RESPA - Real Estate Settlement Procedures Act
Respa - RESPA is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process. RESPA is all about closing cost parameters and settlement procedures. RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services.
1. The 3/7/3 Rule requires a seven business day waiting period once the initial disclosure is provided before closing a home loan (business days are everyday except Sundays and Holidays). This means that before a borrower can close on a transaction the borrower must receive the initial Good Faith Estimate (GFE) and initial Truth in Lending (TIL) statement disclosing the final Annual Percentage Rate (APR) seven days prior to closing.
2. If the final annual percentage rate is off by more than .125% for a fixed rate loan or .25% for an ARM loan, from the initial GFE disclosure, then the lender must re-disclose and wait yet another three business days before closing on the transaction. Note: If the rate fluctuates EITHER WAY, up or down, more than .125% on a fixed or .25% on an ARM, the re-disclosure takes effect.
3. Lenders are forbidden from collecting money for appraisals, loan applications, etc. prior to the delivery of the truth in lending statement. Lenders can only collect the credit report fees from the borrower at the time of prior delivery of the final TIL. No other fees are permitted to be collected at the time of the application. If the TIL is sent by mail, additional charges can occur after the 3rd business day after the borrower receives the TIL in the mail.
4. The following language must be clearly written on the initial and final TIL: “You are not required to complete this agreement merely because you have received these disclosures or signed a loan application.”
5. Any Lender or Settlement Service Provider found in violation of the new RESPA regulations will have 30 days after the close of escrow to correct any errors and compensate the consumer for any overage.
6. Any Lender or Settlement Service Provider needs to respond to a customer with written responses within a 20 day window, acknowledging receipt of your requests.
7. After the acknowledgment, the lender or service provider has 60 days to respond to that request. Damages and fines can be imposed if these condition are not met.
- Patrick Rogers Respa