(RESPA) Real Estate Settlement Procedures Act (Regualtion X)

Question 1

Consumer Financial Protection Bureau (CFPB)

Answer 1

New Sheriff in town that all Financial entities report to. (Fair Housing does not report to CFPB)

Question 2

Real Estate Settlement Procedure Act (RESPA) (Regulation X)

Answer 2

• To help consumers become better shoppers for Settlement Services
• RESPA Does NOT cover Cash sales, rental property more than 4 units, commercial property and property of 25 acres or more (Agricultural)
• Violating RESPA could result in a fine up to $10,000 and/or One in prison

Question 3

RESPA Section 6

Answer 3

• Deals with Mortgage Servers and Servicing abuses. Designed to address servicers’ obligation to correct errors and work with home buyers if payments are not made.

Question 4

RESPA Section 8

Answer 4

Prohibits Kickbacks, fee splitting, and unearned fees. Prohibits giving or accepting a fee, kickback “thing of value” in exchange for referrals or settlement service business (allows minimal value promotional items). Also prohibits fee-splitting and receiving unearned fees.

Question 5

RESPA Section 9

Answer 5

Deals with Title Insurance. Prohibits seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale.
Allows buyers to sue for an amount equal to “three times” (treble damages) all charges made for the title insurance.

Question 6

RESPA Section 10

Answer 6

Deals with Escrow Accounts. Sec 10 set limits on the amounts that a lender may require a borrower to put into an escrow account for purposes of paying taxes, hazard insurance, and related charges.

• Each month - Lenders may require borrowers to pay into escrow accounts “no more than 1/12th of annual disbursement. At closimg cushion of “2 months (1/6th the annual amount.
• Requires “annual escrow analysis “ If there is any shortage - Return excess over $50 to consumer (if borrower is not delinquent)

Question 7

Defining a Complete Application

Answer 7

1. Name(s) of borrower
2. SSN of each borrower
3. Gross monthly income of borrower(s)
4. Loan amount of sought
5. Address of subject property
6. Estimate of property Value

• Once a complete application is obtained and borrower has indicated his/her intent to proceed-initial disclosures must be provided-unless:
• the applicant withdraws the application within the 3 business day period or
• the lender turns down the loan before the 3 business-day period

Question 8

RESPA Application Initial Disclosures

Answer 8

At or within 3 business Days of Application

1. Home Loan Toolkit (RESPA) for Purchases only.
2. Loan Estimate (TILA) Formerly called the Good Faith estimate (GFE)
3. Mortgage Servicing Disclosure Statement (RESPA) Intention of who will service loan
4. List of HUD Approved Home Counselors (RESPA)

Question 9

RESPA Required Disclosures (BEFORE Settlement)

Answer 9

1. Affiliated Business Arrangement (ABA) Disclosure (1% - not 10%) RESPA
2. Closing Disclosure: 3 days prior to consummation (TILA) previously known as HUD-1

Question 10

RESPA Required Disclosures (AT Settlement)

Answer 10

1. Finalized Closing Disclosure (TILA)
2. Initial Escrow Statement (within 45 days of closing) (RESPA)

Question 11

RESPA Required Disclosures (AFTER Settlement)

Answer 11

1. Annual Escrow Statement (REPSA Sec 10) (RESPA)
2. Servicing Transfer Statement (RESPA)
   - Goodbye Letter (15 days prior to transfer - no penalty for the 1st 60 days)

Question 12

Loan Estimate

Answer 12

• Loan Estimate combines GFE and the initial Truth in Lending Statement
• No fee (except credit report fee) may be charged prior to delivering the Loan Estimate
• Must be delivered or mailed with 3 business days of receipt of complete application
• Availability of terms - must be available 10 business days
• TIP = Total Interest Percentage (APR = total interest + fees percentage)
• Rate Lock is shown on the Loan Estimate form ONLY

Question 13

Closing Disclosure

Answer 13

• Review the form - Replaces the existing HUD-1 form and the final Truth in Lending Statement
• The Closing Disclosure generally must contain the “actual terms” and costs of the transaction.
• The Creditor is responsible for providing the statement to the borrower and the settlement agent (title agent) is responsible for providing the statement to the seller.
• Initial Closing Disclosure must be delivered to the borrower three (3) business days prior to loan consummation. A final Closing Disclosure is delivered at loan consummation.
• If there is a change to the closing disclosure due to VALID Change in Circumstance- the borrower receives a new 3 day waiting period. This would include:

1. Changes in the loan’s APR
2. Changes in Loan product
3. The addition of a prepayment penalty