THE RESPA FACT SHEET
(Real Estate Settlement Procedure Act)
A Need to Know for:
All Real Estate Professionals:
For all Buyers
Part I
More than 30 years ago, Congress realized there were challenges in which instances where consumers were often steered to higher priced settlement services. As a result, Congress enacted a consumer protection statute to help guide the loan process: The Real Estate Settlement Procedures Act (RESPA). Making us fully aware of RESPA and certain prohibitions is a win-win for all involved. Realtors’ lack of knowledge and/or failure to know about RESPA could lead to Violations of harsh penalties, including triple damages, fines and even imprisonment.
- RESPA stands for the Real Estate Settlement Procedures Act and is a federal law passed for consumers’ protection with residential property loans (including refinancing, home improvement loans, and equity lines) requiring certain disclosures made to the lender within the process.
- In January 1, 2010, Housing and Urban Development Secretary Shaun Donovan announced mortgage reforms that would save home loan applicants time and money.
- RESPA process begins with the initial loan application. It requires that a borrower be given a Good Faith Estimate that includes the range of costs associated with the closing of the loan.
- RESPA is a consumer disclosure and anti-kickback statute designed to inform consumer of their settlement costs and to prohibit kickbacks that can increase the cost of obtaining a mortgage.
- Real Estate licensees must comply with RESPA.
- Violators may receive harsh penalties, including triple damages, fines and even imprisonment.
- Purpose of RESPA, is to help consumers become better shoppers for settlement services.
- RESPA requires that borrowers receive disclosures at various times. Some disclosures spell out the costs associated with the settlement, outline lender servicing and escrow practices and describe business relationships between settlement service providers.
- GOOD FAITH ESTIMATE OF SETTLEMENT COST: RESPA requires that when you apply for a loan, the lender or mortgage broker give you a GFE (Good Faith Estimate) of Settlement service charges Borrowers are likely to pay.
- If Borrowers do not get this GFE when they apply, the lender or mortgage broker must mail or deliver it to you within the next (3) three business days.
- BE AWARE: The amounts listed on the GFE are only estimates. Actual cost may vary. Changing market conditions can affect prices. Remember that the lender’s estimate is not a guarantee. Keep GFE to compare it with the final settlement costs and ask the lender questions about any changes.
- RESPA requires the lender or mortgage broker to tell Borrower in writing, when applying for a loan or within the next (3) business days, whether it expects that someone else will be servicing loan (collecting your payments). This is referred to as a Servicing Disclosure Statement.
- RESPA requires the referring party to give buyer an Affiliated Business Arrangement Disclosure. This form will remind a Borrower that they are generally not required with certain exceptions, to use the affiliate and are free to shop for other providers. Example: A real estate broker refers a Borrower to a mortgage broker affiliate.
- HUD-1 Settlement Statement: One business day before the settlement, the Borrower have the right to inspect the HUD-1 Settlement Statement. This statement itemizes the services provided and the fees charged. The fully completed HUD-1 settlement statement generally must be delivered or mailed to buyer at or before the settlement. In cases where there is no settlement meeting, the escrow agent will mail the buyer the HUD-1 after settlement.
- Escrow Account Operation & Disclosures: Borrower’s lender may require an escrow or impound account to insure that taxes and insurance premiums are paid on time.
- Within the next 45 days, the person servicing loan must give an initial escrow account statement. That form will show all of the payments which are expected to be deposited into the escrow account and all of the disbursements which are expected to be made from the escrow account during the year ahead. The Borrower’s lender or servicer will review the escrow account annually and send a disclosure each year which shows the prior year’s activity and any adjustments necessary in the escrow payments that Borrower will make in the forthcoming year.
In our fast past world, consumers are relying on us (Realtors) to SIMPLIFY the real estate process. They are looking for trustworthy “Navigators” to help them through the process; while at the same time- meeting their needs. In order to provide the best customer service, Realtors must be better informed and educated about RESPA. It is an integral part of the loan process. Realtors’ lack of knowledge and/or failure to know about RESPA could lead to Violations of harsh penalties, including triple damages, fines and even imprisonment.
This is a Need to Know. What say you?
Hollywood Homes By MC
M. C. Griffin Campbell, Broker License #: 01819507
Short Sales and Foreclosure Resource (SFR) Certification
Seniors Real Estate Specialist Designation (SRES)
323-382-4364: 323-464-5431
www.hollywoodhomesbymcampbell.com
email: hollywoodhomesmc@aol.com
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