker is 

retaining a part of the deposit against the 

sales price (earnest money) to apply towards 

the sales agent’s or real estate broker’s 

commission, include in Line 703 only that 

part of the commission being disbursed at 

settlement and insert a note on Line 704 

indicating the amount the sales agent or real 

estate broker is retaining as a ‘‘P.O.C.’’ item. 

Line 704 may be used for additional 

charges made by the sales agent or real estate 

broker, or for a sales commission charged to 

the Borrower, which will be disbursed by the 

settlement agent. 

Line 801 is used to record ‘‘Our origination 

charge,’’ which includes all charges received 

by the loan originator, except any charge for 

the specific interest rate chosen (points). This 

number must not be listed in either the 

buyer’s or seller’s column. The amount 

shown in Line 801 must include any 

amounts received for origination services, 

including administrative and processing 

services, performed by or on behalf of the 

loan originator. 

Line 802 is used to record ‘‘Your credit or 

charge (points) for the specific interest rate 

chosen,’’ which states the charge or credit 

adjustment as applied to ‘‘Our origination 

charge,’’ if applicable. This number must not 

be listed in either column or shown on page 

one of the HUD–1. 

For a mortgage broker originating a loan in 

its own name, the amount shown on Line 802 

will be the difference between the initial loan 

amount and the total payment to the 

mortgage broker from the lender. The total 

payment to the mortgage broker will be the 

sum of the price paid for the loan by the 

lender and any other payments to the 

mortgage broker from the lender, including 

any payments based on the loan amount or 

loan terms, and any flat rate payments. For 

a mortgage broker originating a loan in 

another entity’s name, the amount shown on 

Line 802 will be the sum of all payments to 

the mortgage broker from the lender, 

including any payments based on the loan 

amount or loan terms, and any flat rate 

payments. 

In either case, when the amount paid to the 

mortgage broker exceeds the initial loan 

amount, there is a credit to the borrower and 

it is entered as a negative amount. When the 

initial loan amount exceeds the amount paid 

to the mortgage broker, there is a charge to 

the borrower and it is entered as a positive 

amount. For a lender, the amount shown on 

Line 802 may include any credit or charge 

(points) to the Borrower. 

Line 803 is used to record ‘‘Your adjusted 

origination charges,’’ which states the net 

amount of the loan origination charges, the 

sum of the amounts shown in Lines 801 and 

802. This amount must be listed in the 

columns as either a positive number (for 

example, where the origination charge shown 

in Line 801 exceeds any credit for the interest 

rate shown in Line 802 or where there is an 

origination charge in Line 801 and a charge 

for the interest rate (points) is shown on Line 

802) or as a negative number (for example, 

where the credit for the interest rate shown 

in Line 802 exceeds the origination charges 

shown in Line 801). 

In the case of ‘‘no cost’’ loans, where ‘‘no 

cost’’ refers only to the loan originator’s fees, 

the amounts shown in Lines 801 and 802 

should offset, so that the charge shown on 

Line 803 is zero. Where ‘‘no cost’’ includes 

third party settlement services, the credit 

shown in Line 802 will more than offset the 

amount shown in Line 801. The amount 

shown in Line 803 will be a negative number 

to offset the settlement charges paid 

indirectly through the loan originator. 

Lines 804–808 may be used to record each 

of the ‘‘Required services that we select.’’ 

Each settlement service provider must be 

identified by name and the amount paid 

recorded either inside the columns or as paid 

to the provider outside closing (‘‘P.O.C.’’), as 

described in the General Instructions. 

Line 804 is used to record the appraisal fee. 

Line 805 is used to record the fee for all 

credit reports. 

Line 806 is used to record the fee for any 

tax service. 

Line 807 is used to record any flood 

certification fee. 

Lines 808 and additional sequentially 

numbered lines, as needed, are used to 

record other third party services required by 

the loan originator. These Lines may also be 

used to record other required disclosures 

from the loan originator. Any such 

disclosures must be listed outside the 

columns. 

Lines 901–904. This series is used to 

record the items which the Lender requires 

to be paid at the time of settlement, but 

which are not necessarily paid to the lender 

(e.g., FHA mortgage insurance premium), 

other than reserves collected by the Lender 

and recorded in the 1000-series. 

Line 901 is used if interest is collected at 

settlement for a part of a month or other 

period between settlement and the date from 

which interest will be collected with the first 

regular monthly payment. Enter that amount 

here and include the per diem charges. If 

such interest is not collected until the first 

regular monthly payment, no entry should be 

made on Line 901. 

Line 902 is used for mortgage insurance 

premiums due and payable at settlement, 

including any monthly amounts due at 

settlement and any upfront mortgage 

insurance premium, but not including any 

reserves collected by the Lender and 

recorded in the 1000-series. If a lump sum 

mortgage insurance premium paid at 

settlement is included on Line 902, a note 

should indicate that the premium is for the 

life of the loan. 

Line 903 is used for homeowner’s 

insurance premiums that the Lender requires 

to be paid at the time of settlement, except 

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reserves collected by the Lender and 

recorded in the 1000-series. 

Lines 904 and additional sequentially 

numbered lines are used to list additional 

items required by the Lender (except for 

reserves collected by the Lender and 

recorded in the 1000-series), including 

premiums for flood or other insurance. These 

lines are also used to list amounts paid at 

settlement for insurance not required by the 

Lender. 

Lines 1000–1007. This series is used for 

amounts collected by the Lender from the 

Borrower and held in an account for the 

future payment of the obligations listed as 

they fall due. Include the time period 

(number of months) and the monthly 

assessment. In many jurisdictions this is 

referred to as an ‘‘escrow’’, ‘‘impound’’, or 

‘‘trust’’ account. In addition to the property 

taxes and insurance listed, some Lenders 

may require reserves for flood insurance, 

condominium owners’ association 

assessments, etc. The amount in line 1001 

must be listed in the columns, and the 

itemizations in lines 1002 through 1007 must 

be listed outside the columns. 

After itemizing individual deposits in the 

1000 series, the servicer shall make an 

adjustment based on aggregate accounting. 

This adjustment equals the difference 

between the deposit required under aggregate 

accounting and the sum of the itemized 

deposits. The computation steps for aggregate 

accounting are set out in 12 CFR 1024.17(d). 

The adjustment will always be a negative 

number or zero (-0-), except for amounts due 

to rounding. The settlement agent shall enter 

the aggregate adjustment amount outside the 

columns on a final line of the 1000 series of 

the HUD–1 or HUD–1A statement. Appendix 

E to this part sets out an example of aggregate 

analysis. 

Lines 1100–1108. This series covers title 

charges and charges by attorneys and closing 

or settlement agents. The title charges 

include a variety of services performed by 

title companies or others, and include fees 

directly related to the transfer of title (title 

examination, title search, document 

preparation), fees for title insurance, and fees 

for conducting the closing. The legal charges 

include fees for attorneys representing the 

lender, seller, or borrower, and any attorney 

preparing title work. The series also includes 

any settlement, notary, and delivery fees 

related to the services covered in this series. 

Disbursements to third parties must be 

broken out in the appropriate lines or in 

blank lines in the series, and amounts paid 

to these third parties must be shown outside 

of the columns if included in Line 1101. 

Charges not included in Line 1101 must be 

listed in the columns. 

Line 1101 is used to record the total for the 

category of ‘‘Title services and lender’s title 

insurance.’’ This amount must be listed in 

the columns. 

Line 1102 is used to record the settlement 

or closing fee. 

Line 1103 is used to record the charges for 

the owner’s title insurance and related 

endorsements. This amount must be listed in 

the columns. 

Line 1104 is used to record the lender’s 

title insurance premium and related 

endorsements. 

Line 1105 is used to record the amount of 

the lender’s title policy limit. This amount is 

recorded outside of the columns. 

Line 1106 is used to record the amount of 

the owner’s title policy limit. This amount is 

recorded outside of the columns. 

Line 1107 is used to record the amount of 

the total title insurance premium, including 

endorsements, that is retained by the title 

agent. This amount is recorded outside of the 

columns. 

Line 1108 used to record the amount of the 

total title insurance premium, including 

endorsements, that is retained by the title 

underwriter. This amount is recorded outside 

of the columns. 

Additional sequentially numbered lines in 

the 1100-series may be used to itemize title 

charges paid to other third parties, as 

identified by name and type of service 

provided. 

Lines 1200–1206. This series covers 

government recording and transfer charges. 

Charges paid by the borrower must be listed 

in the columns as described for lines 1201 

and 1203, with itemizations shown outside 

the columns. Any amounts that are charged 

to the seller and that were not included on 

the Good Faith Estimate must be listed in the 

columns. 

Line 1201 is used to record the total 

‘‘Government recording charges,’’ and the 

amount must be listed in the columns. 

Line 1202 is used to record, outside of the 

columns, the itemized recording charges. 

Line 1203 is used to record the transfer 

taxes, and the amount must be listed in the 

columns. 

Line 1204 is used to record, outside of the 

columns, the amounts for local transfer taxes 

and stamps. 

Line 1205 is used to record, outside of the 

columns, the amounts for state transfer taxes 

and stamps. 

Line 1206 and additional sequentially 

numbered lines may be used to record 

specific itemized third party charges for 

government recording and transfer services, 

but the amounts must be listed outside the 

columns. 

Line 1301 and additional sequentially 

numbered lines must be used to record 

required services that the borrower can shop 

for, such as fees for survey, pest inspection, 

or other similar inspections. These lines may 

also be used to record additional itemized 

settlement charges that are not included in a 

specific category, such as fees for structural 

and environmental inspections; pre-sale 

inspections of heating, plumbing or electrical 

equipment; or insurance or warranty 

coverage. The amounts must be listed in 

either the borrower’s or seller’s column. 

Line 1400 must state the total settlement 

charges as calculated by adding the amounts 

within each column. 

Page 3 

Comparison of Good Faith Estimate (GFE) 

and HUD–1/1A Charges 

The HUD–1/1–A is a statement of actual 

charges and adjustments. The comparison 

chart on page 3 of the HUD–1 must be 

prepared using the exact information and 

amounts for the services that were purchased 

or provided as part of the transaction, as that 

information and those amounts are shown on 

the GFE and in the HUD–1. If a service that 

was listed on the GFE was not obtained in 

connection with the transaction, pages 1 and 

2 of the HUD–1 should not include any 

amount for that service, and the estimate on 

the GFE of the charge for the service should 

not be included in any amounts shown on 

the comparison chart on Page 3 of the HUD– 

1. The comparison chart is comprised of 

three sections: ‘‘Charges That Cannot 

Increase’’, ‘‘Charges That Cannot Increase 

More Than 10%’’, and ‘‘Charges That Can 

Change’’. 

‘‘Charges That Cannot Increase’’. The 

amounts shown in Blocks 1 and 2, in Line 

A, and in Block 8 on the borrower’s GFE 

must be entered in the appropriate line in the 

Good Faith Estimate column. The amounts 

shown on Lines 801, 802, 803 and 1203 of 

the HUD–1/1A must be entered in the 

corresponding line in the HUD–1/1A 

column. The HUD–1/1A column must 

include any amounts shown on page 2 of the 

HUD–1 in the column as paid for by the 

borrower, plus any amounts that are shown 

as P.O.C. by or on behalf of the borrower. If 

there is a credit in Block 2 of the GFE or Line 

802 of the HUD–1/1A, the credit should be 

entered as a negative number. 

‘‘Charges That Cannot Increase More Than 

10%’’. A description of each charge included 

in Blocks 3 and 7 on the borrower’s GFE 

must be entered on separate lines in this 

section, with the amount shown on the 

borrower’s GFE for each charge entered in the 

corresponding line in the Good Faith 

Estimate column. For each charge included 

in Blocks 4, 5 and 6 on the borrower’s GFE 

for which the loan originator selected the 

provider or for which the borrower selected 

a provider identified by the loan originator, 

a description must be entered on a separate 

line in this section, with the amount shown 

on the borrower’s GFE for each charge 

entered in the corresponding line in the Good 

Faith Estimate column. The loan originator 

must identify any third party settlement 

services for which the borrower selected a 

provider other than one identified by the 

loan originator so that the settlement agent 

can include those charges in the appropriate 

category. Additional lines may be added if 

necessary. The amounts shown on the HUD– 

1/1A for each line must be entered in the 

HUD–1/1A column next to the corresponding 

charge from the GFE, along with the 

appropriate HUD–1/1A line number. The 

HUD–1/1A column must include any 

amounts shown on page 2 of the HUD–1 in 

the column as paid for by the borrower, plus 

any amounts that are shown as P.O.C. by or 

on behalf of the borrower. 

The amounts shown in the Good Faith 

Estimate and HUD–1/1A columns for this 

section must be separately totaled and 

entered in the designated line. If the total for 

the HUD–1/1A column is greater than the 

total for the Good Faith Estimate column, 

then the amount of the increase must be 

entered both as a dollar amount and as a 

percentage increase in the appropriate line. 

‘‘Charges That Can Change’’. The amounts 

shown in Blocks 9, 10 and 11 on the 

borrower’s GFE must be entered in the 

appropriate lines in the Good Faith Estimate 

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column. Any third party settlement services 

for which the borrower selected a provider 

other than one identified by the loan 

originator must also be included in this 

section. The amounts shown on the HUD–1/ 

1A for each charge in this section must be 

entered in the corresponding line in the 

HUD–1/1A column, along with the 

appropriate HUD–1/1A line number. The 

HUD–1/1A column must include any 

amounts shown on page 2 of the HUD–1 in 

the column as paid for by the borrower, plus 

any amounts that are shown as P.O.C. by or 

on behalf of the borrower. Additional lines 

may be added if necessary. 

Loan Terms 

This section must be completed in 

accordance with the information and 

instructions provided by the lender. The 

lender must provide this information in a 

format that permits the settlement agent to 

simply enter the necessary information in the 

appropriate spaces, without the settlement 

agent having to refer to the loan documents 

themselves. 

Instructions for Completing HUD–1A 

Note: The HUD–1A is an optional form that 

may be used for refinancing and subordinatelien federally related mortgage loans, as well 

as for any other one-party transaction that 

does not involve the transfer of title to 

residential real property. The HUD–1 form 

may also be used for such transactions, by 

utilizing the borrower’s side of the HUD–1 

and following the relevant parts of the 

instructions as set forth above. The use of 

either the HUD–1 or HUD–1A is not 

mandatory for open-end lines of credit 

(home-equity plans), as long as the 

provisions of Regulation Z are followed. 

Background 

The HUD–1A settlement statement is to be 

used as a statement of actual charges and 

adjustments to be given to the borrower at 

settlement, as defined in this part. The 

instructions for completion of the HUD–1A 

are for the benefit of the settlement agent 

who prepares the statement; the instructions 

are not a part of the statement and need not 

be transmitted to the borrower. There is no 

objection to using the HUD–1A in 

transactions in which it is not required, and 

its use in open-end lines of credit 

transactions (home-equity plans) is 

encouraged. It may not be used as a 

substitute for a HUD–1 in any transaction 

that has a seller. 

Refer to the ‘‘definitions’’ section (§ 1024.2) 

of 12 CFR part 1024 (Regulation X) for 

specific definitions of terms used in these 

instructions. 

General Instructions 

Information and amounts may be filled in 

by typewriter, hand printing, computer 

printing, or any other method producing 

clear and legible results. Refer to 12 CFR 

1024.9 regarding rules for reproduction of the 

HUD–1A. Additional pages may be attached 

to the HUD–1A for the inclusion of 

customary recitals and information used 

locally for settlements or if there are 

insufficient lines on the HUD–1A. The 

settlement agent shall complete the HUD–1A 

in accordance with the instructions for the 

HUD–1 to the extent possible, including the 

instructions for disclosing items paid outside 

closing and for no cost loans. 

Blank lines are provided in section L for 

any additional settlement charges. Blank 

lines are also provided in section M for 

recipients of all or portions of the loan 

proceeds. The names of the recipients of the 

settlement charges in section L and the 

names of the recipients of the loan proceeds 

in section M should be set forth on the blank 

lines. 

Line-Item Instructions 

Page 1 

The identification information at the top of 

the HUD–1A should be completed as follows: 

The borrower’s name and address is entered 

in the space provided. If the property 

securing the loan is different from the 

borrower’s address, the address or other 

location information on the property should 

be entered in the space provided. The loan 

number is the lender’s identification number 

for the loan. The settlement date is the date 

of settlement in accordance with 12 CFR 

1024.2, not the end of any applicable 

rescission period. The name and address of 

the lender should be entered in the space 

provided. 

Section L. Settlement Charges. This section 

of the HUD–1A is similar to section L of the 

HUD–1, with minor changes or omissions, 

including deletion of lines 700 through 704, 

relating to real estate broker commissions. 

The instructions for section L in the HUD– 

1 should be followed insofar as possible. 

Inapplicable charges should be ignored, as 

should any instructions regarding seller 

items. 

Line 1400 in the HUD–1A is for the total 

settlement charges charged to the borrower. 

Enter this total on line 1601. This total 

should include section L amounts from 

additional pages, if any are attached to this 

HUD–1A. 

Section M. Disbursement to Others. This 

section is used to list payees, other than the 

borrower, of all or portions of the loan 

proceeds (including the lender, if the loan is 

paying off a prior loan made by the same 

lender), when the payee will be paid directly 

out of the settlement proceeds. It is not used 

to list payees of settlement charges, nor to list 

funds disbursed directly to the borrower, 

even if the lender knows the borrower’s 

intended use of the funds. 

For example, in a refinancing transaction, 

the loan proceeds are used to pay off an 

existing loan. The name of the lender for the 

loan being paid off and the pay-off balance 

would be entered in section M. In a home 

improvement transaction when the proceeds 

are to be paid to the home improvement 

contractor, the name of the contractor and the 

amount paid to the contractor would be 

entered in section M. In a consolidation loan, 

or when part of the loan proceeds is used to 

pay off other creditors, the name of each 

creditor and the amount paid to that creditor 

would be entered in section M. If the 

proceeds are to be given directly to the 

borrower and the borrower will use the 

proceeds to pay off existing obligations, this 

would not be reflected in section M. 

Section N. Net Settlement. Line 1600 

normally sets forth the principal amount of 

the loan as it appears on the related note for 

this loan. In the event this form is used for 

an open-ended home equity line whose 

approved amount is greater than the initial 

amount advanced at settlement, the amount 

shown on Line 1600 will be the loan amount 

advanced at settlement. Line 1601 is used for 

all settlement charges that both are included 

in the totals for lines 1400 and 1602, and are 

not financed as part of the principal amount 

of the loan. This is the amount normally 

received by the lender from the borrower at 

settlement, which would occur when some or 

all of the settlement charges were paid in 

cash by the borrower at settlement, instead of 

being financed as part of the principal 

amount of the loan. Failure to include any 

such amount in line 1601 will result in an 

error in the amount calculated on line 1604. 

Items paid outside of closing (P.O.C.) should 

not be included in Line 1601. 

Line 1602 is the total amount from line 

1400. 

Line 1603 is the total amount from line 

1520. 

Line 1604 is the amount disbursed to the 

borrower. This is determined by adding 

together the amounts for lines 1600 and 1601, 

and then subtracting any amounts listed on 

lines 1602 and 1603. 

Page 2 

This section of the HUD–1A is similar to 

page 3 of the HUD–1. The instructions for 

page 3 of the HUD–1 should be followed 

insofar as possible. The HUD–1/1A Column 

should include any amounts shown on page 

1 of the HUD–1A in the column as paid for 

by the borrower, plus any amounts that are 

shown as P.O.C. by the borrower. 

Inapplicable charges should be ignored. 

BILLING CODE 4810–AM–P 

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Appendix B to Part 1024—Illustrations 

of Requirements of RESPA 

The following illustrations provide 

additional guidance on the meaning and 

coverage of the provisions of RESPA. Other 

provisions of Federal or state law may also 

be applicable to the practices and payments 

discussed in the following illustrations. 

1. Facts: A, a provider of settlement 

services, provides settlement services at 

abnormally low rates or at no charge at all 

to B, a builder, in connection with a 

subdivision being developed by B. B agrees 

to refer purchasers of the completed homes 

in the subdivision to A for the purchase of 

settlement services in connection with the 

sale of individual lots by B. 

Comments: The rendering of services by A 

to B at little or no charge constitutes a thing 

of value given by A to B in return for the 

referral of settlement services business, and 

both A and B are in violation of section 8 of 

RESPA. 

2. Facts: B, a lender, encourages persons 

who receive federally related mortgage loans 

from it to employ A, an attorney, to perform 

title searches and related settlement services 

in connection with their transaction. B and 

A have an understanding that in return for 

the referral of this business A provides legal 

services to B or B’s officers or employees at 

abnormally low rates or for no charge. 

Comments: Both A and B are in violation 

of section 8 of RESPA. Similarly, if an 

attorney gives a portion of his or her fees to 

another attorney, a lender, a real estate broker 

or any other provider of settlement services, 

who had referred prospective clients to the 

attorney, section 8 would be violated by both 

persons. 

3. Facts: A, a real estate broker, obtains all 

necessary licenses under state law to act as 

a title insurance agent. A refers individuals 

who are purchasing homes in transactions in 

which A participates as a broker to B, an 

unaffiliated title company, for the purchase 

of title insurance services. A performs 

minimal, if any, title services in connection 

with the issuance of the title insurance policy 

(such as placing an application with the title 

company). B pays A a commission (or A 

retains a portion of the title insurance 

premium) for the transactions or alternatively 

B receives a portion of the premium paid 

directly from the purchaser. 

Comments: The payment of a commission 

or portion of the title insurance premium by 

B to A, or receipt of a portion of the payment 

for title insurance under circumstances 

where no substantial services are being 

performed by A, is a violation of section 8 

of RESPA. It makes no difference whether the 

payment comes from B or the purchaser. The 

amount of the payment must bear a 

reasonable relationship to the services 

rendered. Here A really is being compensated 

for a referral of business to B. 

4. Facts: A is an attorney who, as a part of 

his legal representation of clients in 

residential real estate transactions, orders 

and reviews title insurance policies for his 

clients. A enters into a contract with B, a title 

company, to be an agent of B under a 

program set up by B. Under the agreement, 

A agrees to prepare and forward title 

insurance applications to B, to re-examine 

the preliminary title commitment for 

accuracy and if he chooses to attempt to clear 

exceptions to the title policy before closing. 

A agrees to assume liability for waiving 

certain exceptions to title, but never exercises 

this authority. B performs the necessary title 

search and examination work, determines 

insurability of title, prepares documents 

containing substantive information in title 

commitments, handles closings for A’s 

clients and issues title policies. A receives a 

fee from his client for legal services and an 

additional fee for his title agent ‘‘services’’ 

from the client’s title insurance premium to 

B. 

Comments: A and B are violating section 

8 of RESPA. Here, A’s clients are being 

double billed because the work A performs 

as a ‘‘title agent’’ is that which he already 

performs for his client in his capacity as an 

attorney. For A to receive a separate payment 

as a title agent, A must perform necessary 

core title work and may not contract out the 

work. To receive additional compensation as 

a title agent for this transaction, A must 

provide his client with core title agent 

services for which he assumes liability, and 

which includes at a minimum, the evaluation 

of the title search to determine insurability of 

the title, and the issuance of a title 

commitment where customary, the clearance 

of underwriting objections, and the actual 

issuance of the policy or policies on behalf 

of the title company. A may not be 

compensated for the mere re-examination of 

work performed by B. Here, A is not 

performing these services and may not be 

compensated as a title agent under section 

8(c)(1)(B). Referral fees or splits of fees may 

not be disguised as title agent commissions 

when the core title agent work is not 

performed. Further, because B created the 

program and gave A the opportunity to 

collect fees (a thing of value) in exchange for 

the referral of settlement service business, it 

has violated section 8 of RESPA. 

5. Facts: A, a ‘‘mortgage originator,’’ 

receives loan applications, funds the loans 

with its own money or with a wholesale line 

of credit for which A is liable, and closes the 

loans in A’s own name. Subsequently, B, a 

mortgage lender, purchases the loans and 

compensates A for the value of the loans, as 

well as for any mortgage servicing rights. 

Comments: Compensation for the sale of a 

mortgage loan and servicing rights 

constitutes a secondary market transaction, 

rather than a referral fee, and is beyond the 

scope of section 8 of RESPA. For purposes of 

section 8, in determining whether a bona fide 

transfer of the loan obligation has taken 

place, the Bureau examines the real source of 

funding, and the real interest of the named 

settlement lender. 

6. Facts. A, a credit reporting company, 

places a facsimile transmission machine 

(FAX) in the office of B, a mortgage lender, 

so that B can easily transmit requests for 

credit reports and A can respond. A supplies 

the FAX machine at no cost or at a reduced 

rental rate based on the number of credit 

reports ordered. 

Comments: Either situation violates section 

8 of RESPA. The FAX machine is a thing of 

value that A provides in exchange for the 

referral of business from B. Copying 

machines, computer terminals, printers, or 

other like items which have general use to 

the recipient and which are given in 

exchange for referrals of business also violate 

RESPA. 

7. Facts: A, a real estate broker, refers title 

business to B, a company that is a licensed 

title agent for C, a title insurance company. 

A owns more than 1% of B. B performs the 

title search and examination, makes 

determinations of insurability, issues the 

commitment, clears underwriting objections, 

and issues a policy of title insurance on 

behalf of C, for which C pays B a 

commission. B pays annual dividends to its 

owners, including A, based on the relative 

amount of business each of its owners refers 

to B. 

Comments: The facts involve an affiliated 

business arrangement. The payment of a 

commission by C to B is not a violation of 

section 8 of RESPA if the amount of the 

commission constitutes reasonable 

compensation for the services performed by 

B for C. The payment of a dividend or the 

giving of any other thing of value by B to A 

that is based on the amount of business 

referred to B by A does not meet the affiliated 

business agreement exemption provisions 

and such actions violate section 8. Similarly, 

if the amount of stock held by A in B (or, if 

B were a partnership, the distribution of 

partnership profits by B to A) varies based on 

the amount of business referred or expected 

to be referred, or if B retained any funds for 

subsequent distribution to A where such 

funds were generally in proportion to the 

amount of business A referred to B relative 

to the amount referred by other owners, such 

arrangements would violate section 8. The 

exemption for controlled business 

arrangements would not be available because 

the payments here would not be considered 

returns on ownership interests. Further, the 

required disclosure of the affiliated business 

arrangement and estimated charges have not 

been provided. 

8. Facts: Same as illustration 7, but B pays 

annual dividends in proportion to the 

amount of stock held by its owners, 

including A, and the distribution of annual 

dividends is not based on the amount of 

business referred or expected to be referred. 

Comments: If A and B meet the 

requirements of the affiliated business 

arrangement exemption there is not a 

violation of RESPA. Since the payment is a 

return on ownership interests, A and B will 

be exempt from section 8 if (1) A also did not 

require anyone to use the services of B, and 

(2) A disclosed its ownership interest in B on 

a separate disclosure form and provided an 

estimate of B’s charges to each person 

referred by A to B (see Appendix D of this 

part), and (3) B makes no payment (nor is 

there any other thing of value exchanged) to 

A other than dividends. 

9. Facts: A, a franchisor for franchised real 

estate brokers, owns B, a provider of 

settlement services. C, a franchisee of A, 

refers business to B. 

Comments: This is an affiliated business 

arrangement. A, B and C will all be exempt 

from section 8 if C discloses its franchise 

relationship with the owner of B on a 

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separate disclosure form and provides an 

estimate of B’s charges to each person 

referred to B (see Appendix D of this part) 

and C does not require anyone to use B’s 

services and A gives no thing a value to C 

under the franchise agreement (such as an 

adjusted level of franchise payment based on 

the referrals), and B makes no payments to 

A other than dividends representing a return 

on ownership interest (rather than, e.g., an 

adjusted level of payment being based on the 

referrals). Nor may B pay C anything of value 

for the referral. 

10. Facts: A is a real estate broker who 

refers business to its affiliate title company 

B. A makes all required written disclosures 

to the homebuyer of the arrangement and 

estimated charges and the homebuyer is not 

required to use B. B refers or contracts out 

business to C who does all the title work and 

splits the fee with B. B passes its fee to A in 

the form of dividends, a return on ownership 

interest. 

Comments: The relationship between A 

and B is an affiliated business arrangement. 

However, the affiliated business arrangement 

exemption does not provide exemption 

between an affiliated entity, B, and a third 

party, C. Here, B is a mere ‘‘shell’’ and 

provides no substantive services for its 

portion of the fee. The arrangement between 

B and C would be in violation of section 8(a) 

and (b). Even if B had an affiliate relationship 

with C, the required exemption criteria have 

not been met and the relationship would be 

subject to section 8. 

11. Facts: A, a mortgage lender is affiliated 

with B, a title company, and C, an escrow 

company and offers consumers a package of 

mortgage title and escrow services at a 

discount from the prices at which such 

services would be sold if purchased 

separately. Neither A, B, nor C requires 

consumers to purchase the services of their 

sister companies and each company sells 

such services separately and as part of the 

package. A also pays its employees (e.g., loan 

officers, secretaries, etc.) a bonus for each 

loan, title insurance or closing that A’s 

employees generate for A, B, or C 

respectively. A pays such employee bonuses 

out of its own funds and receives no 

payments or reimbursements for such 

bonuses from B or C. At or before the time 

that customers are told by A or its employees 

about the services offered by B and C and/ 

or the package of services that is available, 

the customers are provided with an affiliated 

business disclosure form. 

Comments: A’s selling of a package of 

settlement services at a discount to a 

settlement service purchaser does not violate 

section 8 of RESPA. A’s employees are 

making appropriate affiliated business 

disclosures and since the services are 

available separately and as part of a package, 

there is not ‘‘required use’’ of the additional 

services. A’s payments of bonuses to its 

employees for the referral of business to A or 

A’s affiliates, B and C, are exempt from 

section 8 under § 1024.14(g)(1). However, if 

B or C reimbursed A for any bonuses that A 

paid to its employees for referring business 

to B or C, such reimbursements would violate 

section 8. Similarly, if B or C paid bonuses 

to A’s employees directly for generating 

business for them, such payments would 

violate section 8. 

12. Facts. A is a mortgage broker who 

provides origination services to submit a loan 

to a Lender for approval. The mortgage 

broker charges the borrower a uniform fee for 

the total origination services, as well as a 

direct up-front charge for reimbursement of 

credit reporting, appraisal services or similar 

charges. 

Comment. The mortgage broker’s fee must 

be itemized in the Good Faith Estimate and 

on the HUD–1 Settlement Statement. Other 

charges which are paid for by the borrower 

and paid in advance are listed as P.O.C. on 

the HUD–1 Settlement Statement, and reflect 

the actual provider charge for such services. 

Also, any other fee or payment received by 

the mortgage broker from either the lender or 

the borrower arising from the initial funding 

transaction, including a servicing release 

premium or yield spread premium, is to be 

noted on the Good Faith Estimate and listed 

in the 800 series of the HUD–1 Settlement 

Statement. 

13. Facts. A is a dealer in home 

improvements who has established funding 

arrangements with several lenders. 

Customers for home improvements receive a 

proposed contract from A. The proposal 

requires that customers both execute forms 

authorizing a credit check and employment 

verification, and frequently, execute a dealer 

consumer credit contract secured by a lien on 

the customer’s (borrower’s) 1- to 4-family 

residential property. Simultaneously with the 

completion and certification of the home 

improvement work, the note is assigned by 

the dealer to a funding lender. 

Comments. The loan that is assigned to the 

funding lender is a loan covered by RESPA, 

when a lien is placed on the borrower’s 1- 

to 4-family residential structure. The dealer 

loan or consumer credit contract originated 

by a dealer is also a RESPA-covered 

transaction, except when the dealer is not a 

‘‘creditor’’ under the definition of ‘‘federally 

related mortgage loan’’ in § 1024.2. The 

lender to whom the loan will be assigned is 

responsible for assuring that the lender or the 

dealer delivers to the borrower a Good Faith 

Estimate of closing costs consistent with 

Regulation X, and that the HUD–1 or HUD– 

1A Settlement Statement is used in 

conjunction with the settlement of the loan 

to be assigned. A dealer who, under § 1024.2, 

is covered by RESPA as a creditor is 

responsible for the Good Faith Estimate of 

Closing Costs and the use of the appropriate 

settlement statement in connection with the 

loan. 

Appendix C to Part 1024—Instructions 

for Completing Good Faith Estimate 

(GFE) Form 

The following are instructions for 

completing the GFE required under section 5 

of RESPA and 12 CFR 1024.7 of the Bureau 

regulations. The standardized form set forth 

in this Appendix is the required GFE form 

and must be provided exactly as specified; 

provided, however, preparers may replace 

HUD’s OMB approval number listed on the 

form with the Bureau’s OMB approval 

number when they reproduce the GFE form. 

The instructions for completion of the GFE 

are primarily for the benefit of the loan 

originator who prepares the form and need 

not be transmitted to the borrower(s) as an 

integral part of the GFE. The required 

standardized GFE form must be prepared 

completely and accurately. A separate GFE 

must be provided for each loan where a 

transaction will involve more than one 

mortgage loan. 

General Instructions 

The loan originator preparing the GFE may 

fill in information and amounts on the form 

by typewriter, hand printing, computer 

printing, or any other method producing 

clear and legible results. Under these 

instructions, the ‘‘form’’ refers to the required 

standardized GFE form. Although the 

standardized GFE is a prescribed form, 

Blocks 3, 6, and 11 on page 2 may be adapted 

for use in particular loan situations, so that 

additional lines may be inserted there, and 

unused lines may be deleted. 

All fees for categories of charges shall be 

disclosed in U.S. dollar and cent amounts. 

Specific Instructions 

Page 1 

Top of the Form—The loan originator must 

enter its name, business address, telephone 

number, and email address, if any, on the top 

of the form, along with the applicant’s name, 

the address or location of the property for 

which financing is sought, and the date of the 

GFE. 

‘‘Purpose.’’—This section describes the 

general purpose of the GFE as well as 

additional information available to the 

applicant. 

‘‘Shopping for your loan.’’—This section 

requires no loan originator action. 

‘‘Important dates.’’—This section briefly 

states important deadlines after which the 

loan terms that are the subject of the GFE 

may not be available to the applicant. In Line 

1, the loan originator must state the date and, 

if necessary, time until which the interest 

rate for the GFE will be available. In Line 2, 

the loan originator must state the date until 

which the estimate of all other settlement 

charges for the GFE will be available. This 

date must be at least 10 business days from 

the date of the GFE. In Line 3, the loan 

originator must state how many calendar 

days within which the applicant must go to 

settlement once the interest rate is locked. In 

Line 4, the loan originator must state how 

many calendar days prior to settlement the 

interest rate would have to be locked, if 

applicable. 

‘‘Summary of your loan’’—In this section, 

for all loans the loan originator must fill in, 

where indicated: 

(i) The initial loan amount; 

(ii) The loan term; and 

(iii) The initial interest rate. 

The loan originator must fill in the initial 

monthly amount owed for principal, interest, 

and any mortgage insurance. The amount 

shown must be the greater of: (1) The 

required monthly payment for principal and 

interest for the first regularly scheduled 

payment, plus any monthly mortgage 

insurance payment; or (2) the accrued 

interest for the first regularly scheduled 

payment, plus any monthly mortgage 

insurance payment. 

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The loan originator must indicate whether 

the interest rate can rise, and, if it can, must 

insert the maximum rate to which it can rise 

over the life of the loan. The loan originator 

must also indicate the period of time after 

which the interest rate can first change. 

The loan originator must indicate whether 

the loan balance can rise even if the borrower 

makes payments on time, for example in the 

case of a loan with negative amortization. If 

it can, the loan originator must insert the 

maximum amount to which the loan balance 

can rise over the life of the loan. For Federal, 

state, local, or tribal housing programs that 

provide payment assistance, any repayment 

of such program assistance should be 

excluded from consideration in completing 

this item. If the loan balance will increase 

only because escrow items are being paid 

through the loan balance, the loan originator 

is not required to check the box indicating 

that the loan balance can rise. 

The loan originator must indicate whether 

the monthly amount owed for principal, 

interest, and any mortgage insurance can rise 

even if the borrower makes payments on 

time. If the monthly amount owed can rise 

even if the borrower makes payments on 

time, the loan originator must indicate the 

period of time after which the monthly 

amount owed can first change, the maximum 

amount to which the monthly amount owed 

can rise at the time of the first change, and 

the maximum amount to which the monthly 

amount owed can rise over the life of the 

loan. The amount used for the monthly 

amount owed must be the greater of: (1) The 

required monthly payment for principal and 

interest for that month, plus any monthly 

mortgage insurance payment; or (2) the 

accrued interest for that month, plus any 

monthly mortgage insurance payment. 

The loan originator must indicate whether 

the loan includes a prepayment penalty, and, 

if so, the maximum amount that it could be. 

The loan originator must indicate whether 

the loan requires a balloon payment and, if 

so, the amount of the payment and in how 

many years it will be due. 

‘‘Escrow account information.’’—The loan 

originator must indicate whether the loan 

includes an escrow account for property 

taxes and other financial obligations. The 

amount shown in the ‘‘Summary of your 

loan’’ section for ‘‘Your initial monthly 

amount owed for principal, interest, and any 

mortgage insurance’’ must be entered in the 

space for the monthly amount owed in this 

section. 

‘‘Summary of your settlement charges.’’— 

On this line, the loan originator must state 

the Adjusted Origination Charges from 

subtotal A of page 2, the Charges for All 

Other Settlement Services from subtotal B of 

page 2, and the Total Estimated Settlement 

Charges from the bottom of page 2. 

Page 2 

‘‘Understanding your estimated settlement 

charges.’’—This section details 11 settlement 

cost categories and amounts associated with 

the mortgage loan. For purposes of 

determining whether a tolerance has been 

met, the amount on the GFE should be 

compared with the total of any amounts 

shown on the HUD–1 in the borrower’s 

column and any amounts paid outside 

closing by or on behalf of the borrower. 

‘‘Your Adjusted Origination Charges’’ 

Block 1, ‘‘Our origination charge.’’—The 

loan originator must state here all charges 

that all loan originators involved in this 

transaction will receive, except for any 

charge for the specific interest rate chosen 

(points). A loan originator may not separately 

charge any additional fees for getting this 

loan, including for application, processing, or 

underwriting. The amount stated in Block 1 

is subject to zero tolerance, i.e., the amount 

may not increase at settlement. 

Block 2, ‘‘Your credit or charge (points) for 

the specific interest rate chosen.’’—For 

transactions involving mortgage brokers, the 

mortgage broker must indicate through check 

boxes whether there is a credit to the 

borrower for the interest rate chosen on the 

loan, the interest rate, and the amount of the 

credit, or whether there is an additional 

charge (points) to the borrower for the 

interest rate chosen on the loan, the interest 

rate, and the amount of that charge. Only one 

of the boxes may be checked; a credit and 

charge cannot occur together in the same 

transaction. 

For transactions without a mortgage broker, 

the lender may choose not to separately 

disclose in this block any credit or charge for 

the interest rate chosen on the loan; however, 

if this block does not include any positive or 

negative figure, the lender must check the 

first box to indicate that ‘‘The credit or 

charge for the interest rate you have chosen’’ 

is included in ‘‘Our origination charge’’ 

above (see Block 1 instructions above), must 

insert the interest rate, and must also insert 

‘‘0’’ in Block 2. Only one of the boxes may 

be checked; a credit and charge cannot occur 

together in the same transaction. 

For a mortgage broker, the credit or charge 

for the specific interest rate chosen is the net 

payment to the mortgage broker from the 

lender (i.e., the sum of all payments to the 

mortgage broker from the lender, including 

payments based on the loan amount, a flat 

rate, or any other computation, and in a table 

funded transaction, the loan amount less the 

price paid for the loan by the lender). When 

the net payment to the mortgage broker from 

the lender is positive, there is a credit to the 

borrower and it is entered as a negative 

amount in Block 2 of the GFE. When the net 

payment to the mortgage broker from the 

lender is negative, there is a charge to the 

borrower and it is entered as a positive 

amount in Block 2 of the GFE. If there is no 

net payment (i.e., the credit or charge for the 

specific interest rate chosen is zero), the 

mortgage broker must insert ‘‘0’’ in Block 2 

and may check either the box indicating 

there is a credit of ‘‘0’’ or the box indicating 

there is a charge of ‘‘0’’. 

The amount stated in Block 2 is subject to 

zero tolerance while the interest rate is 

locked, i.e., any credit for the interest rate 

chosen cannot decrease in absolute value 

terms and any charge for the interest rate 

chosen cannot increase. (Note: An increase in 

the credit is allowed since this increase is a 

reduction in cost to the borrower. A decrease 

in the credit is not allowed since it is an 

increase in cost to the borrower.) 

Line A, ‘‘Your Adjusted Origination 

Charges.’’—The loan originator must add the 

numbers in Blocks 1 and 2 and enter this 

subtotal at highlighted Line A. The subtotal 

at Line A will be a negative number if there 

is a credit in Block 2 that exceeds the charge 

in Block 1. The amount stated in Line A is 

subject to zero tolerance while the interest 

rate is locked. 

In the case of ‘‘no cost’’ loans, where ‘‘no 

cost’’ refers only to the loan originator’s fees, 

Line A must show a zero charge as the 

adjusted origination charge. In the case of 

‘‘no cost’’ loans where ‘‘no cost’’ 

encompasses third party fees as well as the 

upfront payment to the loan originator, all of 

the third party fees listed in Block 3 through 

Block 11 to be paid for by the loan originator 

(or borrower, if any) must be itemized and 

listed on the GFE. The credit for the interest 

rate chosen must be large enough that the 

total for Line A will result in a negative 

number to cover the third party fees. 

‘‘Your Charges for All Other Settlement 

Services’’ 

There is a 10 percent tolerance applied to 

the sum of the prices of each service listed 

in Block 3, Block 4, Block 5, Block 6, and 

Block 7, where the loan originator requires 

the use of a particular provider or the 

borrower uses a provider selected or 

identified by the loan originator. Any 

services in Block 4, Block 5, or Block 6 for 

which the borrower selects a provider other 

than one identified by the loan originator are 

not subject to any tolerance and, at 

settlement, would not be included in the sum 

of the charges on which the 10 percent 

tolerance is based. Where a loan originator 

permits a borrower to shop for third party 

settlement services, the loan originator must 

provide the borrower with a written list of 

settlement services providers at the time of 

the GFE, on a separate sheet of paper. 

Block 3, ‘‘Required services that we 

select.’’—In this block, the loan originator 

must identify each third party settlement 

service required and selected by the loan 

originator (excluding title services), along 

with the estimated price to be paid to the 

provider of each service. Examples of such 

third party settlement services might include 

provision of credit reports, appraisals, flood 

checks, tax services, and any upfront 

mortgage insurance premium. The loan 

originator must identify the specific required 

services and provide an estimate of the price 

of each service. Loan originators are also 

required to add the individual charges 

disclosed in this block and place that total in 

the column of this block. The charge shown 

in this block is subject to an overall 10 

percent tolerance as described above. 

Block 4, ‘‘Title services and lender’s title 

insurance.’’—In this block, the loan 

originator must state the estimated total 

charge for third party settlement service 

providers for all closing services, regardless 

of whether the providers are selected or paid 

for by the borrower, seller, or loan originator. 

The loan originator must also include any 

lender’s title insurance premiums, when 

required, regardless of whether the provider 

is selected or paid for by the borrower, seller, 

or loan originator. All fees for title searches, 

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examinations, and endorsements, for 

example, would be included in this total. The 

charge shown in this block is subject to an 

overall 10 percent tolerance as described 

above. 

Block 5, ‘‘Owner’s title insurance.’’—In this 

block, for all purchase transactions the loan 

originator must provide an estimate of the 

charge for the owner’s title insurance and 

related endorsements, regardless of whether 

the providers are selected or paid for by the 

borrower, seller, or loan originator. For nonpurchase transactions, the loan originator 

may enter ‘‘NA’’ or ‘‘Not Applicable’’ in this 

Block. The charge shown in this block is 

subject to an overall 10 percent tolerance as 

described above. 

Block 6, ‘‘Required services that you can 

shop for.’’—In this block, the loan originator 

must identify each third party settlement 

service required by the loan originator where 

the borrower is permitted to shop for and 

select the settlement service provider 

(excluding title services), along with the 

estimated charge to be paid to the provider 

of each service. The loan originator must 

identify the specific required services (e.g., 

survey, pest inspection) and provide an 

estimate of the charge of each service. The 

loan originator must also add the individual 

charges disclosed in this block and place the 

total in the column of this block. The charge 

shown in this block is subject to an overall 

10 percent tolerance as described above. 

Block 7, ‘‘Government recording charge.’’— 

In this block, the loan originator must 

estimate the state and local government fees 

for recording the loan and title documents 

that can be expected to be charged at 

settlement. The charge shown in this block 

is subject to an overall 10 percent tolerance 

as described above. 

Block 8, ‘‘Transfer taxes.’’—In this block, 

the loan originator must estimate the sum of 

all state and local government fees on 

mortgages and home sales that can be 

expected to be charged at settlement, based 

upon the proposed loan amount or sales 

price and on the property address. A zero 

tolerance applies to the sum of these 

estimated fees. 

Block 9, ‘‘Initial deposit for your escrow 

account.’’—In this block, the loan originator 

must estimate the amount that it will require 

the borrower to place into a reserve or escrow 

account at settlement to be applied to 

recurring charges for property taxes, 

homeowner’s and other similar insurance, 

mortgage insurance, and other periodic 

charges. The loan originator must indicate 

through check boxes if the reserve or escrow 

account will cover future payments for all 

tax, all hazard insurance, and other 

obligations that the loan originator requires 

to be paid as they fall due. If the reserve or 

escrow account includes some, but not all, 

property taxes or hazard insurance, or if it 

includes mortgage insurance, the loan 

originator should check ‘‘other’’ and then list 

the items included. 

Block 10, ‘‘Daily interest charges.’’—In this 

block, the loan originator must estimate the 

total amount that will be due at settlement 

for the daily interest on the loan from the 

date of settlement until the first day of the 

first period covered by scheduled mortgage 

payments. The loan originator must also 

indicate how this total amount is calculated 

by providing the amount of the interest 

charges per day and the number of days used 

in the calculation, based on a stated projected 

closing date. 

Block 11, ‘‘Homeowner’s insurance.’’—The 

loan originator must estimate in this block 

the total amount of the premiums for any 

hazard insurance policy and other similar 

insurance, such as fire or flood insurance that 

must be purchased at or before settlement to 

meet the loan originator’s requirements. The 

loan originator must also separately indicate 

the nature of each type of insurance required 

along with the charges. To the extent a loan 

originator requires that such insurance be 

part of an escrow account, the amount of the 

initial escrow deposit must be included in 

Block 9. 

Line B, ‘‘Your Charges for All Other 

Settlement Services.’’—The loan originator 

must add the numbers in Blocks 3 through 

11 and enter this subtotal in the column at 

highlighted Line B. 

Line A+B, ‘‘Total Estimated Settlement 

Charges.’’—The loan originator must add the 

subtotals in the right-hand column at 

highlighted Lines A and B and enter this total 

in the column at highlighted Line A+B. 

Page 3 

‘‘Instructions’’ 

‘‘Understanding which charges can change 

at settlement.’’—This section informs the 

applicant about which categories of 

settlement charges can increase at closing, 

and by how much, and which categories of 

settlement charges cannot increase at closing. 

This section requires no loan originator 

action. 

‘‘Using the tradeoff table.’’—This section is 

designed to make borrowers aware of the 

relationship between their total estimated 

settlement charges on one hand, and the 

interest rate and resulting monthly payment 

on the other hand. The loan originator must 

complete the left hand column using the loan 

amount, interest rate, monthly payment 

figure, and the total estimated settlement 

charges from page 1 of the GFE. The loan 

originator, at its option, may provide the 

borrower with the same information for two 

alternative loans, one with a higher interest 

rate, if available, and one with a lower 

interest rate, if available, from the loan 

originator. The loan originator should list in 

the tradeoff table only alternative loans for 

which it would presently issue a GFE based 

on the same information the loan originator 

considered in issuing this GFE. The 

alternative loans must use the same loan 

amount and be otherwise identical to the 

loan in the GFE. The alternative loans must 

have, for example, the identical number of 

payment periods; the same margin, index, 

and adjustment schedule if the loans are 

adjustable rate mortgages; and the same 

requirements for prepayment penalty and 

balloon payments. If the loan originator fills 

in the tradeoff table, the loan originator must 

show the borrower the loan amount, 

alternative interest rate, alternative monthly 

payment, the change in the monthly payment 

from the loan in this GFE to the alternative 

loan, the change in the total settlement 

charges from the loan in this GFE to the 

alternative loan, and the total settlement 

charges for the alternative loan. If these 

options are available, an applicant may 

request a new GFE, and a new GFE must be 

provided by the loan originator. 

‘‘Using the shopping chart.’’—This chart is 

a shopping tool to be provided by the loan 

originator for the borrower to complete, in 

order to compare GFEs. 

‘‘If your loan is sold in the future.’’—This 

section requires no loan originator action. 

BILLING CODE 4810–AM–P 

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Appendix D to Part 1024 

Affiliated Business Arrangement Disclosure 

Statement Format Notice 

To: lllllllllllllllllll

From: lllllllllllllllll

(Entity Making Statement) 

Property: llllllllllllllll

Date: llllllllllllllllll

This is to give you notice that [referring 

party] has a business relationship with 

[settlement services provider(s)]. [Describe 

the nature of the relationship between the 

referring party and the provider(s), including 

percentage of ownership interest, if 

applicable.] Because of this relationship, this 

referral may provide [referring party] a 

financial or other benefit. 

[A.] Set forth below is the estimated charge 

or range of charges for the settlement services 

listed. You are NOT required to use the listed 

provider(s) as a condition for [settlement of 

your loan on] [or] [purchase, sale, or 

refinance of] the subject property. THERE 

ARE FREQUENTLY OTHER SETTLEMENT 

SERVICE PROVIDERS AVAILABLE WITH 

SIMILAR SERVICES. YOU ARE FREE TO 

SHOP AROUND TO DETERMINE THAT 

YOU ARE RECEIVING THE BEST SERVICES 

AND THE BEST RATE FOR THESE 

SERVICES. 

[provider and settlement service] lllll

lllllllllllllllllllll

lllllllllllllllllllll

[charge or range of charges] llllllll

lllllllllllllllllllll

lllllllllllllllllllll

[B.] Set forth below is the estimated charge 

or range of charges for the settlement services 

of an attorney, credit reporting agency, or real 

estate appraiser that we, as your lender, will 

require you to use, as a condition of your 

loan on this property, to represent our 

interests in the transaction. 

[provider and settlement service] lllll

lllllllllllllllllllll

lllllllllllllllllllll

[charge or range of charges] llllllll

lllllllllllllllllllll

lllllllllllllllllllll

ACKNOWLEDGMENT 

I/we have read this disclosure form, and 

understand that referring party is referring 

me/us to purchase the above-described 

settlement service(s) and may receive a 

financial or other benefit as the result of this 

referral. 

lllllllllllllllllllll

Signature 

[INSTRUCTIONS TO PREPARER:] [Use 

paragraph A for referrals other than those by 

a lender to an attorney, a credit reporting 

agency, or a real estate appraiser that a lender 

is requiring a borrower to use to represent the 

lender’s interests in the transaction. Use 

paragraph B for those referrals to an attorney, 

credit reporting agency, or real estate 

appraiser that a lender is requiring a 

borrower to use to represent the lender’s 

interests in the transaction. When applicable, 

use both paragraphs. Specific timing rules for 

delivery of the affiliated business disclosure 

statement are set forth in 12 CFR 

1024.15(b)(1) of Regulation X). These 

INSTRUCTIONS TO PREPARER should not 

appear on the statement.] 

Appendix E to Part 1024—Arithmetic 

Steps 

I. Example Illustrating Aggregate Analysis 

Assumptions 

Disbursements: 

$360 for school taxes disbursed on 

September 20 

$1,200 for county property taxes: 

$500 disbursed on July 25 

$700 disbursed on December 10 

Cushion: One-sixth of estimated annual 

disbursements 

Settlement: May 15 

First Payment: July 1 

STEP 1—INITIAL TRIAL BALANCE

Aggregate 

pmt disb bal 

Jun .................... 0 0 0 

Jul ..................... 130 500 ¥370 

Aug ................... 130 0 ¥240 

Sep ................... 130 360 ¥470 

Oct .................... 130 0 ¥340 

Nov ................... 130 0 ¥210 

Dec ................... 130 700 ¥780 

Jan .................... 130 0 ¥650 

Feb .................... 130 0 ¥520 

Mar .................... 130 0 ¥390 

Apr .................... 130 0 ¥260 

May ................... 130 0 ¥130 

Jun .................... 130 0 0 

STEP 2—ADJUSTED TRIAL BALANCE

[Increase monthly balances to eliminate 

negative balances] 

Aggregate 

pmt disb bal 

Jun .................... 0 0 780 

Jul ..................... 130 500 410 

Aug ................... 130 0 540 

Sep ................... 130 360 310 

Oct .................... 130 0 440 

Nov ................... 130 0 570 

Dec ................... 130 700 0 

Jan .................... 130 0 130 

Feb .................... 130 0 260 

Mar .................... 130 0 390 

Apr .................... 130 0 520 

May ................... 130 0 650 

Jun .................... 130 0 780 

STEP 3—TRIAL BALANCE WITH

CUSHION

Aggregate 

pmt disb bal 

Jun .................... 0 0 1040 

Jul ..................... 130 500 670 

Aug ................... 130 0 800 

Sep ................... 130 360 570 

Oct .................... 130 0 700 

Nov ................... 130 0 830 

Dec ................... 130 700 260 

Jan .................... 130 0 390 

Feb .................... 130 0 520 

Mar .................... 130 0 650 

Apr .................... 130 0 780 

May ................... 130 0 910 

Jun .................... 130 0 1040 

II. Example Illustrating Single-Item Analysis 

Assumptions 

Disbursements: 

$360 for school taxes disbursed on 

September 20 

$1,200 for county property taxes: 

$500 disbursed on July 25 

$700 disbursed on December 10 

Cushion: One-sixth of estimated annual 

disbursements 

Settlement: May 15 

First Payment: July 1 

STEP 1—INITIAL TRIAL BALANCE

Single-item 

Taxes School taxes 

pmt disb bal pmt disb bal 

June ..................... 0 0 0 0 0 0 

July ....................... 100 500 ¥400 30 0 30 

August .................. 100 0 ¥300 30 0 60 

September ............ 100 0 ¥200 30 360 ¥270 

October ................ 100 0 ¥100 30 0 ¥240 

November ............. 100 0 0 30 0 ¥210 

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STEP 1—INITIAL TRIAL BALANCE—Continued 

Single-item 

Taxes School taxes 

pmt disb bal pmt disb bal 

December ............. 100 700 ¥600 30 0 ¥180 

January ................ 100 0 ¥500 30 0 ¥150 

February ............... 100 0 ¥400 30 0 ¥120 

March ................... 100 0 ¥300 30 0 ¥90 

April ...................... 100 0 ¥200 30 0 ¥60 

May ...................... 100 0 ¥100 30 0 ¥30 

June ..................... 100 0 0 30 0 0 

STEP 2—ADJUSTED TRIAL BALANCE

[Increase monthly balances to eliminate negative balances] 

Single-item 

Taxes School taxes 

pmt disb bal pmt disb bal 

Jun ....................... 0 0 600 0 0 270 

Jul ......................... 100 500 200 30 0 300 

Aug ....................... 100 0 300 30 0 330 

Sep ....................... 100 0 400 30 360 0 

Oct ........................ 100 0 500 30 0 30 

Nov ....................... 100 0 600 30 0 60 

Dec ....................... 100 700 0 30 0 90 

Jan ....................... 100 0 100 30 0 120 

Feb ....................... 100 0 200 30 0 150 

Mar ....................... 100 0 300 30 0 180 

Apr ........................ 100 0 400 30 0 210 

May ...................... 100 0 500 30 0 240 

Jun ....................... 100 0 600 30 0 270 

STEP 3—TRIAL BALANCE WITH CUSHION

Single-item 

Taxes School taxes 

pmt disb bal pmt disb bal 

Jun ....................... 0 0 800 0 0 330 

Jul ......................... 100 500 400 30 0 360 

Aug ....................... 100 0 500 30 0 390 

Sep ....................... 100 0 600 30 360 60 

Oct ........................ 100 0 700 30 0 90 

Nov ....................... 100 0 800 30 0 120 

Dec ....................... 100 700 200 30 0 150 

Jan ....................... 100 0 300 30 0 180 

Feb ....................... 100 0 400 30 0 210 

Mar ....................... 100 0 500 30 0 240 

Apr ........................ 100 0 600 30 0 270 

May ...................... 100 0 700 30 0 300 

Jun ....................... 100 0 800 30 0 330 

Appendix MS–1 to Part 1024 

[Sample language; use business stationery 

or similar heading] 

[Date] 

SERVICING DISCLOSURE STATEMENT 

NOTICE TO FIRST LIEN MORTGAGE LOAN 

APPLICANTS: THE RIGHT TO COLLECT 

YOUR MORTGAGE LOAN PAYMENTS 

MAY BE TRANSFERRED 

You are applying for a mortgage loan 

covered by the Real Estate Settlement 

Procedures Act (RESPA) (12 U.S.C. 2601 et 

seq.). RESPA gives you certain rights under 

Federal law. This statement describes 

whether the servicing for this loan may be 

transferred to a different loan servicer. 

‘‘Servicing’’ refers to collecting your 

principal, interest, and escrow payments, if 

any, as well as sending any monthly or 

annual statements, tracking account balances, 

and handling other aspects of your loan. You 

will be given advance notice before a transfer 

occurs. 

Servicing Transfer Information 

[We may assign, sell, or transfer the 

servicing of your loan while the loan is 

outstanding.] 

[or] 

[We do not service mortgage loans of the 

type for which you applied. We intend to 

assign, sell, or transfer the servicing of your 

mortgage loan before the first payment is 

due.] 

[or] 

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[The loan for which you have applied will 

be serviced at this financial institution and 

we do not intend to sell, transfer, or assign 

the servicing of the loan.] 

[INSTRUCTIONS TO PREPARER: Insert 

the date and select the appropriate language 

under ‘‘Servicing Transfer Information.’’ The 

model format may be annotated with further 

information that clarifies or enhances the 

model language.] 

Appendix MS–2 to Part 1024 

[Sample language; use business stationery or 

similar heading] 

NOTICE OF ASSIGNMENT, SALE, OR 

TRANSFER OF SERVICING RIGHTS 

You are hereby notified that the servicing 

of your mortgage loan, that is, the right to 

collect payments from you, is being assigned, 

sold or transferred from __________ to 

__________ effective __________. 

The assignment, sale or transfer of the 

servicing of the mortgage loan does not affect 

any term or condition of the mortgage 

instruments, other than terms directly related 

to the servicing of your loan. 

Except in limited circumstances, the law 

requires that your present servicer send you 

this notice at least 15 days before the 

effective date of transfer, or at closing. Your 

new servicer must also send you this notice 

no later than 15 days after this effective date 

or at closing. [In this case, all necessary 

information is combined in this one notice]. 

Your present servicer is __________. If you 

have any question relating to the transfer of 

servicing from your present servicer call 

__________ [enter the name of an individual 

or department here] between __ a.m. and __ 

p.m. on the following days __________. 

This is a [toll-free] or [collect call] number. 

Your new servicer will be __________. 

The business address for your new servicer 

is: 

lllllllllllllllllllll

_________________________________________ . 

The [toll-free] [collect call] telephone 

number of your new servicer is __________. 

If you have any question relating to the 

transfer of servicing to your new servicer call 

__________ [enter the name of an individual 

or department here] at __________ [toll free or 

collect call telephone number] between 

__ a.m. and __ p.m. on the following days 

__________. 

The date that your present servicer will 

stop accepting payments form you is 

__________. The date that your new servicer 

will start accepting payments from you is 

__________. Send all payments due on or 

after that date to your new servicer. 

[Use the paragraph if appropriate; 

otherwise omit.] The transfer of servicing 

rights may affect the term of or the continued 

availability of mortgage life or disability 

insurance or any other type of optional 

insurance in the following manner: 

lllllllllllllllllllll

lllllllllllllllllllll

lllllllllllllllllllll

lllllllllllllllllllll

lllllllllllllllllllll

__________ 

and you should take the following action to 

maintain coverage: 

lllllllllllllllllllll

lllllllllllllllllllll

__________. 

You should also be aware of the following 

information, which is set out in more detail 

in Section 6 of the Real Estate Settlement 

Procedures Act (RESPA) (12 U.S.C. 2605): 

During the 60-day period following the 

effective date of the transfer of the loan 

servicing, a loan payment received by your 

old servicer before its due date may not be 

treated by the new loan servicer as late, and 

a late fee may not be imposed on you. 

Section 6 of RESPA (12 U.S.C. 2605) gives 

you certain consumer rights. If you send a 

‘‘qualified written request’’ to your loan 

servicer concerning the servicing of your 

loan, your servicer must provide you with a 

written acknowledgment within 20 Business 

Days of receipt of your request. A ‘‘qualified 

written request’’ is a written correspondence, 

other than notice on a payment coupon or 

other payment medium supplied by the 

servicer, which includes your name and 

account number, and your reasons for the 

request. [If you want to send a ‘‘qualified 

written request’’ regarding the servicing of 

your loan, it must be sent to this address: 

________________________________________ ] 

Not later than 60 Business Days after 

receiving your request, your servicer must 

make any appropriate corrections to your 

account, and must provide you with a 

written clarification regarding any dispute. 

During this 60-Business Day period, your 

servicer may not provide information to a 

consumer reporting agency concerning any 

overdue payment related to such period or 

qualified written request. However, this does 

not prevent the servicer from initiating 

foreclosure if proper grounds exist under the 

mortgage documents. 

A Business Day is a day on which the 

offices of the business entity are open to the 

public for carrying on substantially all of its 

business functions. 

Section 6 of RESPA also provides for 

damages and costs for individuals or classes 

of individuals in circumstances where 

servicers are shown to have violated the 

requirements of that section. You should seek 

legal advice if you believe your rights have 

been violated. 

[INSTRUCTIONS TO PREPARER: Delivery 

means placing the notice in the mail, first 

class postage prepaid, prior to 15 days before 

the effective date of transfer (transferor) or 

prior to 15 days after the effective date of 

transfer (transferee). However, this notice 

may be sent not more than 30 days after the 

effective date of the transfer of servicing 

rights if certain emergency business 

situations occur. See 12 CFR 

§ 1024.21(d)(1)(ii). ‘‘Lender’’ may be 

substituted for ‘‘present servicer’’ where 

appropriate. These instructions should not 

appear on the format.] 

lllllllllllllllllllll

PRESENT SERVICER 

[Signature not required] 

lllllllllllllllllllll

Date 

[and][or] 

lllllllllllllllllllll

FUTURE SERVICER 

[Signature not required] 

lllllllllllllllllllll

Date 

Dated: October 24, 2011. 

Alastair M. Fitzpayne, 

Deputy Chief of Staff and Executive Secretary, 

Department of the Treasury. 

[FR Doc. 2011–31722 Filed 12–19–11; 8:45 am] 

BILLING CODE 4810–AM–P 

mstockstill on DSK4VPTVN1PROD with RULES2