Many real estate investors are turning to purchasing a note as it becomes more and more difficult to purchase short sales. As in many aspects of life, there are advantages and disadvantages to this. One such example of a potential pitfall is RESPA. RESPA was enacted in 1974 as a means of proper disclosure to the consumer. It also eliminates kickbacks in real estate financing transactions. RESPA compliance alone, can determine the enforceability of your note. Here are a few key issues to consider:
1. RESPA requires a HUD disclosure booklet, so include one in every transaction in which you are buying or selling a real estate note.
2. RESPA requires that all real estate transactions include a HUD-1 statement. Many investors mistakenly believve that it is not necessary to have one when buying or selling the note. Include one for compliance.
3. Mortgage Servicing Disclosure Document. This document discloses the likelihood of assigning the note and also a statement of who will be servicing the loan/note.
4. Good Faith Estimate. RESPA requires this to and iut would be prusdent to include this in every note transaction. Just because you are buying or selling the note, you are not relieved from this compliance requirement.
5.Escow Account Reconcilaition Statement. If you are escrowing for taxes, etc., you are required to send a yearly statement of reconciliation for mney paid in and money paid out from teh escrow account!
Paddy Deighan, Esq
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