RESPA Reform, Mortgage Disclosure Improvement Act and Truth in Lending
For the first time in more than 30 years, the U.S. Department of Housing and Urban Development (HUD) has issued long-anticipated mortgage reforms that will help consumers to shop for the lowest cost mortgage and avoid costly and potentially harmful loan offers. HUD will require, for the first time ever, that lenders and mortgage brokers provide consumers with a standard Good Faith Estimate (GFE) that clearly discloses key loan terms and closing costs. Up until now, this wasn’t required – though you could ask for a GFE, it wasn’t always guaranteed that you would receive it. HUD estimates its new regulation will save consumers nearly $700 at the closing table.
When the Real Estate Settlement Procedures Act was designed in 1974, the intent was to help simplify the mortgage shopping process and reduce consumer settlement costs. The current changes will make the process even more transparent and understandable for consumers. RESPA is about closing costs and settlement procedures. RESPA requires that consumers receive disclosures at various times in the transaction and outlaws kickbacks that increase the cost of settlement services. RESPA is a HUD consumer protection statute designed to help homebuyers be better shoppers in the home buying process, and is enforced by HUD.
This new federal regulation has been created as a way to protect consumers from deceptive loan practices. As a result, there are new requirements and timelines for disclosing information, collecting fees and scheduling closings/settlements. FINALLY!
The Mortgage Disclosure Improvement Act (MDIA), part of the Housing and Economic Recovery Act, affects mortgage disclosures, closing dates and fees. MDIA represents a major shift in the way our industry does business: All lenders (including brokers) must comply.
As of July 30, 2009, no fees (except for a credit report fee) can be collected by the mortgage broker/originator until the initial disclosures are received by the borrower. If disclosures are mailed they are considered “received” three full business days after mailing, allowing the fees to be collected on the fourth business day.
The earliest possible closing date is the 8th business day after initial disclosures are provided to the borrower.
An increase or decrease of more than 0.125 percent in the Annual Percentage Rate (APR) from the initial Truth in Lending disclosure (TIL)** requires that a revised TIL disclosure be issued to the borrower. If the TIL must be revised, the borrower must receive the revision at least three business days before closing and the TIL disclosure is not considered “received” until three business days after mailing.
**Why would the APR change?
– if the loan amount changes UP or DOWN
– if the loan program changes.
– if fees are higher than initially disclosed (including attorney fees)
– if additional fees not originally disclosed must be charged.
What does this mean for us?
– More transparent, level and fair regulation of our industry.
– Consistent lending practices among all lenders.
– Additional controls to prevent deceptive lending practices.
– Even more consumer protection.
– Consumers that are better informed and more confident about the mortgage process.
Contact me for more information. If you are looking for a new home and I am happy to help. You can receive listing notifications, or search for properties yourself at www.Basking-Ridge-Real-Estate.com.
