HUD-1 Settlement Statement

Key Takeaways

• The HUD-1 Settlement Statement lists all charges and credits to the buyer and to the seller in a real estate settlement, or all the charges in a mortgage refinance.
• For most mortgage applications taken after October 3, 2015, the Closing Disclosure replaced the HUD-1 under the TILA-RESPA Integrated Disclosure rule.
• The HUD-1A is the short version used when there is a borrower and no seller, such as a refinance loan.
• The HUD-1 is not extinct. A borrower applying for a reverse mortgage still receives a HUD-1 or HUD-1A, because reverse mortgages sit outside the TRID forms.

What It Means

The HUD-1 Settlement Statement is the itemized closing form that lists all charges and credits to the buyer and to the seller in a real estate settlement, or all the charges in a mortgage refinance. It came out of the Real Estate Settlement Procedures Act of 1974, and for four decades it was the page a buyer read line by line at the closing table. Its front-end partner was the Good Faith Estimate, and the lending side of the same closing produced a separate final Truth in Lending Disclosure.

Two forms replaced it. The Trid rule folded the disclosures required by the Truth in Lending Act and the Real Estate Settlement Procedures Act into a single pair, the Loan Estimate at application and the Closing Disclosure at settlement. For most mortgage applications taken after October 3, 2015, the buyer now receives a Closing Disclosure instead of a HUD-1. The older form survives where TRID does not reach. A borrower applying for a reverse mortgage still receives a HUD-1 or HUD-1A, and settlements that closed on applications dated on or before October 3, 2015 were completed on the HUD-1 no matter when they funded.

How It Works in Washington

Washington does not write its own settlement statement. The form is federal: 12 CFR 1024.8 tells the settlement agent to use the HUD-1 in every settlement involving a federally related mortgage loan in which there is a borrower and a seller, allows the HUD-1A where there is a borrower and no seller, and exempts open-end lines of credit, meaning home equity plans, from the requirement altogether. What Washington regulates is the file the firm keeps afterward. RCW 18.85.285 requires the designated broker to maintain adequate records of all real estate transactions, including a copy of the purchase and sale agreement, the earnest money receipt, and an itemization of the receipts and disbursements with each transaction. The settlement statement is that itemization.

WAC 308-124C-105 sets the shelf life. The firm's transaction folder must hold all agreements, receipts, contracts, documents, leases, closing statements, broker price opinions, referral agreements, and material correspondence, and all records must be retained and available for inspection by the director or the director's authorized representative for a minimum of three years. Whether a given closing produced a HUD-1 or a Closing Disclosure, that Closing Statement belongs in the file. A Washington auditor pulling a transaction folder is looking for the document showing where the money went, not for one particular form number. Our walkthrough of a first Washington closing shows where that statement lands in the sequence.

Example

In June 2014 Ellen Barta sells a house in Yakima for $265,000 to Marcus Reed, who finances $238,500 with a conventional loan. The application predates October 3, 2015, so the closing runs on the old forms. Marcus received a Good Faith Estimate at application, and at the table the settlement agent hands both parties a HUD-1 with one column for the buyer and one for the seller.

Marcus's column shows the $265,000 contract price plus $2,385 in loan origination, $780 in title insurance, $450 for his half of the escrow fee, and $310 in recording charges, a total of $268,925 due. Against that sit his credits: $238,500 in loan proceeds and the $5,000 earnest money already deposited. His cash to close reads $25,425. Ellen's side subtracts a $181,300 loan payoff, $15,900 in brokerage commission, $450 for her half of the escrow fee, and $1,120 in prorated property taxes from the same $265,000, leaving $66,230 before excise tax and remaining minor charges. Run the identical deal today and Marcus receives a Loan Estimate and a Closing Disclosure instead, and the listing firm files that Closing Disclosure in the transaction folder WAC 308-124C-105 requires.

Common Mistakes and Exam Traps

• The HUD-1 is a settlement statement, not an estimate. It reports the final charges at closing, while the Good Faith Estimate predicted those charges back at application.
• Match the pairs carefully. The Loan Estimate replaced the Good Faith Estimate and the initial Truth in Lending Disclosure, and the Closing Disclosure replaced the HUD-1 and the final Truth in Lending Disclosure.
• October 3, 2015 is an application date, not a closing date. A loan applied for on or before that date closed on a HUD-1 even if the closing happened months later.
• Open-end home equity plans never used the HUD-1 at all. 12 CFR 1024.8 exempts open-end lines of credit covered by the Truth in Lending Act and Regulation Z from the HUD-1 requirement.