Happy New Year Peachtree City & AR! As we welcomed in the official beginning of the new millennium and a new decade the government also introduced some sweeping new regulatory reform changes that will pose a significant impact on the mortgage industry and everyone in the real estate profession.
The Real Estate Settlement Procedures Act (RESPA)went into effect on January 1st. I would be remiss if I did not also state that HUD will overseeing enforcement of these new rules and is stated to say that they
will "exercise restraint in enforcement" giving lenders an opportunity to make a good faith effort to comply with the new regulations.
So what is all the hoopla about the new RESPA reform? Well the two major changes related to the new RESPA reform are the revised HUD-1 Settlement Statement and the Good Faith Estimate (GFE). These docs contain a itemization of closing costs issued by lenders, settlement agents, and closing attorneys. The new RESPA reform will require lenders and mortgage brokers to provide consumers with a newly revised Good Faith Estimate that clearly lists and discloses the loan term and all closing costs. On the other end, the Closing agents/Closing Attorneys will also be required to provide borrowers with a new HUD-1 Settlement Statement that clearly lists and compares all the borrowers costs related to their transaction.
Now I recently attended the RESPA seminar provided by my closing attorneys and I have to admit that even though initially it will take time for lenders and closing attorneys to get acclimated to handle the additional paperwork and processing related to the changes.....it will be extremely beneficial! Here's why? The opportunity was there previously for unscrupulous lenders to hide, add in fees, changes rates or charge outrageously high fees for their services without any recourse from unsuspecting or unsophisticated borrowers.
The new law states that Lenders must now provide borrowers with a firm "origination charge" which must include all the various loan origination fees now separately itemized on the HUD-1 Settlement Statement, including points, appraisal, credit, and application fees, administrative, lender inspection, wire, and document preparation fees. This origination fee cannot increase. Lenders also have to provide borrowers with a "firm" quote for typical closings costs, including attorneys' fees, title insurance and recording fees, and select up to 1 preferred provider for such services. The firm quote cannot increase by more than 10% at closing. Changes could delay your closing by 3 days! If the lender allows, borrowers can use their own providers who will not be subject at all to the firm quote requirement. The new changes will require quite a bit of coordination between lenders and closing attorneys.
Although a good number of lenders may not be ready for these changes....your Real Estate professional and/or Attorney should be able to explain the changes to you. Proper planning will help expedite the process and guarantee a much smoother transaction leading up to your closing.
Need further information please contact me or go to the HUD website: www.hud.gov/news/
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