General Regulations Part 38
May 21, 2008
In an electronic mail, dated April 16, 2008, to the New York State Banking Department (the "Department"), you asked whether there is any prohibition on a mortgage broker receiving a "mortgage broker fee" and have same designated as an "origination fee" on the HUD-1 Settlement Statement (“HUD-1”).
At the outset, note that the HUD-1 is a disclosure document, which was created by the U.S. Department of Housing and Urban Development ("HUD"), and, therefore, the Department is not the optimal authority to interpret and/or opine on its proper usage.
Nonetheless, from a plain reading of the instructions in a booklet provided by HUD entitled, Buying Your Home: Settlement Costs and Information (the "Booklet"), it is clear that a "Mortgage Broker Fee" shall not be identified or disclosed on the HUD-1 as a "Loan Origination Fee" as such "Loan Origination Fee, ... sometimes called a "point" ... covers the lender's administrative costs in processing the loan," and, therefore, is a fee paid to the mortgage lender and not the mortgage broker, and disclosed on Line 801 of the HUD-1. A "fee paid to a mortgage broker," on the other hand, shall be disclosed on line 808 of the HUD-1. id.
Additionally, in accordance with NYCRR Title 3, General Regulations of the Banking Board ("GRBB"), Part 38.1(n) a "point" is a "percentage-based fee denominated as brokerage fee (excluding fees taken for real estate brokerage services), origination fee, or warehousing fee." Therefore, while a "mortgage brokerage fee" and/or an "origination fee" can be referred to as a "point," a "mortgage brokerage fee" cannot be referred to as an "origination fee." Such conclusion is simply drawn from the fact that if the drafters intended to permit the "mortgage brokerage fee" to be referred to as an "origination fee," then they would have so stated; instead, the drafters recognized that they are two separate fees and specifically identified them as such.
Therefore, based on a plain reading of the instructions in the Booklet and a reasonable interpretation of section 38.1 (n) of the GRBB, a mortgage broker is prohibited from receiving a "broker fee" and designating same as an "origination fee" on the HUD-1.
I trust the foregoing is responsive to your inquiry.
Very truly yours,
Harry C. Goberdhan