Have you ever had somebody explain something to you that just doesn't make sense?
That happened to me a few days ago when I spoke to Kevin Stevens, a compliance protection specialist with the U.S. Department of Housing and Urban Development.
See, there was this legal action last year which determined that Natural Hazard Disclosure (NHD) statements in California are a settlement service as part of the escrow process and are subject to the Real Estate Settlement Procedures Act (RESPA).
Settlement services are essentially all the services that are paid for before a home changes hands, including things like mortgage insurance, property taxes and notary fees. And NHDs? They'd have to be at or near the top of the list in terms of importance. These are the reports that let a buyer know if the home they are purchasing is in a fire zone, an earthquake area or subject to some other undesirable situation.
"They are considered, unquestionably, to be a settlement service," Stevens, said. "Not all states have them."
But California does. So I asked Stevens how homebuyers, home sellers and real estate brokers in California are made aware of this. He said the requirement is listed in Section 1300 of HUD 1.
Well, I went onto HUD's website to check that out. Section 1300 of HUD 1 is listed under the banner, "Additional Settlement Charges." And that section includes just two entries: 1301 is listed as a "survey" and 1302, a "pest inspection."
The remaining lines - lines 1303 through 1305 - are blank.
That strikes me as rather odd because other sections of HUD 1 - sections 800, 1000 and 1100, for example - list a myriad of fees. Section 800 lists the loan origination fee, loan discount fee, appraisal fee, credit report, lender's inspection fee, mortgage insurance application fee and the assumption fee. Section 1000 includes hazard insurance, mortgage insurance, city property taxes, county property taxes and annual assessments.
And Section 1100 lists the settlement or closing fee, abstract or title search, title examination, title insurance binder, document preparation, notary fees, attorney's fees, title insurance, lender's coverage and owner's coverage.
But when we get to Section 1300, no mention is made of a Natural Hazard Disclosure statement. It's not hinted at, mentioned in passing or posted on the form in any way. Still, Stevens insists that California buyers, sellers and real estate brokers would be aware of the requirement. He explains it this way:
"It's not pre-printed," he said. "The title company ... would type that into the form."
The title company? Wow! Now I am really at a loss. What does the title company have to do with Natural Hazard reports? Nothing! In California, title companies are regulated by the Insurance Commissioner’s office of the state of California, with no relationship to the Natural Hazards industry, which is completely unregulated.
I will insist on getting the answer from someone at HUD. By now I wonder, “Is there someone who can direct me to a place in the statue, document, hidden drawer or a cloud in the sky that refers to the Natural Hazards Report as a settlement service?"
That happened to me a few days ago when I spoke to Kevin Stevens, a compliance protection specialist with the U.S. Department of Housing and Urban Development.
See, there was this legal action last year which determined that Natural Hazard Disclosure (NHD) statements in California are a settlement service as part of the escrow process and are subject to the Real Estate Settlement Procedures Act (RESPA).
Settlement services are essentially all the services that are paid for before a home changes hands, including things like mortgage insurance, property taxes and notary fees. And NHDs? They'd have to be at or near the top of the list in terms of importance. These are the reports that let a buyer know if the home they are purchasing is in a fire zone, an earthquake area or subject to some other undesirable situation.
"They are considered, unquestionably, to be a settlement service," Stevens, said. "Not all states have them."
But California does. So I asked Stevens how homebuyers, home sellers and real estate brokers in California are made aware of this. He said the requirement is listed in Section 1300 of HUD 1.
Well, I went onto HUD's website to check that out. Section 1300 of HUD 1 is listed under the banner, "Additional Settlement Charges." And that section includes just two entries: 1301 is listed as a "survey" and 1302, a "pest inspection."
The remaining lines - lines 1303 through 1305 - are blank.
That strikes me as rather odd because other sections of HUD 1 - sections 800, 1000 and 1100, for example - list a myriad of fees. Section 800 lists the loan origination fee, loan discount fee, appraisal fee, credit report, lender's inspection fee, mortgage insurance application fee and the assumption fee. Section 1000 includes hazard insurance, mortgage insurance, city property taxes, county property taxes and annual assessments.
And Section 1100 lists the settlement or closing fee, abstract or title search, title examination, title insurance binder, document preparation, notary fees, attorney's fees, title insurance, lender's coverage and owner's coverage.
But when we get to Section 1300, no mention is made of a Natural Hazard Disclosure statement. It's not hinted at, mentioned in passing or posted on the form in any way. Still, Stevens insists that California buyers, sellers and real estate brokers would be aware of the requirement. He explains it this way:
"It's not pre-printed," he said. "The title company ... would type that into the form."
The title company? Wow! Now I am really at a loss. What does the title company have to do with Natural Hazard reports? Nothing! In California, title companies are regulated by the Insurance Commissioner’s office of the state of California, with no relationship to the Natural Hazards industry, which is completely unregulated.
I will insist on getting the answer from someone at HUD. By now I wonder, “Is there someone who can direct me to a place in the statue, document, hidden drawer or a cloud in the sky that refers to the Natural Hazards Report as a settlement service?"
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