Bulletin: SLS2008004

Dear Associates:

Hard costs that you have spent in order to close a transaction may generally be collected. Such hard costs that are subject to collection are: long distance calls, wire transfer fees, local delivery fees and overnight air delivery. These items can be shown on the appropriate lines of the HUD-1 statement and charged to the party who benefits from the service. Please consult your local laws and/or local Stewart underwriting counsel to confirm that applicable hard costs may be separately collected. However:

(1) HUD takes the position that the ultimate payee for these services must be disclosed on the HUD-1. You should have receipts in the file that reflect the actual cost of the item for which you are charging. Circuit Courts are split regarding whether mark ups are covered by Section 8(b) of RESPA. The second and eleventh Circuits hold that the mark up of a settlement service provided by a third party vendor without adding value is a violation of Section 8(b) of RESPA. The fourth, seventh, and eight Circuits have disagreed, finding that mark ups are not covered by Section 8(b). Other Circuits have not taken a position on mark ups and Section 8(b). This notwithstanding, HUD takes the position that, if your company "marks up" the cost of these items (or any other line item, for that matter) that you must have added value to the product in order to justify the increased cost charged to the consumer. If a third party charge is increased, you must be prepared to satisfy HUD that you have added value to the product and that the amount you have added bears a reasonable relationship to the actual market value of the added service.

(2) Note that mark ups to third party services should be shown as such on a SEPARATE line item from the payments to third party vendors. As an example, you may make a separate charge for services on recording fees. Actual or estimated recording fees would be shown on one line and you may charge a mark up on a separate line on the HUD-1 to cover your costs of hiring and sending an employee to do the recording service together with parking fees, etc., to reflect the cost of your added service. Not all states permit aggregation of service fees. Please consult your local laws and/or local Stewart underwriting counsel to determine whether mark ups for several third party services can all be aggregated as a service fee payable to your company and shown together on one line.

Please note that RESPA restrictions apply only to RESPA regulated transactions. Commercial transactions are generally not subject to these restrictions; however, there may be applicable state laws on the issue. Please consult your local laws for verification.

(3) You should also be aware that many courts have taken the position that state consumer protection statutes supplement any RESPA enforcement and you must determine that your charges and disclosures on the HUD-1 comply with state law.

(4) Some states have various statutes that regulate the fees that can be charged for equity loans and you must be sure that any charges you might make on these kinds of loans comply with your state law.

Other areas for consideration as to the appropriate fee to be charged are the simultaneous policy charge (unless you are in a state which promulgates rates), or the settlement fee (if you perform settlements and the settlement fee is not included in the premium charge). If your state requires rate filing or escrow filings by your underwriter, our rate and form filing department will be happy to file the appropriate charges. However, competitive pressures may affect your ability to increase any charge.

You may think of additional revenue opportunities. Just remember that you should be able to justify the charge and you must disclose the charges for such services on a separate line on the HUD-1.

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