Significance

• The Settlement Statement is part of the disclosures required by Real Estate Settlement Procedures Act (RESPA). This disclosure is important because it reviews, in great detail, the cost of the loan to the lender, consumer, broker and selling agent (if applicable). It offers a one-page summary that captures a snapshot of the total cost of a loan.
  
  

Function

• The main function of the loan is to make sure that the consumer is fully aware of the costs involved with the loan. Borrowers should be fully briefed on the costs prior to closing, and the disclosure of the document itself should merely be a review. It also offers borrowers and lenders a change to double-check numbers and look for transcription errors.
  
  

Identification

• The HUD1-A Settlement Statement is split into two columns. The left side of the document discloses fees that must be paid by the borrower. These include: origination fees, discount fees, appraisal and title fees, and down payments (if required). The right side of the document lists any disbursements to other parties--like creditors if the loan is paying off bills.
  
  

Misconceptions

• The Settlement Statement is not the mortgage note or the mortgage itself. The mortgage note breaks down the mortgage rate, term (length) and payment information. The mortgage document discloses the total principal balance of the loan, including any financed fees, and, once signed, is recorded at the Registry of Deeds.
  
  

Warning

• Consumers should be very concerned if there are new fees on the Settlement Statement and they are not transcription errors. Some unethical lenders will try to "pack" fees onto a loan right before closing to pad their pockets and fleece vulnerable borrowers. Any loan that is not completely disclosed before closing should not be closed.