A HUD-1 form, also called a HUD settlement statement, is a detailed list of all the fees payable by the borrower in order to close a reverse mortgage or refinancing operation. The closing disclosure form replaced the HUD-1 form for most other real estate transactions as of October 3, 2020.
Both forms must be reviewed by the borrower before closing to avoid mistakes or unpleasant surprises.
Understanding the HUD-1 form
The HUD-1 lists all the costs associated with closing the transaction. Federal law requires that the form be used as a standard real estate settlement form in reverse mortgage and mortgage refinancing operations.
Key points to remember
- The HUD-1 form listing all closing costs is provided to all parties involved in the reverse mortgage and mortgage refinancing operations.
- Since the end of 2020, a different form, the Closing Disclosure, has been prepared for the parties involved in all other real estate transactions.
- Both should be reviewed by the borrower before closing to avoid mistakes or surprises.
The law also requires that borrowers receive a copy of the HUD-1 at least one day prior to the settlement, although the numbers can be added, corrected or updated until the parties are sitting at the closing table.
Most buyers and sellers review the form with a real estate agent, lawyer, or settlement agent.
Note: on the HUD-1 form, buyers are called “borrowers” even if no loan is involved.
Detailed costs HUD-1
Anyone who completed a real estate transaction before October 3, 2020 should have received a HUD-1 before closing.
Curiously, the HUD-1 is supposed to be reviewed first, or on the back, first.
The back has two columns: the left column details the borrower’s fees and the right column details the seller’s fees.
The final disclosure form was required by banking reform legislation enacted in 2020.
The borrower’s list includes mortgage-related fees, such as loan origination fees, discount points, payment of a credit report, and flood assessment and certification fees. It may also include all prepaid interest charges, owner’s insurance costs, property taxes, owner and lender title insurance and closing agent fees.
The detailed list of sellers can detail the real estate commission, any contractually agreed credit to the buyer and mortgage repayment information. The detailed costs of the seller are generally lower than the costs of the buyer.
The figures on the back HUD-1 are added together and the totals are shown on the front or on the front of the form. The cash amount to be paid by the borrower and the amount to be paid to the seller appear at the bottom of the first page.
The final disclosure
The Dodd-Frank Wall Street Reform Act and Consumer Protection Act of 2020 requires lenders to provide borrowers with all types of mortgages other than reverse mortgages and mortgage refinancing closing a disclosure form.
Borrowers must be notified of the disclosure three days before closing.
The five-page form includes final figures for all costs and closing costs for the borrower, as well as loan terms, projected monthly mortgage payments and closing costs.
The three days are intended to allow the borrower to ask questions of the lender and to clear up any variance or misunderstanding regarding costs before closing.