Catching up on the RESPA FAQS – Transfer Taxes
By Fredric J. Gooch - General Counsel, DocuTech Corporation
One of the more confusing aspects of the new RESPA rule has been the treatment of transfer taxes. HUD staff members have informally discussed the fact that transfer tax disclosure issues have generated many of the questions submitted to the department. The April 2, 2010 FAQ has some valuable information regarding transfer taxes that may help alleviate some of the confusion.
HUD has defined transfer taxes as “taxes charged by state and local governments on mortgages and home sales based upon the loan amount or sales price and on the property address.” HUD has also advised that recordation taxes, excise taxes, doc stamps, intangible taxes, mortgage stamps or deeds stamps may also be considered transfer taxes. Much of the confusion over transfer taxes arises based on the general GFE rule that fees typically paid by the borrower would be disclosed on the GFE even if they are paid by another party such as the seller.
Transfer taxes are disclosed in their own block GFE Block 8. If the borrower is paying the transfer taxes the originator discloses the entire amount in GFE Block 8. However, there are many jurisdictions where the borrower usually does not pay the transfer taxes. After considering these differing practices, HUD advised “If state or local law is unclear or does not specifically attribute transfer tax to a seller or borrower, the amount to be disclosed on the GFE is governed by common practice or experience in the locality of the property.” HUD further advised if a seller pays a portion of the transfer taxes that was not disclosed on the GFE then the seller’s portion should be listed in the seller’s column in the 1200 series of the HUD-1.
It appears that HUD is now advising that GFE Block 8 should contain the amount of transfer taxes that the borrower will likely pay based on local custom or law. Hopefully this new guidance from HUD will alleviate some of the confusion in what has been one of the more difficult parts of the new rule to implement and understand.
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