The Real Estate Settlement Procedures Act or RESPA, as defined on the HUD site, is about closing costs and settlement procedures.
Federal regulations have just changed RESPA requirements.
Some of the major changes are:
- There is a new HUD-1 statement. The old one was 2 pages, the new one is 3.
- There is a new GFE, Good Faith Estimate, which gives you an estimate of your settlement charges and loan terms you are likely to incur to obtain a specific loan.
- The government has eliminated the cap on FHA origination fees.
Previously HUD limited origination fees to 1 percent of the mortgage amount for most FHA loans.
According to the HUD site, the intent of the standardized GFE and HUD-1 is to provide borrowers an easier means of comparing loan offers, and to determine that they are getting the loan at settlement that they were offered in the GFE.
If you already had a loan in process, HUD states that, if your GFE was issued on the old form prior to January 1, 2010, then the old HUD-1 form must be used even if closing will occur after January 1, 2010.
Things to be aware of: on the new GFE, your total monthly payment is not disclosed. Nor are you shown how much cash you will need to complete the transaction. The form simply addresses information pertaining to the mortgage loan, and does NOT provide for information on your taxes, insurance or other costs.
Your GFE must be issued no later than 3 business days after the loan originator receives your application or information sufficient to complete an application. Application includes the submission of your financial information to obtain a credit decision for a mortgage loan. Application includes: (1)your name, (2) monthly income; (3) social security number to obtain a credit report; (4) property address; (5) estimate of value of the property; (6) loan amount and (7) any other information deemed necessary by the loan originator (lender or mortgage broker).
No additional pages or addendums may be added to the standard GFE form. However, additional pages may be attached to the HUD-1 to add sequentially numbered lines as needed to accommodate the complete listing of all items required to be shown.
If you do not express an intent to continue with an application within ten business days after the GFE is provided (or such longer time period specified by the loan originator), the loan originator is no longer bound by the GFE.
There are no restrictions on the amount of time the interest rate must remain available. The interest rate can be available for any period of time that the loan originator chooses, including for example, a period of time within one day or for several days. Be sure to read the GFE to find out what date your interest rate lock will expire.
**Note that the GFE is not a loan commitment.
In the new HUD-1, the new third page links back to the GFE in a way that is supposed to be easier for you to compare the charges. The GFE estimates your settlement charges. At your settlement, you receive a HUD-1, a form that lists your actual costs.
The new page on the HUD-1 Settlement Statement is intended to allow you to easily compare your final loan terms and closing costs with those listed on your GFE. To facilitate comparison between the HUD-1 and the GFE, each designated line on the final HUD-1 now includes a reference to the relevant line from the GFE.
Be sure to take advantage of these changes and compare the charges on the HUD-1 with the charges on your Good Faith Estimate.
For more information,visit HUD’s Real Estate Settlement Procedures Act information page.
