How should a lender disclose the cure for a tolerance violation?
A lender may disclose the cure of a tolerance violation in one of two ways.
POC on HUD-1
- The lender may disclose the fee that it absorbed to cure the tolerance violation as “paid outside of closing” on page 2 of the HUD-1.
Credit on Page 1 of HUD-1
- Alternatively, the lender may show the amount as a credit to the borrower in the 200 section on page 1 of the HUD-1. Because of the fact that a lender that uses the POC option must identify a specific fee that is being reimbursed, it may easier for the lender to use this option if it is providing a lump sum reimbursement that could apply to multiple fees.
A lender may, but is not required to, reflect the cure payment in the Comparison Chart on page 3 of the HUD-1. These alternatives can be found in FAQ #9 and 12 of HUD’s FAQs.
HUD's FAQs can be found at http://www.hud.gov/offices/hsg/rmra/res/respa_hm.cfm