REVIEWING ESTIMATED HUD STATEMENTS

What is a HUD statement?  A Housing and Urban Development (aka HUD) statement is a document prepared by a closing agent that provides an itemized listing of funds that are paid at closing.  Each type of expense goes on a specific numbered line on the sheet.

What is a HUD statement?  The totals at the bottom of the HUD ‐ 1 statement define the seller's net proceeds and the buyer's net payment at closing.  The HUD ‐ 1 statement is also referred to as a closing statement or settlement sheet.

HUD Facts  The HUD is normally two pages in length but can have up to 5 pages depending on the fees and costs:  The HUD is divided into two sections, the Summary of Borrowers Transactions & Summary of Sellers Transactions  The summary of sellers transactions is always located on the right side of the HUD and are the costs the Lender will review when submitting a Short Sale

Understanding the HUD  There are four fields that we want to review and ensure are accurate

Four Fields  Section B: Type of Loan  Section D: Name of the Borrower (Buyer)  Section E: Name of Seller  Section G: Property Location  Please see the next slide for an image

HUD Image

Summary of Sellers Transactions  Page 1: Lines 400 ‐ 420  This section of the HUD typically contains limited, but important information  Purchase Price: Line 401 This is the amount must match the amount on purchase contract  City/County Taxes: Lines 406 ‐ 408 Taxes show in this area of the HUD are typically Credits or prorated taxes  Gross Amount to Seller: Line 420 will be the total purchase price  Please see the next slide for an image

Summary of Sellers Transactions Image

Reductions in Amount to the Seller  Settlement Charges to Seller: Line 502 This amount is the total of all closing costs on page 2 of the HUD  Payoff to Lender: Line 504 this is the proposed net amount Lender will receive after all closing cost are paid. Typically, this cost will be on line 504.

Reductions in Amount to the Seller  County Taxes/City Taxes & Assessments: Lines 510 ‐ 513 these fields are for any outstanding taxes due on the property. Typically, the cost will include two separate line items for delinquent and prorated taxes.  Additional Cost: Lines 513 ‐ 519 any additional closing request can be placed in these fields. On this HUD there is a request for a “Seller Concession”

Reductions in Amount to the Seller  Cash to or From Seller: Line 603 these line items will state if the seller needed to bring funds to closing. Typically, on estimated HUDs the field will be zero. Occasionally, the sellers may be required to bring funds to the closing.

Reductions in Amount to the Seller  Page 1: Lines 500 ‐ 603  Please see the following slide for an image

Reductions in Amount to the Seller Image

Settlement Charges  Page 2: Lines 700 ‐ 704  This section of the HUD will include all real estate agents commissions. In a normal sale transaction, the sellers pay all agent commissions  Please see the following slides for an image

Settlement Charges Image

Settlement Charges  Total Sales/Broker’s Commission: Lines 700 ‐ 702 under settlement charges the field description will normally give the state the agents commission based on the purchase price. (Example 6%)

Settlement Charges  Settlement:  Line 703 This field will hold the allocated real estate agents commission.  Line 704 This field is rarely used during a Short Sale transaction, however occasionally agents will try to include an additional “Administrative Fee or Processing Fee.”  This fee should not be allowed

Settlement Charges  Did you know?  The commission on the listing agreement and purchase agreement must match the amount allocated to the real estate agents on the HUD

Buyers Closing Costs  Page 2: Lines 800 ‐ 1008  These fields are primarily buyers closing costs & The Sellers Lender will not approve these costs during a Short Sale

Buyers Closing Costs  Example of buyers cost:  Origination Fees: Line 801  Loan Discount: Line 802  Appraisal Fee: Line 803  Credit Report: Line 804  Lenders Inspection: Line 805  Mortgage Insurance Application Fee: Line 806  Assumption Fee: Line 807  Please see the following slide for an image

Buyers Closing Costs Image

Title/Closing Charges  These are fees associated with the closing of the loan and typically, the sellers lender will allow for closing cost

Title/Closing Charges  Page 2: Lines 1100 ‐ 1113  **When reviewing closing costs on a proposed Short Sale, allows for costs that are “Customary and Reasonable Closing Costs.” Negotiators are not required to approve all closing cost requests!**  Please see the following slide for an image

Title/Closing Charges Image

Title/Closing Charges  Title Charges: These are fees and costs associated with the closing. Typically, the purchase contract outlines if the seller or buyer will be responsible for these costs.  See the following slides for a full list

Title/Closing Charges  Settlement or Closing Fee: Line 1102  Title Search: Line 1102  Notary Fees: Line These charges can vary from state to state.  Attorney Fees: Line The negotiator can use there discretion on max amount of the fees depending on a variety of factors such as purchase price and State the property is located.

Title/Closing Charges  Title Insurance: Line The negotiator can use there discretion on max amount of the fees depending on a variety of factors such as purchase price and State the property is located.  Other Title Charges: Title descriptions and charges fluctuate from State to State.

Government Recoding and Transfer Fees  Lines 1200 ‐ 1205, these costs are State specific fees and most lenders will pay for all fees located in this section of the HUD. They will include Recording Fees, Stamp Taxes, Transfer Fees and Release Fees. State and local governments establish the dollar amount for these costs respectively.  Please see the following slide for an image.

Government Recoding and Transfer Fees Image

Additional Settlement Charges  Line 1300 ‐ 1307, these charges are considered closing cost and a wide variety of additional cost request will be located in this section.  Please see the following slide for an image.

Additional Settlement Charges Image

Additional Settlement Charges  Survey: Line 1301 would not allow for this cost to be paid on a short sale request.  Pest Inspection: Line 1302 will not allocate funds for a pest inspection.  Wire & Overnight Fees: Line 1303 & 1304 Chase will also allow for these fees, but limit the allocation to $50.00 per line item.

Cutting Cost Hints  Don’t allow for judgments or personal debts for our borrower/seller.  Don’t allow for any type of additional and additional “Processing or Negotiating” to outside companies.  Look out for redundant fees like Title Search/Title Exam.

Remember  **Cutting closing costs is an essential part of being a Short Sale Negotiator. Being proficient at recognizing unnecessary costs will reduce the overall loss to the company.**

Remember  The following items are closing cost that should not be paid  Credit for required repairs  Document Preparation  Loan Origination Fee Loan Processing Fee  Listing Fee Tax Service  Drawing Deed Archival & Disposition Fee  Special Assessment Search RES Broker

Remember  Payoff Processing Fee Document Processing Fee s  Tracking Fee Satisfaction Fee  Appraiser Fee Filing Fee  Sub-Escrow Fee Recording Fees  Broker Transaction Fee Document Transfer Fee

Remember  Survey Short Sale Doc Prep Fe e  Late Fee Pest Inspection  Demand Fees Termite Report Inspections  HOA Transfer Fee Home Protection Plan  Document Recording Fee Utility Bills