Have you been overcharged in a real estate transaction? Reports indicate that hundreds and thousands of consumers have been overcharged recording fees, allegedly because their agent is inserting incorrect information in the final HUD-1 settlement statement.
When you "close" on the purchase or refinancing of a home, your Escrow Agent (also referred to as a Closing Agent or Settlement Agent) finalizes your real estate transaction with a Settlement Statement, called a HUD-1. You rely on your agent to record accurate information and charge you accordingly.
But up to 70 percent of transactions are reported as overcharged in recording fees (below) and individuals who have been overcharged on the settlement statement are not refunded monies owed to them. Nationwide, hundreds of thousands of people every year have been overcharged. This could add up to millions of dollars in overcharges that need to be paid back to every consumer that had a transaction.
- 1200. Government Recording and Transfer Charges: These fees may be paid by you or by the seller, depending upon your agreement of sale with the seller. The buyer usually pays the fees for legally recording the new deed and mortgage (line 1201).
- 1201. Recording fees: Deed $ ; Mortgage $ ; Releases $
Financial institutions and associated businesses rely on the accuracy of the information inserted into the HUD-1 by the Escrow Agent. But is the information really accurate? Your escrow agent will typically use a HUD-1 Settlement Statement for the real estate transaction.
The Settlement Statement sets forth all of the credits, costs, and charges associated with the transaction. The Settlement Statement provided at closing is required to list the actual charges associated with the transaction, and the Escrow Agent has a duty to make sure the costs are accurate.
(When real estate transactions involve the use of federally insured funds, the use of the HUD-1 or HUD-1A-- in the case of a residential re-financing transaction-- is mandated. However, even in those transactions which do not utilize federally insured funds, the HUD-1 form is utilized.)
Escrow Agent
The Escrow Agent, typically a representative of the Title Insurance Company, is involved in a residential real estate sale and/or refinancing from the beginning to the end of the transaction. The Escrow Agent collects all of the necessary documents and information associated with the transaction and makes sure all of the necessary documents are filed with the county in which the real estate is located. It is critical to all of the parties to the transaction, as well as the financial institutions that are involved in the transaction, that the information provided by the Escrow Agent is accurate.
Title Insurance Companies
For the most part, it is the major title insurance companies who, acting as the escrow agent in transactions they insure, keep the extra money from the HUD-1 line item overcharges.
Currently, several major Title Insurance companies have existing cases against them and the rest of the major Title Insurance companies are being investigated for class action cases. Several groups of companies control the majority of the Title Insurance market, and these same companies provide Escrow services for the transactions they insure.
Although some of the overcharges are in the $5 per transaction range, some overcharges exceed $100 per transaction. The companies that are overcharging are well aware of what they are doing, yet they still keep the money without notifying the client.
As well, some companies try to justify overcharging by saying that it is easier to â€Óguess-timate� the charges because it is virtually impossible to know the exact charges. However, it is possible to determine the exact amount easily--so that excuse is invalid.
The companies simply choose not to determine the exact amount or intentionally overcharge as it means extra money for them. It is negligence and/or intentional conduct in overcharging on their part. In either scenario, they are libel. No matter what the reason, the agents are duty-bound to report and accept as payment an accurate dollar amount in every transaction.
What the Consumer Can Do
Unscrupulous agents count on you not reading between the lines. Most people spend half an hour going through a transaction they have already spent several weeks and even months preparing for. The amounts listed in the final HUD-1 are not provided to them until 24 hours before the actual closing. Even then, most consumers don't look at the charges until the closing itself, and then only in passing--most closings are conducted quickly. And the parties rely on the Escrow Agent to tell the truth by providing accurate numbers in the HUD-1.
Some Escrow agents get consumers to agree the recording fees are 'just estimates". By telling the client these figures may not be right, they in turn claim they are off the hook as the consumer understood and took the risk. Again, the escrow agent keeps the overcharged amount. Real Estate Lawyers advise that you take the time to read before you sign.
Legal Help
The number of real estate transactions has increased dramatically during the recent real estate boom years, particularly because of the sub-prime market. As a result, there are a lot of funds that should have been returned. If you have either refinanced or purchased a home, it is likely that you have been a victim of these overcharges.
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