Technically brokers aren’t allowed to itemize charges on the HUD 1 anymore. While this rule was enacted to protect clients, often it is the clients themselves who want the itemization. Can a broker provide itemization without violating the HUD program rules? Yes.
Itemization Changes under the RESPA Final Rule
The RESPA Final Rule made a number of changes to the HUD-1 settlement statement intended to make the mortgage process quicker and more transparent to consumers. One of the modifications was that brokers were no longer allowed to itemize certain administrative and miscellaneous charges. The goal was to make it easier for consumers to see how much a sale would really cost, and to make it harder for that small number of unscrupulous brokers to add a large number of small fees that add up to unreasonably high total charges.
This change has been difficult for brokers who used the itemizations to track their various costs. To a consumer a fee might be one large administrative cost, but to an agent it is a collection of expenses that need to be tracked individually. In addition many consumers want to see the itemization behind a fee.
Manual Tracking Doesn’t Work
It’s possible for agents to manually tally individual charges, entering only the totals on the HUD form. This doesn’t violate the law because the HUD form itself doesn’t have itemizations. In theory the real estate office could track the charges either manually or with financial software. They could provide the itemizations to consumers who question the fees.
In practice, manual tracking is cumbersome and prone to error. The practice has to note charges in two places: on the HUD statement and on the separate itemization sheet. If anything changes and only one document gets updated, then the two get out of sync. They must use a spreadsheet or other third party software to keep track of their expenses, adding more chances for errors.
Dedicated RESPA Software Is the Answer
Although a few real estate firms still fill out HUD forms manually, most of them use some kind of software. These range from simple, fill able PDF files to complex real estate programs with a variety of valuable features. Wouldn’t it be nice if these programs could keep track of itemization? Some of them can.
The most advanced of these applications include a smart itemization feature that allows users to enter each charge individually. The software automatically totals the charges into a lump sum when generating the HUD form, but can also generate itemization reports that show each individual charge. The information is kept in one place rather than being duplicated, and automatic totaling ensures the figures on the form are correct.
Smart itemization is just one of the features today’s professionals receive from real estate and legal practice management software. Don’t continue to slow down your practice with manual methods or out-date software solutions. Take advantage of the latest technology for your business – learn more about Easy HUD, our HUD settlement statement software.