Robert: I wrote to HUD with this very question a few years back asking for clarification. The reply , which I will gladly send to you if you would like to see, was short an sweet- "yes, this is a violation of section 8" then they wanted all this information on the company that was doing this. I have looked into this very thing and discussed it here on SOT a number of times, and here is the short story on the rules. It is a section 8 violation to "mark up" or pad the fees  in any manner unless there is ,what HUD refers to as "core title" work, being performed. And by cor title work those adding fees have to actually "do" some title work- no just pass it over the magic wand, as so many seem to feel it is their right to do so. The other aspect of that particular practice , by the same definition, is that those adding fees are required to provide liability coverage for the percentage they are adding to the total on lines 1102 or 1103, which means if you charge 100 and they add 50 to it, they are required to have coverage or be liable for 33% of any potential claim. This illegal practice seems to be rampant in the mid-atlantic region too, promoted by the respective big title insurance companies for their agents to skim off just that much more in the settlement process. HUD is cracking down on some, read the article here on SOT about Fountainhead Title, a big fine was levied for this against them, and many more are just now being brought to light everyday. The fines are on the order of $7k to $10k for each occurrence, so it is not a small thing that they are going after these companies for doing this. It amounts to embezzlement from both the customer and the title abstractor that is trying to remain competitive with what they think are reasonable fees, when the settlement company is inflating the fees for their own selfish gains, while we are being told we need to reduce our fees!!! I have a few HUD-1's that reflect total title fees in excess of $600 for titles that they only paid $100 to the abstractor(an independent company) to complete. When this company was told that title fees were going to go up, they indicted that they would not be able to handle the proposed $10 increase in fees as "it just was not there"!!!  I guess the $500 mark up was just allowing them to barely "make it" in addition to all their other fees they charge for doing the settlement too.There are plenty of cases in the works that will shed more light on this disturbing practice.
Steve Meinecke