The Real Estate Settlement Procedure Act (RESPA) is a law passed by the United States Congress in 1974 and codified as Title 12, Chapter 27 of the United States Code, 12 USC Ã,§Ã, §Ã, 2601 -2617. The ultimate goal is to protect homeowners by helping them become more educated while shopping for real estate services, and eliminating bribes and referral fees that add unnecessary costs to residential services. RESPA requires lenders and others involved in mortgage lending to provide the borrower with relevant and timely disclosure regarding the nature and cost of the real estate settlement process. RESPA is also designed to prohibit potential harassment practices such as bribes and referral fees, double tracking practices, and imposes restrictions on the use of escrow accounts.
Video Real Estate Settlement Procedures Act
History
The RESPA was enacted in 1974 and was initially administered by the Department of Housing and Urban Development (HUD). In 2011, the consumer finance protection bureau (CFPB), created under the terms of the Dodd-Frank Wall Street Reform and Consumer Protection Act, assumes the enforcement and decision-making authority over the RESPA. As of December 31, 2013, the CFPB issued final rules applying the provisions of the Dodd-Frank Act, which directed the CFPB to publish a single, integrated disclosure for mortgage transactions, which includes the requirements for disclosure of mortgages based on the truth in the Loan Act (TILA) and parts 4 and 5 of the RESPA. As a result, Regulation Z now keeps the integrated forms, time, and disclosure requirements integrated for most of the closed consumer mortgage loans.
Maps Real Estate Settlement Procedures Act
Destination
It's made because the various companies that are associated with the purchase and sale of real estate, such as lenders, real estate agents, construction companies and title insurance companies are often involved in providing bribes that are withheld from each other, inflating the cost of real estate transactions and obscuring price competition by facilitating feed-and-switch tactics.
For example, a lender who advertises a home loan may have advertise a loan at an interest rate of 5%, but then when someone applying for a loan, he is told that one should use the affiliate company's affiliate liability insurance and pay $ 5,000 for the service, while the normal rate is $ 1,000. The title company will then pay $ 4,000 to the creditor. This is made illegal, to create a price for a clear service so as to enable price competition by consumer demand and thus lower prices.
On July 21, 2011, the administration and enforcement Act of the Real Housing Settlement Procedure (RESPA) was transferred from the Department of Housing and Urban Development to the Consumer Financial Protection Bureau (CFPB).
General Requirements
The RESPA outlines the requirements that the lender should follow when providing mortgages that are secured by a federal mortgage-related loan. These include home purchase credits, refinancing, assumption of approved lenders, property enhancement loans, equity credit lines, and reverse mortgages.
Under RESPA, the lending institution must:
- Provide specific disclosures when applicable, including Good Cost Settlement Estimates (GFE), Special Information Booklets, HUD-1/1A completion statements and Disclosure of Mortal Handling Services.
- Provides the ability to compare GFEs with HUD-1/1a completion reports when closing
- Follow escrow accounting practices that have been defined
- Do not resume the foreclosure process when the borrower has filed a complete application for loss mitigation options, and
- Not paying bribes or paying referral fees to the settlement service provider (e.g., appraiser, broker/real estate agent and title company)
Good-Faith Estimate of Settlement Cost
For closed reverse-end mortgages, lenders or brokers are required to provide consumers with a Good Estimated Faith standard (GFE) standard. Good Faith The estimated cost of completion is a three-page document showing the estimated cost borrower may borrow on settlement and related loan information. It is designed to allow borrowers to shop for mortgage loans by comparing settlement costs and loan terms. This fee includes, but is not limited to:
- Original cost
- Estimates for required services (e.g., ratings, credit report costs, flood certification)
- Title Insurance
- Daily interest
- Escrow deposit, and
- Insurance premium
Bank or mortgage broker must provide GFE no later than three working days after the lender or mortgage broker receives the application, or information sufficient to complete and application, the application.
Kickback Fee and Unpaid Cost
A person can not give or receive any fees or anything of value to the business referral of mortgage loan settlement. This includes agreements or understandings related to federal mortgages. The fees paid for services related to mortgages should be disclosed. In addition, no person can give or receive any share, share, or percentage of fees for services connected to a federal mortgage except for the services actually performed.
Allowed Compensation
- Payments to lawyers for services are actually provided;
- Payments by title companies to their agents for services are actually done in title insurance issuance;
- Payments by the lender to the agent or contractor designated for the service are actually done in the origination, processing, or funding of the loan;
- Payments to cooperative brokers and referral arrangements between real estate agents and real estate brokers;
- Unrestricted normal promotional and educational activities on business referrals, and do not involve any expenditure on expenses otherwise if a person is in a position to refer to a settlement service; and
- Company payments to its own employees for any referral activity.
It is the lender's responsibility to monitor third-party fees in connection with the services provided to ensure no illegal dings or referral fees are made.
Borrower Requesting Information and Error Notification
Upon receipt of a qualified written request, a mortgage lender is required to take certain steps, each of which is subject to a specific deadline. The service provider must confirm the receipt of the request within 5 business days. The service provider then has 30 working days (from the request) to take action on the request. The service provider must provide written notice that the error has been corrected, or provide a written explanation of why the service provider believes that the account is correct. Either way, the service provider should provide the name and phone number of someone with whom the borrower can discuss the matter. The service provider can not provide information to the credit agency with respect to payments due after a period of 60 days.
If the service provider fails to meet the "qualified written request", the borrower is entitled to actual damage, up to $ 2,000 additional damages if there is a non-compliance pattern, attorney fees and fees.
Criticism
However, critics say that bribes are still happening. For example, lenders often provide prisoner insurance to the insurance company they handle, which critics argue is basically a kickback mechanism. Others rival that economically a transaction is a zero-sum game, where if bribes are banned, lenders will only charge higher prices. Where others argue that the intended purpose of the law is transparency, which will give it away if the lender has to absorb the hidden bribery charge into the fees they charge. One of the core elements of the debate is the fact that customers are very fond of the default service providers associated with lenders or real estate agents, although they sign documents explicitly stating that they can choose to use any service provider.
There are various proposals to modify the Housing Settlement Procedure Act. One proposal is to change the current "open architecture" system, where customers can choose to use any service provider for each service, to bundled services, but where real estate agents or lenders must pay directly for all costs others. Under this system, lenders, who have more purchasing power, will be more aggressive in finding the lowest price for real estate settlement services.
Although HUD-1 and HUD-1A serve to disclose all costs, costs, and fees to buyers and sellers involved in real estate transactions, it is not uncommon for HUDs to occur. Both the buyer and the seller must know how to read the HUD before closing the transaction and on completion is not the ideal time to find unnecessary costs and/or fees that are too high because the transaction will be closed. Buyers or sellers can hire experienced professionals such as real estate agents or lawyers to protect their interests at the time of closure.
Source
External links
- Full text of actions from Legal Information Institute
- Integrated KPR Disclosure Under the Real Estate Settlement Procedure Act (Rule X) and Truth In Loan Law (Regulation Z)
- Know Before You Owe | Mortgage
Source of the article : Wikipedia
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