be inserted in blank spaces in the Uniform Settlement Statement. Lenders are encouraged, but are not required, to set forth the items numbers for each item which appears in the Uniform Settlement Statement (HUD-1).

(3) Additional information relating to a stated item may be provided. Charges which may be grouped together pursuant to the instructions of the Uniform Settlement Statement may be grouped in this disclosure. For example, the amount for several title charges (listed as lines 1101-1106 of the Uniform Settlement Statement) may, in some jurisdictions, customarily be included in an attorney's fee (listed as line 1107).

(e) Description of Lender's requirements on selection of providers. Where the Lender requires that a particular provider (or affiliated group of providers, such as a law firm) be used to provide legal services, title examination services or title insurance or to conduct settlement and requires the borrower to pay all or a portion of the cost of such services (regardless of the interests represented by the provider), the Lender is required to include as part of the Good Faith Estimate, a statement which clearly designates the corresponding estimated charges, and states:

(1) The name, address and telephone number of each provider designated by the Lender, the services which would be rendered by such provider, and the fact that Lender's estimate is based upon the charges of the designated provider; and

(2) A statement whether or not each such provider has a business relationship with the Lender.

(f) As to each Federally Related Mortgage Loan which is exempt from the use of the Uniform Settlement Statement by reason of Section 3500.8(d) of this part, the lender shall keep an accurate record for two years of the itemized list of the settlement services provided, the exact charge, if any, which is to be imposed at settlement, and the subparagraph (Section 3500.8(d)(1) or (d)(2)) under which the exemption is granted. With respect to a transaction which is exempt under § 3500.8(d)(2), the lender shall deliver

or place in the mail to the borrower not later than three business days after loan application a statement of the amount of the fixed charge and a statement of the settlement services and other items covered by such charge.

[41 FR 22705, June 4, 1976; 41 FR 23673, June 11, 1976]

§ 3500.8 Use of Uniform Settlement Statement Form.

(a) Use of HUD-1. As required by section 4 of RESPA, the Uniform Settlement Statement (HUD-1, set forth in Appendix A) shall be used by the person conducting settlement in every Federally Related Mortgage Loan settlement transaction whether or not such person is the Lender. Persons conducting settlements may exhaust supplies of the original HUD-1 which are in stock at the time these regulations take effect.

(b) Charges to be stated. The Uniform Settlement Statement, HUD-1, shall be completed to itemize all charges to be paid by the borrower and the seller in connection with the settlement, except those charges not imposed upon the borrower or seller by the Lender and which the borrower or seller contract to pay for separately outside of the settlement. Charges which are required by the Lender but paid outside of closing shall be included on the statement but marked "P.O.C.", as provided in the general instructions to the form. Lines and columns which relate to the borrower's transaction may be deleted from the copy of the form which will be furnished to the seller and lines and columns which relate to the seller's transaction may be deleted from the copy of the form which will be furnished to the borrower.

(c) Recordkeeping. The person conducting the settlement shall provide the Lender with a copy of each settlement statement (both borrower's and seller's copies, where different) required to be prepared pursuant to section 4 of RESPA. The Lender shall retain the settlement statement for two years after the date of settlement unless the Lender disposes of its interest in the mortgage and does not serv

ice the mortgage. The Lender may permit its copy of the settlement statement to be delivered to the owner or servicer of the mortgage as a part of the transfer of the loan file. If copy of the settlement statement is required to be submitted to the Secretary or other Federal agency, a legible reproduction of the copy retained by the Lender may be used to meet this requirement.

(d) RESPA Transactions exempt from the use of the uniform Settlement Statement. (1) Transactions in which the borrower is not required to pay any settlement charges or adjustments.

rower

(2) Transactions in which the boris required to pay a fixed amount for all charges imposed at settlement and the borrower is informed of the fixed amount at the time of loan application.

§ 3500.9 Printing and duplication of Uniform Settlement Statement Form.

(a) Permissible changes. The Uniform Settlement Statement form, HUD-1, may be reproduced with the following permissible changes and insertions:

(1) The person reproducing the form may insert in Section A its business name and/or logotype and may rearrange, but not delete, the other information which appears in Section A.

(2) The name, address and other information regarding the Lender and settlement agent (person conducting settlement), respectively, may printed in Sections F and H.

be

(3) Reproduction of 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 1001400 which 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 correspondingly shortened. number of a deleted item shall not be used for a substitute or new item, but the number of a blank space on HUD

The

1 may be used for a substitute or new item.

(4) Charges not listed on HUD-1 but which are customary locally or pursuant to the Lender's practice may be inserted in blank spaces; or where existing blank spaces on HUD-1 are insufficient, additional lines and spaces may be added and numbered in sequence with HUD-1 spaces.

(5) The following variations in layout and format are within the discretion of persons reproducing 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 HUD-1 contents on separate pages, on the front and back of a single page, or on one continuous page; use of multicopy tear-out sets; printing on rolls for computer purposes; reorganization of Sections B through I where necessary to accommodate computer printing; placement on the form of the HUD number but not the OMB approval number, neither of which in any case may be deleted from the form.

(6) The borrower's information and the seller's information may be provided on separate pages.

(7) Signature lines may be added. (8) The form may be translated into any other language.

(9) An additional page may be attached to 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 mortgagor'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 HUD-1.

(b) Any other deviation in the form is only permissible upon receipt of written approval of the Secretary. A request to the Secretary for approval may be submitted in writing to the Assistant Secretary for Consumer Affairs

and Regulatory Functions, Attention: RESPA, Room 4100, 451 7th Street, SW., Washington, D.C. 20410, stating the reasons why the applicant believes such deviation is needed. Prior to receiving such approval, the prescribed form must be used.

[41 FR 22706, June 4, 1976; 41 FR 23673, June 11, 1976]

§ 3500.10 One day advance inspection of Uniform Settlement Statement; delivery.

(a) Inspection one day prior to settlement. Except as provided in paragraph (d), upon the request of the borrower, the person conducting the settlement shall permit the borrower to inspect the Uniform Settlement Statement, completed to set forth those items which are known to such person at the time of inspection, during the business day immediately preceding the Date of Settlement.

(b) Delivery. The Uniform Settlement Statement shall be delivered or mailed to the borrower and the seller or their agents at or before settlement, except as provided in paragraphs (c) and (d).

(c) Waiver. The borrower may waive the right to delivery of the completed Uniform Settlement Statement no later than at settlement by executing a written waiver at or before settlement. In such case, the completed Uniform Settlement Statement shall be mailed or delivered to the borrower and seller as soon as practicable after settlement.

(d) Exempt transactions. Where the borrower or the borrower's agent does not attend the settlement or where the person conducting settlement does not require 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 Uniform Settlement Statement shall be delivered as soon as practicable after settlement.

§ 3500.11 Mailing.

The provisions of this part requiring or permitting mailing of settlement statements or other 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 Lender at the time of loan application, or submitted to or obtained by the Lender or person conducting settlement, except that a revised address shall be used where the Lender or such other person has been expressly informed in writing of a change of address.

§ 3500.12 No fee.

As provided in section 12 of RESPA, 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 or on account of the preparation and distribution of the statement required by section 4 of RESPA (Uniform Settlement Statement) or by the Truth in Lending Act.

§ 3500.13 Relation to State laws.

Section 18 of RESPA provides:

This Act does not annul, alter, or affect or exempt any person subject to the provisions of this Act from complying with the laws of any State with respect to settlement practices, except to the extent that those laws are inconsistent with any provision of this Act, and then only to the extent of the inconsistency. The Secretary is authorized to determine whether such inconsistencies exist. The Secretary may not determine that any State law is inconsistent with any provision of this Act if the Secretary determines that such law gives greater protection to the consumer. In making these determination the Secretary shall consult with the appropriate Federal agencies.

A determination by the Secretary that such an inconsistency exists shall be made, after consultation with appropriate Federal agencies, by publication of a notice in the FEDERAL REGISTER.

§ 3500.14 Prohibition against kickbacks and unearned fees.

(a) Statutory prohibitions. Section 8 of RESPA provides:

(a) No person shall give and no person shall accept any fee, kickback, or thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or a part of a real estate settlement service involving a federally related

mortgage loan shall be referred to any person.

(b) 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 real estate settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed.

(c) Nothing in this section shall be construed as prohibiting (1) the payment of a fee (A) to attorneys at law for services actually rendered or (B) by a title company to its duly appointed agent for services actually performed in the issuance of a policy of title insurance or (C) by a lender to its duly appointed agent for services actually performed in the making of a loan, (2) the 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, or (3) payments pursuant to cooperative brokerage and referral arrangements or agreements between real estate agents and brokers, or (4) such other payments or classes of payments or other transfers as are specified in regulations prescribed by the Secretary, after consultation with the Attorney General, the Administrator of Veterans' Affairs, the Federal Home Loan Bank Board, the Federal Deposit Insurance Corporation, the Board of Governors of the Federal Reserve System, and the Secretary of Agriculture.

(d)(1) Any person or persons who violate the provisions of this section shall be fined not more than $10,000 or imprisoned for not more than one year, or both.

(2) In addition to the penalties provided by paragraph (1) of this subsection, any person or persons who viclate the provisions of subsection (a) shall be jointly and severally liable to the person or persons whose business has been referred in an amount equal to three times the value or amount of the fee or thing of value, and any person or persons who violate the provisions of subsection (b) shall be jointly and severally liable to the person or persons charged for the settlement services involved in an amount equal to three times the amount of the portion, split, or percentage. In any successful action to enforce the liability under this paragraph, the court may award the court costs of the action together with a reasonable attorney's fee as determined by the court.

(b) Thing of value. "Thing of value" is broadly defined by section 3(2) of RESPA to include any payment, advance, fund, loan, service, or other consideration. Under section 8 of RESPA, a thing of value may be provided either directly or indirectly to

the person referring settlement business and can take many forms including, but not limited to, monies, things, discounts, salaries, commissions, fees, duplicate payments of a charge, stock, dividends, distributions of partnership profits, credits representing monies that may be paid at a future date, special bank deposits or accounts, banking terms, special loan or loan guarantee terms, services of all types at special or free rates, and sales or rentals at special prices or rates.

(c) Agreement or understanding. An agreement or understanding for the referral of settlement business need not be verbalized but may be established by a practice, pattern or course of conduct pursuant to which the payor and recipient of the thing of value understand that the payment is in return for the referral of business. A payment that is made repeatedly and is connected in any way with the volume or value of the business referred to the payor by the recipient is presumptively pursuant to an agreement or understanding.

(d) Payment of thing of value for referral of business. Any person who gives and any person who receives any fee, kickback or thing of value that represents compensation for the referral of business incident to or a part of a real estate settlement service is in violation of section 8 of RESPA. The fact that the payment of the thing of value does not result in an increase in the charge made for the settlement service by the payor in the particular transaction is irrelevant in determining whether the payment is prohibited.

(e) Payment for goods or services actually rendered. The payment and receipt of a thing of value that bears a reasonable relationship to the value of the goods or services received by the person or company making the payment is not prohibited by RESPA section 8. To the extent the thing of value is in excess of the reasonable value of the goods provided or services performed, the excess is not for services actually rendered and may be considered a kickback or referral fee proscribed by RESPA section 8. The value of the referral itself (i.e., the ad

ditional business obtained thereby) is not to be taken into account in determining whether the payment is reasonable.

(f) Exemptions. The following are not proscribed by RESPA section 8:

(1) The payment of a fee (i) to attorneys at law for services actually rendered, or (ii) by a title company to its duly appointed agent for services actually performed in the issuance of a policy of title insurance, or (iii) by a Lender to its duly appointed agent for sevices actually performed in the making of a loan.

(2) The payment to any person of a bona fide salary, compensation or other payment for goods or facilities actually furnished or for services actually performed.

(3) Payments pursuant to cooperative brokerage and referral arrangements or agreements between real estate agents and brokers.

(4) Normal promotional and educational activities not directly 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 business, such as a reception by a title company, free seminars on title matters to professionals, furnishing property descriptions and names of record owners without

charge to persons such as Lenders, real estate brokers or attorneys or distribution of calendars and other promotional material of nominal value.

(5) The waiver by a Lender of the requirement that a borrower pay a prepayment penalty provided in mortgage documents, whether or not such waiver is conditioned upon receipt by the Lender of a loan application from, cr the making of a loan to, such borrower or a person purchasing a property from such borrower. This exemption is established pursuant to authority to establish exemptions from Section 8 of RESPA; and is not applicable by analogy to any category of cases other than waiver of prepayment penalties.

(g) Examples of violations under section 8. The following are examples of violations under section 8 and are applicable by analogy to other providers

of settlement services in addition to those specified in the examples:

(1) A title company pays a portion of the title insurance premium to a person who performs no services for the title company other than placing an application with the title company.

(2) A title company gives a discount or allowance for the prompt payment of a title insurance premium or other charge for a settlement service to a real estate agent, attorney or lender as a rebate for the placement of business with such title company.

(3) An attorney gives a portion of his fees to another attorney, a Lender or a real estate agent who only referred a prospective client to the attorney.

(4) A title company pays a "commission" to a corporation that is wholly owned by one or more Lenders, even though such corporation performs no substantial services on behalf of the title company.

APPENDIX A-INSTRUCTIONS FOR COMPLETING UNIFORM SETTLEMENT STATEMENT (HUD-1)

The following are instructions for completing sections A through L of the Uniform Settlement Statement, HUD-1, required under section 4 of RESPA and called Regulation X. This form is to be used as a uniform statement of actual costs and adjustments to be given to the parties in connection with the settlement. The instructions for completion of the form are primarily for the benefit of the persons who prepare the statements and need not be transmitted to the parties as an integral part of the form. Refer to Regulation X of the Department of Housing and Urban Development (24 CFR Part 3500) to determine if the Uniform Settlement Statement is legally required to be used in a particular mortgage loan transaction. There is no objection of the use of the form in transactions in which its use is not legally required.

GENERAL INSTRUCTIONS

Information and amounts may be filled in by typewriter, hand printing, computer printing, or any other method producing clear and legible results. Copies of the form sent to the borrower and the seller may be carbon copies or other clear legible copies. Refer to Regulation X regarding rules applicable to printing of the form. An additional page may be attached to HUD-1 for the purpose of including customary recitals and information used locally in real estate settlements, for example, a breakdown of payoff figures; a breakdown of mortgagor's