mance, the performance of the settlement service industries, and proposed intervention strategies. This section presents an overview of these approaches and discusses the analytical and conceptual frameworks which support them.

The National Survey

The national survey was designed to provide a national perspective on settlement costs and practices. It entailed collecting a nationally representative sample of HUD-1s. These statements itemize settlement costs paid by the borrower and the seller and are completed for all one- through four-unit residential real estate transfers by the person conducting settlement. The HUD-ls also indicate the contract sales price, total settlement charges, and other dollar items pertaining to the transfer of residential property.

We sought to achieve a number of specific objectives through the national survey of HUD-1s. These objectives are:

to gather survey data on settlement costs in order to deter-
mine estimates of the average total settlement costs and
individual settlement costs for the nation, the 50 states,
and 8 selected local markets;

to establish benchmarks for settlement costs in these areas
against which cost data from future studies may be compared;

to develop a data base that may assist in assessing the
effectiveness of RESPA;

to provide data from which differences in the types and
amounts of settlement costs may be uncovered and analyzed;
and

to provide a data base with which specific and relevant hypo-
theses regarding settlement costs may be tested.

A stratified cluster sample was determined most appropriate for achieving the sampling objectives. The sampling frame consisted of the headquarter

offices of all U.S. institutional lenders of the following types:

This listing was sorted by state and within each state by lender type. The sorted listings were then stratified by size of lender (large and small) based on loan origination activity. This stratification scheme yielded eight cells for each state. Each lender in a state fell within one of the following cells:

Exhibit I-1 depicts the stratification scheme for institutional lenders.

Four hundred observations for each state and the eight selected Standard Metropolitan Statistical Areas (SMSAs) were sought as a means of developing reasonably reliable estimates of settlement costs by lender type for each geographic area. Proportional weighting, based on mortgage origination activity, was used to determine the number of observations to be collected for each of the eight categories within each geographic area. This would ensure adequate representativeness of the data collected.

Estimates were developed of the average number of HUD-ls completed in each state per month by each of the eight categories of lenders. Using the sampling thresholds developed under the proportional weighting scheme and a conservative estimate of the reponse rate, the number of lenders within each category to be contacted to produce the desired number of observations was determined. Lenders from each state were selected using systematic random sampling (every nth name) from the listing of lenders for each category. Lenders were asked to submit copies of all HUD-1s they maintained for a specified period of months for the latter part of 1978 through January 1979.

Exhibit I-2 shows the number of observations obtained from each state and the eight SMSAS. In only four states was the sampling threshold not attained: Alabama, Idaho, Iowa, and Nevada. The desired number of observations was not reached in two SMSAS: Boston and St. Louis.

From this set, all HUD-1s which were (1) illegible or (2) did not have a contract sales price were eliminated. From the remaining set, a maximum of 300 observations were selected from each state using the same proportional weighting scheme discussed above and were coded and keypunched. All remaining HUD-1s from the SMSAs were processed. Exhibit 1-3 gives the number of observations processed by state and SMSA.

Local Market Studies

Detailed analyses of eight local markets were conducted to provide an indepth look at the way in which local markets operate in providing settlement services. These studies were geared toward understanding the differences in the process of residential real estate settlement and the practices of settlement providers.

A number of criteria were used in selecting the eight local markets to assure that the full range of representative practices were analyzed. They included settlement-related and demographic criteria. Variations were sought in the following settlement-related criteria: