If you had to guess what angers realty agents most about the home buying and financing process, what would it be?

A new study based on interviews with a representative statistical sample of Realtors nationwide, says that their number one peeve is the non-availability of HUD-1 settlement information in advance of the closing.

The survey of 1,780 realty agents and brokers was sponsored by a lending industry trade publication, Inside Mortgage Finance, and was conducted by two market research firms -- Geosegment Systems, Inc. and Campbell Communications, Inc. The study has a 3 percent margin of error.

Many Realtors polled in the study appeared to be under the impression that federal law requires closing, title or escrow officials to have a final HUD-1 available for review by the home buyer one business day in advance of the settlement itself.

But, complained one realty agent in the survey, "I have yet to see a HUD statement prior to a client's closing." Another said the lack of a final HUD-1 in advance forces her buyers to essentially go to closing blindfolded -- "they have no idea of their bottom-line costs" Sometimes, she said, the actual charges and fees are "different from the original quotes given to the buyer -- sometimes by over $1,000."

The federal Real Estate Settlement Procedures Act (RESPA) does include a reference to a one business day HUD-1 requirement, but only when the home buyer asks for it specifically. Even then, the law says that closing or title agents need only show the HUD-1 information that they have received at the time -- which may not be enough to satisfy many consumers or their realty agents.

Title and escrow officials say they often find themselves waiting until the last hours -- even minutes -- before a closing to receive the final settlement instructions and figures from the home buyer's lender.

Richard Fritz, a closing attorney and title agent with Paragon Title & Escrow Co. of Bethesda, MD, says lenders are "the primary" source of delays in the process.

"We need their instructions" before the HUD-1 can be put into final form, he says, "but we often don't get them until the 11th hour" or even later. Fritz says it's unfair for closing and escrow officials to get the brunt of criticism for HUD-1 non-availability, when third parties -- including local government tax agencies, condominium associations, home owner associations and Realtors themselves -- don't send the information requested of them until hours before the scheduled closing.

"We are willing to let borrowers see whatever we have received" 24 hours in advance of settlement," said Fritz, "but what we obviously can't show is what we haven't received."

HUD, the agency that oversees RESPA, confirms that it receives many complaints from consumers and realty agents about settlement sheet surprises every year. But HUD has no way to intervene.

"We simply do not have the (statutory) authority" to force settlement agents or lenders to provide HUD-1 information to consumers and Realtors a day in advance of the closing, said Ivy Jackson, head of HUD's RESPA office.

HUD's forthcoming RESPA reform proposals are expected to address the problem by requiring lenders to either guarantee that their upfront "good faith estimates" of closing costs will be identical to the final numbers on the settlement sheet, or to permit only minimal deviations from the original estimates.

Published: April 24, 2006

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consmer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.