RESPA Flashcards
WHAT DOES RESPA STAND FOR?
The Real Estate Settlement Procedures Act
WHAT REGULATION CREATED RESPA?
Regulation X
When does RESPA apply?
RESPA applies to any transaction involving a federally-related mortgage loan.
When must a lender notify an applicant of potential to transfer servicing rights of the loan?
Within 3 days after application is submitted
What disclosure document states potential to transfer servicing rights of a loan?
Loan Estimate
When must notice of transfer be provided to borrower by the transferring entity?
No less than 15 days before effective date of transfer
When must notice of transfer be provided to borrower by the receiving entity?
No less than 15 days after effective date of transfer
When must notice of transfer be provided if transferring and receiving entities provide joint notice?
No less than 15 days before effective date of transfer
Who must a borrower pay in the event of a servicing transfer?
Either entity for 60 days following the effective date of transfer, with no penalty (including credit report impacts or late charges)
What key information must be provided in a servicing transfer notice?
- Effective date of the transfer
- Contact information and a toll-free or collect number for both the transferring servicer and the new servicer which the borrower may use to submit inquiries
- The date on which the old servicer will cease accepting payments
- Any information regarding mortgage life or disability insurance
- A statement advising the borrower that the terms of their loan will not change
What is the purpose of Aggregate Escrow Analysis?
To ensure that the proper amount is being held in escrow or reserve accounts (i.e., accounts to hold funds on behalf of borrowers for the payment of taxes and insurance).
How much may a Servicer collect in Escrow?
Up to a 2 month cushion, with only one month in each payment, unless there is a shortage
How often must a Servicer analyze a borrower’s escrow account?
Every 12 months
What is the acceptable overage in an escrow account before requiring a refund to the borrower?
Anything over $50 must be refunded or credited towards the borrower’s next escrow payment
When must a borrower be refunded a surplus from their escrow account?
Within 30 days after the annual analysis date
What are a Servicer’s options when analysis proves Borrower has a shortage less than one month escrow?
- Do Nothing
- Require the borrower to repay the shortage within 30 days, or
- Require the borrower to repay the shortage in two or more equal monthly payments
What are a Servicer’s options when analysis proves Borrower has a shortage greater than or equal to one month escrow?
- Do Nothing
2. Allow the borrower to repay it over a minimum 12-month period
What are the three objectives of RESPA?
- Protect consumers from excessive settlement fees
- Limit the amount lenders can collect in escrow
- Establish disclosures to facilitate timely communications from Servicer to Borrower
Who enforces RESPA?
CFPB
What is an affiliated business arrangement?
When a service provider has a business relationship and an ownership interest in other settlement service providers (e.g. Lender also owns a title company)
What is a bona fide discount point?
Fee paid by the borrower to reduce the interest rate on the mortgage
What is a borrower credit?
a fee paid to the borrower by the lender when a loan is originated at a higher interest rate than the lowest rate for which the borrower qualifies (used to subsidize closing costs)
What is fee-splitting or kickback?
Paying or accepting unearned fees, or marking up the fee for a particular settlement service and splitting the overage with another settlement service provider.
When is a markup permissible?
Whenever the fee is not split between two parties (i.e. the servicer provider retains the full markup)
What is a 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.
Which disclosure:
- Explains the settlement process
- Tells borrowers that they have the right to negotiate the terms of a loan
- Reviews the protections that RESPA creates for borrowers
- Warns borrowers that their use of false information on a loan application can lead to loss of their home, a poor credit rating, and even criminal prosecution for fraud
Special Information Booklet or “Your Home Loan Toolkit: A Step-by-Step Guide”
When must a lender deliver the Special Information Booklet?
No later than 3 business days after an application is received or prepared.
What transactions do not require a Special Information Booklet?
A refinance
A closed-end loan secured by a subordinate lien
A reverse mortgage loan
OR if the application is declined within the 3 day period
This disclosure is required when referral of an affiliated business is made over telephone or if the lender requires use of the affiliated service provider
Affiliated Business Arrangement Disclosure
The record retention requirement for Affiliated Business Arrangement Disclosures is
Five years
Which disclosure provides the following:
- The amount of the borrower’s mortgage payment and the portion that is deposited into the escrow account
- Itemized estimated taxes, insurance, and other payments to be made from the escrow account during the computation year
- The amount that the servicer has selected as a cushion
- A “trial running balance” (the accounting process used to reach target balances over the course of a computation year)
Initial Escrow Account Statement
What is the deadline for providing the Initial Escrow Account Statement?
Within 45 Days of Settlement
When is the Annual Escrow Account Statement due to the borrower?
Within 30 days following the annual escrow computation
This Rule established the required use of the Loan Estimate and Closing Disclosure for many mortgage loan transactions. These disclosures will be discussed in more detail in a later section of this course.
TILA-RESPA Integrated Disclosure Rule (TRID)
What transactions require a Good Faith Estimate (GFE) to be delivered within three days of application?
HELOCs
Reverse Mortgages
Loans for homes not attached to the land (mobile homes, manufactured housing)
What key data points constitute a complete application from a borrower under Regulation X?
Name
Monthly income
Social Security Number
Address of the home that will secure the loan
Estimated value of the home that will secure the loan
Loan amount
Other information deemed necessary by the loan originator
What charges cannot change from quotes provided in the GFE?
Origination charges
Charges for locking an interest rate, and
Transfer taxes
What charges can fluctuate by 10% from quotes provided in the GFE?
Lender-required settlement services performed by a provider chosen by the lender
Lender-required services and title and insurance services if the loan applicant uses a provider recommended by the lender, and
Recording fees
When are revised GFEs permitted?
Change in circumstances affecting settlement charges
Change in circumstances affecting the loan (i.e. loss of employment)
Requested by Borrower
Expiration of the GFE (10 day expiration)
Interest Rate Dependent Changes (borrower has not yet locked rate)
Which disclosure includes the actual charges paid by the borrower and seller, and must be provided to the borrower by the settlement agent at least one business day prior to settlement.
HUD-1 Settlement Statement
What is the penalty for each violation of RESPA?
Up to $10,000 and 1 year of imprisonment
Financial gains on affiliated business agreements are limited to:
Return on ownership interest:
- Dividends
- Capital or equity distribution
What is the document retention requirement for Servicers after a loan is discharded
One Year
What is the time period by which a Servicer must repay a borrower for surplus escrow $$ after a loan is paid off?
20 Days
Hazard insurance that a servicer obtains to insure a home securing a mortgage when a borrower fails to maintain insurance.
Force-Placed Insurance
Eliminates the requirement for a Servicer to file for disclosure via a lawsuit (judicial foreclosure)
Power of Sale Clause
Loss Mitigation time-based requirements include
Live contact to borrower on 36th day of delinquency
Written contact to borrower by 45th day of delinquency
