Effective January 1, 2010 new regulations implementing the Real Estate Settlement Procedures Act (RESPA) went into full effect. The new Rule updates the 30 year old RESPA rule and is intended to enhance disclosures to residential borrowers. The Good Faith Estimate (GFE) and HUD-1 closing statement forms have been completely revamped by the U.S. Department of Housing and Urban Development (HUD). A form GFE can be found here and a form HUD-1 can be found here.
The changes are complex and include potential penalties for noncompliance. The new Rule mandates that lenders give borrowers more detailed and accurate cost disclosures. For instance, the lender’s origination and other fees on the GFE must match the fees given to the borrower on the HUD-1. Unaffiliated entity fees can only increase 10% from the GFE to the HUD-1. If such fees increase by more than 10%, the transaction can still close but the lender only has 30 days to reconcile and cure the defect. The thought is that the new Rule will save borrowers’ money at closing, and will allow them to compare financing costs between lenders.
Mortgage brokerage fees must be disclosed along with the lender charges. (This Rule goes into effect simultaneous with the new mortgage broker licensing requirements that anyone providing loan modification services in
Under the new RESPA Rule, loan originators are required to provide borrowers with a GFE no later than three days subsequent to the loan originator’s receipt of all necessary information from the borrower.
HUD has announced that it will exercise restraint in its enforcement of the new Rule for several months. However, HUD urges all lenders and settlement agents to “make a good faith effort to comply with the new regulations beginning January 1.” The new Rule will require more coordination between lenders and settlement agents.
For more information call us or read HUD’s FAQs here.
Prepared by: Monica Evans
