Mortgage RESPA Rules

Mortgage RESPA Rules -Real Estate Safe Practice Act (RESPA) Mortgage Lending

 Loan Estimate and Closing Disclosure

Updated post 10/24/2022

 

RESPA protects “you” the consumer during any loan process with certain rules and regulations, that Banks, Mortgage Companies, and any financial institution that lend money have to follow.

RESPA is about closing costs and settlement procedures.  RESPA has certain disclosures that consumers are to receive at the origination of a loan and at various times throughout a transaction.

HUD (United States Department of Urban Development) regulates and enforces these rules and regulations and has made some very important changes to the beginning of mortgage lending transactions and settlement procedures.

Important Regulations

Loan Estimate Disclosure Took the Place of the Good Faith Estimate (GFE) in 2015

•  the origination charges
• the charge for the interest rate chosen *provided the rate is locked in,  if the interest rate has not been locked by you, the borrower, or a locked interest rate has expired, the charge or credit for the interest rate chosen, the adjusted origination charges, per diem interest, and the loan terms related to the interest rate may change.  If you, the borrower later lock the interest rate, a NEW Loan Estimate must be provided showing the revised interest rate-dependent charges and terms.  ALL other charges and terms remain the same as on the original Loan Estimate
• transfer taxes *tolerance- the sum at closing may not be greater than 10 percent above the sum of the amount included on the Loan Estimate.
• lender -required settlement services and required title insurance, and owner’s title insurance, when the borrower uses a settlement service (attorney/title agent) provider identified by the loan originator
• government recording fees/charges

Re: CFPB Latest Update  Updated (2018) – The TILA-RESPA Rule requires creditors to provide consumers with a Loan Estimate that discloses good faith estimates of key loan terms and closing costs for certain residential mortgage
loans. Generally, an estimated closing cost is disclosed in good faith if the charge paid by or imposed on the consumer does not exceed the amount originally disclosed on the Loan Estimate.

However, certain closing costs are disclosed in good faith if the charge paid by or imposed on the consumer is within a “tolerance” specified in the TILA-RESPA Rule. For example, recording fees and certain other third-party charges are subject to an aggregate 10% tolerance (i.e., the total amount paid by or imposed on the consumer for charges within this category cannot exceed the total of the amounts disclosed on the Loan Estimate by more than 10%).

If there is a changed circumstance or another triggering event listed in 12 CFR 1026.19(e)(3)(iv), a creditor may be able to use a revised estimate, instead of the estimate originally disclosed on the Loan Estimate, to determine whether an estimated closing cost was disclosed in good faith. The use of a revised estimate to determine good faith is sometimes referred to as “resetting tolerances.”
If a creditor uses a revised estimate to reset tolerances, the creditor must provide the revised estimate within three business days of receiving information sufficient to establish that the changed circumstance or other triggering event has occurred. (CFPB)

Special Note-Expiration of Loan Estimate

The Loan Estimate is not a loan commitment and there is no regulation which means that the loan originator is required to make a loan to a particular borrower.  The loan originator IS NOT required to provide a loan estimate if he/she does not have available a loan for which the applicant is eligible or if the applicant cannot qualify.

Closing Disclosure Statement Takes the place of the HUD1- Settlement Statement (2015)-

This is the final settlement statement that you receive at closing.  This form is prepared by the closing agent/attorney/title company whichever is applicable.