What does RESPA stand for?
Who enacted RESPA, what year, and for what two purposes?
((Real Estate Procedures Act))
Congress enacted RESPA in 1974 for two purposes:
* To allow consumers to obtain information on the cost of closing so that they can shop for settlement services. RESPA uses mandatory disclosure requirements to ensure that consumers obtain information on closing cost.
* To protect consumers from excessive settlement cost and unearned fees. RESPA establishes prohibited practices to protect consumers from uearned fees.
Who is the Regulatory Agency for RESPA and what Regulation is RESPA?
* The Department Of Urban Development (HUD) is the federal regulatory agency that is responsible for enforcement of RESPA and for issuing implementing regulations.
* The regulations that HUD has promogulated under RESPA are know as (REGULATION X)
What are considered "Covered Loans" by RESPA?
RESPA applies to "federally related mortgage loans"which are defined as loans secured by a first or subordinate lien on residential property which are:
* Made with funds insured by the federal government (e.g. FHA loans).
* Made with funds from a lender regulated by the federal government (e.g. FDIC or NCUA).
* Intended for sale to Fannie Mae or Freddie Mac.
* Made by a creditor regulated under the Truth-in-Lending Act.
With such a broad definition of "federally related mortgage loans," the requirements of RESPA apply to virtually every home loan secured by a mortgage.
What are considered "Exempt Loans" by RESPA?
RESPA does not apply to"
* Loans for 25 acres or more
* Loans for business, commercial, or agricultural purposes
* Temporary financing, such as bridge loans
* Loans secured by vacant land
* Loan assumptions which are permissible without lender approval
* Loans sold in the secondary market
* Loan conversions, when a new note is not required and the provisions are consistent with those of the original mortgage
What are the Definition of Terms Related to RESPA?
(Violations of Section 8 of RESPA)
* Settlement Services: Borrowers depend on a number of settlement service providers to prepare for closing. Third party services are provided by appraisers, inspectors, credit reporting agencies, title insurers, and loan processors.
* Things of Value: Any payment, advance loan, or service including money, discounts, commisions, salaries, stock, opportunities to participate in a money-making program, special banking terms, tickets to theater orsporting events, services at special rates, and trips at another's expense.
* Agreement or Understanding: A written or verbal agreement or even an agreement established through a practice, pattern, or course of conduct, to offer things of value in exchange for the referral of settlement business.
* Fee Splitting and Kickbacks: The sharing of fees among settlement service providers.
* Markups: A unilateral increase in the cost of a settlement service. HUD's policy on markups is that they violate Section 8.
* Affiliated Business Arrangement: An arragement in which one person refers loan applicants to a settlement service provider with whom the person has an affiliate relationship or ownership interest of more than 1%.
* Sham Affiliated Business Arrangement: A partnership or joint venture created between settlement service providers for the illegal purpose of splitting fees under the guise of a bona fide affiliated business arrangement.
* Yield Spread Premium (YSP): A fee paid to a loan originator by the lender for originating a loan at an interest rate higher than the par rate.
What are the Closing Cost Disclosures Required by RESPA?
* Good Faith Estimate
* HUD Settlement Cost Information Booklet
* The Mortgage Servicing Disclosure Statement
* The Affiliated Business Arrangement Disclosure
* The HUD-1 Settlement Statement
When must the "Good Faith Estimate" be provided?
* Mortgage Brokers and Lenders must provide the GFE at the time of application or mail it within three business days after the receipt of the loan application.
Under RESPA, what days are not considered business days?
* RESPA business days do not include federal holidays, Sundays, or Saturdays (unless saturday is a regular business day for the lender)
When a broker takes a loan appliction, regardless of whether a lender has been selected, who is responsible for providing the GFE?
* The Broker
On a purchase transaction, when is the GFE provided to the borrower?
* Not until the subject property had been identified. In this situation, the loan application is considered a pre-qualification.
What is a "Good Faith Estimate" GFE?
* The GFE is a document that includes a reasonable, and as accurate as possible, estimate of the charges that are due at the time of closing.
What are the Estimated fees to the borrower listed in the GFE?
* Loan Origination
* Property Appraisal
* Credit Reporting
* Title Insurance
* Recording the Mortgage
What are the only fees Excluded from the GFE?
((Cost paid the seller))
Estimated fees found on the GFE can be consolidated into what four key areas?
* Lender Charges
* Title Charges
* Government Charges
* Prepaid items and Deposits
(Attorney Fee can be known as Escrow)
How long must all charges listed on the GFE, other than the interest rate and fees tied to the interest rate be available for?
* 10 Days from the time the GFE is provided.
At the time of settlement, the following charges cannot exceed the charges listed on teh GFE:
* The Origination Charge
* Charges for locking an interest rate, while the rate is locked.
* The adjusted origination charge, while the interest rate is locked
* Transfer taxes.
What are the Charges that cannot exceed the charges listed on the GFE by more than 10%?
* Settlement Services
* Lender required services, title services, and title insurance.
* Government recording charges.
If a loan originator charges a borrower an amount that wrongfully exceeds the amount listed on the GFE, how many days does the L.O. have to correct the mistake?
* 30 days to cure the excess charge by reimbursing the excess amount to the borrower.
* Can offer a revised GFE, but must document the reason for any charges listed and must retain the information on the revisions for at least three years after settlement.
Settlement Cost Booklet or Information Booklet
* For purchase transactions only
* The Settlement Cost Information booklet is due three business days after completion of a loan applicaion for a purchase transaction.
* Explains the settlement process.
* Tells borrowers that they have the right to nogotiate the terms of a loan.
* Warns borrowers taht their use of false informaion on a loan application can lead to loss of their home, a poor credit rating, and even criminal prosecution for fraud.
* If there are more than one borrower, only one disclosure may be provided to any of the borrowers.
* This document can be reproduced in any form, stamped with a mortgage professional's contact information and translated into any langue, but acnnot be combined into a larger document with other disclosures.
Mortgage Servicing Disclosure Statement (RESPA)
* This disclosure requirement applies only to first-lien mortgages.
* It's due three business days after completion of the loan applicaion.
* The disclosure states whether the loan servicing can be sold, assigned, or transferred durring the life of the Loan Servicing Transfer Statement.
The disclosure must include:
* Applicants acknowledgment of receipt of the disclosure. (If there is more than one applicaint, signtures of all applicants are required)