The Point at which ownership of a property is transferred in exchange for the payment of the selling price
- Two major events:
- 1. The promises made ine the sales contract are fulfilled
- 2. The mortgage funds are distributed to the buyer
- Both the buyer and the seller have concerns to be addressed.
- Buyers and Lenders must be sure the seller can deliver the title that was promised in the purchase agreement and the property is now essterntially the sale conditin it was in when the buyer and the seller agreed to the sale.
- This involves inspecting:
- 1. The title evidence
- 2. The seller's deed
- 3. Any documents demonstrating the removal of undesired lien and encumbrances
- 4. The survey
- 5. The results on any inspections, such as termite or structural inspections or required repairs and
- 6. Any leases, if tenants reside on the premises.
- Lenders and settlement agents have the following disclosure obligations at the time of the loan application and loan closing or within 3 business days of receiving the locan application. If the lender denies the loan within 3 days, then RESPA does not require that the lender provide the following documents
- 1. SPecial Information Booklet--HUD booklet that much br given at the time of application or provided within 3 days if the locan application, provides the borrower with general information about settlement, closing costs.. It also explains the variousprovisions of the RESPA, including a line-by-line description of the Uniform Settlement Statement (HUD-1)
- 2. Good Faith Estimate of Settlement Costs--GFE must contain the exact language specified by HUD making it easier for the borrowers to compare loan conditions from one lender to another. The only fee that the lender may collect before the applicant receives the the GFE is the credit report. Once the GFE is issued, lenders are committed and may only modify the GFE in certain specific instances. If information or circumstances change, a new GFE must be issued and a new 3 day waiting periond occurs. The GFE indicates which of the closing costs may or may not change before settlement and, if they do, by how much. These fees are dvided into three catagories: No Tolerence Fees--may not increase before closing, including lender charges for taking, underwriting and processing the application, including points, origination fees and yield spread premiums.. 10 Percent Tolerence Fees--cannot increase by more than 10% in any given catagory, including settlements services for which the lender selects the provider for whick the borrower selces the provider from the lender's list. Title services and title insurance if the lender selects the provider and recording fees. Unlimited Tolerence--are out of the lender's control, including services for which the borrower chooses the provider( such as escrow and titile insurance, impounds for taxes, mortgage interst, and the cost of homeowners' insurance.
- 3. Morgage serviceing disclosure statement--the statement tells the borrower whether the lender intends to service the loan or to transfer to another lender. It also provides information about resolving complaints.
- 4. Uniform Settelment Statement (HUD-1)--RESPA requires that HUD-1 itemize all changes normally paid by a borrower and seller in connection with settlement, whether required by the lender or another party, or paid by the lender of any other person. Charge required by the lender that are paid before closing are indicated as paid outside of the closing, POC. THe 3rd page of HUD-1 provides a comparison of the origional good-faith estimates to the actual good-faith estimates to the actual charges appearing on the HUD-1. Lenders are permitted to "correct" any violation of the tolerences by rembursing the borrower within 30 days of settlement.