What’s in a Few Letters, Numbers, or Words?

27 Jun

R-E-S-P sounds like the beginning of the Aretha Franklin song RESPECT.

What we are talking about across the nation is The Real Estate Settlement and Procedures Act best known as RESPA. This act is actually a consumer protection statute; it was first passed in 1974 so it is nothing new to real estate transactions. There are two main purposes of RESPA

1. to help consumers become better shoppers for settlement services

2. to eliminate kickbacks and referral fees that unnecessarily increase the cost of certain settlement services

RESPA covers loans secured with a mortgage placed on a one to four family residential property. These include most purchase loans, refinances, property improvement loans and equity lines of credit. Let’s talk about the sweeping changes to RESPA that have become effective January 1st 2010. It impacts YOU!!!

On January 1st 2010 Housing and Urban Development (HUD) will require that lenders and mortgage brokers provide consumers with a standard Good Faith Estimate (GFE) that clearly discloses key loan terms and closing costs. It is nothing like the GFE’s you have seen in the past. It does not disclose monthly payments and cash to close like you were used to, and it does not break down itemized lender transaction costs.

Closing agents will also be required to use a new HUD 1 Settlement Statement that clearly compares consumer’s final and estimated costs. This all new HUD has guidelines and tolerances that MUST be adhered to with out exception. Please visit http://www.hud.gov/respa and download New RESPA Rule FAQ’s (51 pages).It will be your survival handbook for the coming year.

Grant Simon, GRI