RESPA or the Real Estate Settlement Procedures Act was formed to protect consumers by helping them be better shoppers in the home buying process, and is enforced by HUD. RESPA deals with closing costs and settlement procedures and requires that certain disclosures are received by consumers at various points in the transaction. It also outlaws kickbacks that may increase the cost of settlement services.
New RESPA regulations were published November 17,2008 and are scheduled to take full effect on January 1, 2010.
HUD is requiring that loan originators provide borrowers with a standard Good Faith Estimate that clearly discloses key loan terms and closing costs and that closing agents provide borrowers with a new HUD-l settlement statement.
Good Faith Estate-A new, standardized OFE provided to borrowers at the time of application to outline the loan terms and total settlement costs. The new good Faith Estimate offers consumers more certainly about their loan and enables them to shop around more effectively to find the lowest cost loan.
HUD-lIHUD-IA Settlement Statements-Each line on the revised HUD-l includes a reference to the relevant line from the OFE with consistent terminology used in both. This will allow borrowers to easily compare their final loan terms and closing costs with those listed on their Good Faith Estimate.
Servicing Disclosure Statement-This revised upfront disclosure statement infonns the borrower whether a loan's servicing will be assigned to another financial institution.
Settlement Cost Booklet-This revised booklet is provided at the time of application to inform the borrower offees involved in home purchase
Any Lender or Settlement Service Provider found in violation ofthe new RESPA regulations will have 30 days after close ofescrow to correct any errors and compensate the consumer for any overages.
