The Real Estate Settlement Procedures Act (RESPA) was enacted in 1974 to provide consumers with improved disclosures of settlement costs and to reduce the costs of closing by the elimination of referral fees and kickbacks. Through the years, the Department of Housing and Urban Development (HUD) has issued regulations and policy statements to provide RESPA guidance to industry and consumers alike. On November 17, 2008, HUD published a new final rule "To Simplify and Improve the Process of Obtaining Mortgages and Reduce Consumer Settlement Costs." The rule mandates use of a new Good Faith Estimate (GFE) and HUD-1 which went into effect on January 1, 2010 Here are some frequently asked questions and answers: 1) Q: If there is an inadvertent or technical error on the HUD-1, is this considered a violation of Section 4 of RESPA? A: As long as a revised HUD-1 is provided to all parties within 30 calendar days after settlement, it would not be considered a violation of RESPA Section 4. 2) Q: Who is responsible for any tolerance violation? A: The lender is responsible for curing tolerance violations. 3) Q: Does the settlement agent have to stop the closing if a tolerance would be violated? A: No, the settlement agent does not need to stop the closing. While HUD recommends that the lender cure the tolerance violation at closing, the lender has 30 calendar days to cure. 4) Q: If a charge on the HUD-1 is less than the charge on the GFE, is this a tolerance violation? A: No. It is permissible for charges to the borrower to decrease. This is not considered a violation. 5) Q: What happens if the charges are not properly calculated on the GFE and later results in a tolerance violation? Will the settlement agent be responsible for paying the difference to the consumer? A: The lender is responsible for curing all tolerance violations; not the settlement agent. The lender must cure the violation at closing or within 30 days after settlement. REVS staffing is dedicated in keeping our clients informed! For more information regarding this blog click here.
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