Purpose of RESPA
- Protect the borrower by educating them on the costs associated with the transaction
- Allows the borrower to obtain information about the closing costs so that they can shop for settlement services
- Protects the consumer from excess settlement costs and unearned fees
- Limits the amount that the lender can collect for escrow
When was RESPA enacted?
1974
RESPA applies to…
1-4 residential property
What are the RESPA Disclosures?
- GFE or Good Faith Estimate- within 3 days of application
- HUD-1 or Uniform settlement statement- due at closing or 1 day prior if the borrower requests
- Homeownership Counseling Organizations- due within 3 business days of application
- Mortgage Servicing Disclosure Statement (MSDS) aka Initial Servicing Disclosure Statement (ISDS) - Due within 3 business days of application
- Special information Booklet aka Settlement Cost Information Booklet (SCIB) - due within 3 business days of application
- Initial Escrow Statement- due within 45 days of closing
- Annual Escrow Statement- due annually
- Service Transfer Statement- 15 days before transfer and 15 days after transfer
- Affiliated Business Arrangement- due at the time of referral
What is the purpose of RESPA?
- Protect the borrower by educating them on the costs associated with the transaction
- Allows the borrower to obtain information about the closing costs so that they can shop for settlement services
- Protects the consumer from excess settlement costs and unearned fees
- Limits the amount that the lender can collect for escrow
What regulation is RESPA?
X; RE”X”PA
RESPA
Real Estate Settlement Procedures Act
Who regulates RESPA?
HUD
Exceptions to RESPA?
- Loans for 25 acres or more
- ABC- Agricultural, Business, Commercial
- Loans that are secured by vacant land
- Temporary Financing
- Loans sold in the secondary market
- All cash sales
- Purchases where the seller carries back the mortgage (seller financed)
Business day
Any day you are open for business excluding FEDERAL holidays and Sundays
SCIB
Special Information Booklet; Mortgage 101; RESPA disclosure. Does not apply to: Refi, HECM, 5 units, or Close end subordinate loans. Cannot be part of Bigger package
Initial Escrow Statement
Provides the borrower with an estimate of escrow payments required in the first 12 months. RESPA disclosure
Annual Escrow Statement
- Annual analysis of the borrower’s escrow account
- How a surplus or deficiency is to be paid/handled
RESPA disclosure
RESPA Disclosures Acronym
HIMHASGAS
Escrow accounts under RESPA must…
- Have 2 month cushion
2. Any amount greater than $50 + cushion returned to borrower (30 cdays)
Transferor
Old loan service provider
Transferee
New loan service provider
How many days must a loan servicer let the borrower know of transfer?
15 days prior to transfer and 15 days after transfer
What is the maximum amount an escrow can hold under RESPA?
14 months (12 months + 2 month cushion)
MSDS or ISDS
Informs the borrower what we plan to do with the servicing of the loan; RESPA Disclosure
ABA
Affiliated Business Arrangement; Must disclose to the borrower if the lender own 1% or more of the settlement service company that the borrower is being referred to ; RESPA disclosure
What is section 6 of RESPA?
Servicing the Loan
What is section 8 of RESPA?
Kickbacks
What is section 9 of RESPA?
Title Insurance
