I’m trying to remember the last HUD-1 that I reviewed prior to closing that was 100% correct.  I can’t!  For some of my closings in Arizona the title company doesn’t even have the HUD-1 prepared for you to review ahead of time - at the closing table is the first you see of it.  Well I’ve shown up at many a closing table only to reschedule and walk out without closing.  Sometimes I’ve received the documents a couple hours before or even a day before closing and I’ve caught a few things that needed to be corrected.  With all of the different people involved in a transaction, and with all of those eyes looking at the numbers, I am perplexed by the situation really.  Of course maybe that is precisely why there are so many errors.

One time I got the HUD-1 a couple hours before my closing appointment.  On the line for insurance impounds instead of there being a dollar figure there, it said “need information.”  So I call the title company and politely asked what they need, considering I faxed my insurance policy to my mortgage broker weeks ago.  Title didn’t have the annual cost for my insurance. So getting a little less polite I ask how is it possible that it’s 2 hours before close and this is still unresolved.  Instead of putting a note on the HUD-1, did she try calling anyone to ask for the insurance amount?  Of course not.  Did my mortgage broker review the HUD-1 before me or at the same time as me and take care of it?  No.  My realtor?  He was completely out of the picture as I had not spoken to him since the day he told me about the deal.  See realtor mishaps.  I wonder what would have happened if I would not have been by my desk, able to get the HUD-1 by email, if I wouldn’t have had time to review it, or if I would have relied on all the people that were getting paid to handle this transaction for me.  I would’ve gotten to the closing table, only to leave without closing.  Simple changes like this can never be made on the spot.  It takes days.  Watch out if you have a closing deadline and you get charged a late fee per day if you close late.  In this incident, $1,200 in late fees racked up pretty quickly while everyone scrambled to do whatever was necessary to plug in the insurance premium that was clearly stated on my insurance policy.  I later got the late fees removed as I was able to convince the builder that since we were using their preferred title company and since they were paying the realtor, it was someone else’s responsibility to get it right before I only have the final 2 hours before closing to check over everyone’s work.

I have another example from yesterday, this one slightly different. 

We received the HUD-1 a day before closing this time.  It was littered with fees we had never seen before.  $50 email fee?  Come on.  $275 appraisal review fee?  After questioning that one we learned that the title company reviews the appraisal to make sure it’s legit and we pay for that.  A $350 broker fee?  For what broker?  We’re already paying the mortgage broker on a separate line item, and I couldn’t figure what other broker that would be referring to.  Then there was the most important line - the bottom line on the front left page.  Amount DUE or FROM borrower.  We were expecting to get $2,000 back but it indicated we were paying $3,600 in.  That’s a $5,600 sway from what we were expecting.  So after sorting through all the details, here’s what we came up with:

Email fee, appraisal review fee, broker fee - all removed just for the asking.  There were several other title company fees that they said it was too late to take off now, but if we would have known about them ahead of time and asked for them to be removed at that time they could have been.  Not sure how we could possibly predict what they are about to charge us for but anyway… they said for next time now we know.  The $5,600 sway appeared because the loan amount was lower than expected.  We are refinancing out to 90% LTV based on the appraised amount.  For some reason, the loan was underwritten for some oddball amount less than 90% LTV.  After weeks of phone calls, emails, faxes, answering to every concern the underwriter had, here the loan amount was wrong the whole time.  I have never seen the loan amount until getting the HUD-1.  With all of the eyes and ears involved in this transaction behind the scenes, why am I the one catching this AFTER the loan has been underwritten?

So we worked through all the adjustments that needed to be made to the fees and the loan amount.  Anytime you change the amount borrowed it has to go back to underwriting.  That takes days for sure.  So we’re closing late again.  This time it’s a re-fi so there are no late fees and it’s no big deal, however, what about the investor who takes the HUD-1 at face value and doesn’t interrogate it?  What about the person who doesn’t ask for fees to be removed?  I guess these people pay full price and no one’s the wiser.  And what about people who have to switch schedules at work or arrange for time off to attend these closings that end up being non-closings, only to have to go back a second time in a few days?

Oh, forgot to mention, in the midst of reworking the numbers suddenly our mortgage broker offered to take $2,000 off of his fee too.  We didn’t even ask for this but he offered.  Interesting how there’s that much slack in fees that you’re either charged for or not, depending on who says what or what kind of mood anyone seems to be in.  He explained that he’s interested in our long term relationship and hopes to work with us on many more loans in the future.  That was really nice and we appreciate that.

I’m telling you this financing is a game.  Maybe a little like poker in some respects.  After all the closings I’ve done, I’ve learned that I can’t quite predict what I’m going to see but that I need to expect the unexpected and look everything over very carefully.  Ask a lot of questions, and especially ask what you do and don’t have to pay for.