How Does the Final Settlement Statement Get Prepared?

By
Mortgage and Lending with The Mortgage Experts at America's Mortgage, a Division of Cherry Creek Mortgage Co. NMLS #241555

We're often asked what the process is for getting the HUD-1 Settlement Statement prepared.  Here you go:

  • The underwriter issues the final approval for the loan, often referred to as the "clear-to-close".
  • The mortgage broker lists the lender fees on the doc prep order form and sends it to the doc prep company (if he is acting as a mortgage banker) or the doc prep department at the lender (if he is acting as a mortgage broker).
  • The doc prep company prepares the figures and sends the order to the title company.
  • The title company adds their fees, prepares the settlement statement, and sends it to doc prep and the mortgage broker for review.
  • Any necessary changes are made (the most common error is incorrect payees for the line item fees) and doc prep and the mortgage broker send the change requests to title.
  • Any mistakes are corrected and the updated settlement statement is sent to doc prep and the mortgage broker for final approval.
  • After receiving the final approval from doc prep and the broker, title prepares the final settlement statement and sends it to everyone.

This can all usually be accomplished very comfortably within two days.  Although the actual length of time that any one person is working on the settlement statement is relatively short, it's important to remember that the broker, the doc prep company, and title all have other deals in their pipelines.  A good mortgage broker will make sure that any final settlement statements move to the top of his priority list, but for doc prep and title, one settlement statement is the same as any other.  Rushes are possible, but typically they are totally unnecessary.  The real important part of this process is to make sure that the borrower has plenty of time to review the settlement statement with the mortgage broker, so that when everyone gets to the closing, there are no financing questions.

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Rainer
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Charles Perkins
Charles G. Perkins, CPA - Burien, WA

It's unfortunate that there isn't better disclosure regarding the fees that are charged.  I have yet to see a Good Faith estimate that includes all of the common fees. Many of these fees show up on the HUD-1 later though.  It is a constant surprise at signing to find HUD-1 settlement forms quite different than expected.

Sep 11, 2009 05:49 PM #1
Rainmaker
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Chris Thomas
The Mortgage Experts at America's Mortgage, a Division of Cherry Creek Mortgage Co. - Denver, CO

Charles -- The new Truth In Lending regulations should go a long way towards solving the problem you describe.  It has been standard operating procedure for many, many mortgage brokers to lie on their Good Faith Estimates and hope no one complains too much when they see the final HUD.  Now, the APR on the final HUD has got to be within 0.125% of the APR on the most recently disclosed TIL, which means the Good Faith has got to be correct.  If it doesn't match, then there is a 3-day waiting period before the loan can close.  Everyone is complaining about this new regulation, but it is the best thing that could possibly happen to the industry.  It won't get rid of all the crooks, but it sure will put them on the hot seat.  If loans can't close because the mortgage brokers are crooks, hopefully the Realtors will stop using the crooks.

Sep 14, 2009 11:44 AM #2
Rainer
110,832
Charles Perkins
Charles G. Perkins, CPA - Burien, WA

Glad to hear this.  It's unfortunate that we sometimes have to legislate ethical behavior.

Sep 14, 2009 08:23 PM #3
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Chris Thomas

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