What does RESPA stand for?
Real Estate Settlement Procedures Act
What regulation does RESPA fall under?
X
What is the main purpose of RESPA?
To drive down high settlement costs.
How does RESPA drive down high settlement costs?
By implementing protections for consumers
What are ways in which RESPA protects consumers?
- By requiring that pertinent disclosures related to settlement costs (i.e. a Good Faith Estimate of Settlement Costs(GFE), Special Information Booklet, HUD settlement statement and Initial Escrow Statement) be given to the borrower in a timely manner
- By prohibiting certain real estate practices
- By putting regulations on the amount and use of escrow funds
Regulation X refers to all _______ mortgage loans. What are the exceptions?
Federally-related
- Bridge loans
- Commercial loans
- Construction loans
- Home equity loans
- Reverse mortgages
- Seller-financed transactions
When was RESPA passed?
1974
Who enacted RESPA?
HUD
In what year did RESPA assume new enforcement and rule making authority and by who?
2011 by CFPB
What is a mortgage broker?
An intermediary who brings mortgage borrowers and mortgage lenders together, but does not use their own funds to originate mortgages
What loan types are applicable under RESPA?
Home loans made for residential properties designed to accommodate 1-4 families.
RESPA prohibitions
- Kickbacks and referral fees: lenders, real estate agents, or any other parties involved in the mortgage process cannot give or receive kickbacks or referral fees in exchange for business referrals.
- Mandatory use: Lenders are prohibited from requiring borrowers to use a particular title insurance company, attorney, or other settlement service provider in order to obtain a mortgage loan. Borrowers have the right to shop around for settlement services.
- Fee splitting: RESPA prohibits the splitting of fees between settlement service providers unless a bona fide service is actually performed.
- Unearned fees: Lenders cannot charge fees for services that were not actually performed, or for amounts exceeding the reasonable value of the services provided.
- Escrow accounts: Lenders are required to properly manage escrow accounts and are prohibited from forcing borrowers to maintain excessive escrow amounts. Borrowers have the right to receive an annual escrow account analysis.
- Loan servicing transfers: Lenders are required to properly notify borrowers of any transfers of loan servicing to another entity, and are prohibited from charging excessive fees in connection with the transfer.
- Misrepresentation: RESPA prohibits any misrepresentation or false statements related to the mortgage loan transaction.
What are some limitations of RESPA?
- CFPB has limited resources and may not be able to investigate every complaint or violation.
- It only focuses on disclosures and kickbacks.
- Penalties and fines may not be enough to deter misconduct or compensate harmed consumers.
RESPA settlement services
- Title insurance
- Appraisals
- Loan origination fees
What disclosures have to go out within 3 days of receiving a completed application?
- HUD Settlement Cost Booklet
- GFE of Settlement Costs
- Mortgaging Servicing Disclosure Statement
What is GFE?
Good Faith Estimate of settlement costs - provides an estimate of each charge the buyer is likely to pay at settlement
What information is required of the borrower on their application?
ALIENS
- Address of property
- Loan amount
- Income
- Estimated value
- Name
- SSN
Foreclosure process
Under RESPA, servicers must:
-contact borrowers by phone or in-person within 36 days of delinquent payment and again within 36 days of each subsequent delinquency
-inform borrower of loss mitigation options that might be available such as modification, short sale, or deed in lieu of foreclosure
-contact borrower in writing no later than 45 days after a missed payment and again within 45 days of each late payment, however, only one written notice needs to be provided within a 180-day period
-appoint personnel to help the borrower before 45 days of delinquency
-not participate in dual tracking (evaluating a borrower for loss mitigation while simultaneously pursuing a foreclosure)
-wait more than 120 days past delinquency before starting the foreclosure and only if the borrower has not submitted an application for loss mitigation or been approved for any
-stop the foreclosure if the borrower completed a loss mitigation application more than 37 days before the foreclosure sale
*generally doesn’t apply to HELOCs and reverse mortgages
Initial escrow statement
Details the specific charges that borrowers will pay into escrow (money towards upcoming tax and insurance bills) each month
What’s in the HUD Settlement Cost Booklet?
Consumer info regarding various real estate settlement services
What’s disclosed in the Mortgaging Servicing Disclosure Statement?
Whether the lender intends to service the loan or transfer it to another lender and provides information about complaint resolution
RESPA required disclosures BEFORE settlement occurs
- AfBA Disclosure
- HUD-1 Settlement Statement
What does the AfBA disclosure require?
A settlement service provider to give an AfBA disclosure to the consumer at or prior to the time of referral to another provider with whom the referring party has ownership or interest. Must describe the relationship and give the borrower an estimate if the second providers charges.
What does AfBA stand for?
Affiliated Business Arrangements
