- January 15, 2010
- All Texas Issuing Offices
- Texas Insurance Department Guidelines for New RESPA Rule
In December 2009, the staff of the Texas Insurance Department (TDI) issued some guidelines and interpretations of Texas law and regulations as they apply to the new HUD-1 Settlement Statements. TDI observed that generally Texas requires full disclosure whereas the new HUD rule directs that all title charges should be lumped into one amount, so that consumers can shop around and compare the lump sum amounts.
In addressing this contrast, TDI's posting in the "Title Auditor's Notebook" issued the following guidelines:
Many of the charges that used to be itemized on the settlement statement and will now be lumped together can be shown "outside the column" on the new HUD settlement statement. This allows the payees and the amounts to be identified on the settlement statement, as required by Texas law, but also allows the lump sum amount to appear.
Another issue is that it is not clear yet how many lines on the new HUD can be used to show the "outside the column" charges. If there is not enough room to show all of the charges on additional added lines, then an additional sheet may be attached as an addendum. Items such as premiumsplits and guaranty fees will need to be shown.
It appears there are five main fees that need to be addressed: escrow fees, attorney fees, pass through fees, guaranty fees, and premium splits.
The new RESPA regulations appear to require the title agent to show all fees related to handling the escrow funds and issuing the loan policy in one lump sum on line 1101. If the escrow fee charged to the buyer or borrower is retained by the title agency, the amount of the fee is not required to be disclosed on the HUD-1.
TDI auditors must be provided with information about exactly how much was charged for the title policy and how much was charged for the escrow fee so they can verify that the rate rules were applied correctly.
If an escrow fee is charged to the seller, the fee should be shown in the Seller's column on line 1102. If an escrow fee is charged to the borrower, the fee should be shown outside the column on line 1102 (and also shown inside the column as part of the lump sum on line 1101).
Attorney fees (frequently listed as document preparation fees)
When a consumer is billed for attorney fees, however, that charge needs to be identified, so that TDI auditors can compare the charged amount with the amount shown on the supporting invoice to check for overcharges. Attorney fees for document preparation charged to a borrower should be disclosed outside the borrower's column on a blank line in the 1100 series (1109 or higher). Attorney fees for document preparation charged to a seller should be disclosed in the seller's column on a blank line in the 1100 series (1109 or higher).
Pass through fees
Since overcharging is not allowed on pass through expenses, all fees charged for pass through items must be clearly identified. As mentioned above, the new RESPA regulations appear to require the title agent to show all fees related to handling the settlement in one lump sum on line 1101. As with the escrow fee, TDI auditors must be provided with information about exactly how much was charged for each pass through item, so they can verify that there was no overcharging. Title agents should remember that the Basic Manual has the following instruction regarding pass-through expenses: "...it should be determined that these charges are actual expenses or reasonable estimates of charges that must be made prior to closing and not arbitrary or uniformly charged amounts for these items on all closing statements."
The policy guaranty fee for the loan policy will also have to be included in the lump sum total shown on 1101. The policy guaranty fee on a loan policy should also be shown outside the column on a blank line in the 1100 series (1109 or higher). The policy guaranty fee for an owner's policy is shown as part of the cost of policy on line 1103. A separate disclosure, outside the column, must be made (required by Administrative Rule G-1), so TDI auditors can verify proper collection of the fee.
If a title agent is sharing a portion of the title insurance premium with an attorney or another title agency to pay for title services rendered, only the portion of the premium retained by the agent is shown outside the column on line 1107. The portion paid to the attorney or other title agent should be shown outside the column on a blank line in the 1100 series (1109 or higher)."
These TDI guidelines may be found on TDI's website at http://www.tdi.state.tx.us/title/documents/New%20HUD-1%20Guidelines%2012.2.09.pdf.
Stewart Title Guaranty Company is providing you with this information issued by the Texas Insurance Department to keep you advised of current information when using the new HUD-1 Settlement Statement. While Stewart Title Guaranty Company has reviewed the positions taken, we do remind you that settlement services are outside the scope of our agency contract. Information, interpretations and views of Stewart Title Guaranty Company as to the new HUD-1 and new RESPA Rule are offered as a courtesy only and expressly do not constitute legal advice. You may or may not agree with or follow such views and interpretations. You are advised to consult your own legal counsel in making all decisions regarding laws and regulations pertaining to escrow and closing matters. See the box below for a more complete summary of our position.
If you have questions related to this bulletin, please contact your local underwriting personnel or Stewart Legal Services.
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THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.