Real Estate Settlement Procedures Act (RESPA)
What Happens if the Lender Sells or Transfers the Loan?
Both the lender and new owner or servicer shall retain the Closing Disclosure for the remainder of the five‐year period.
PAGE 1 of CLOSING DISCLOSURE
CD replaces HUD-1 and Final TIL disclosure (1) General Information -closing information, transaction information, and loan information. (2) Loan Terms (3) Projected Payments Table (4) Costs at Closing Table
Good faith estimate or (GFE)
Good faith estimate or (GFE) means an estimate of settlement charges a borrower is likely to incur, as a amount, and related loan information, based upon common practice and experience in the locality of the mortgaged property.
TILA-RESPA Integrated disclosure forms
Loan Estimate and the Closing Disclosure.
RESPA's Purposes
RESPA's Purposes 1- To allow consumers to obtain information on the costs of closing so that they can shop for settlement services. 2- To protect consumers from excessive settlement costs and unearned fees. • To help consumers get fair settlement services by requiring that key service costs be disclosed in advance • To protect consumers by eliminating kickbacks and referral fees that will unnecessarily increase the costs of settlement services • To further protect consumers by prohibiting certain practices that increase the cost of settlement services
RESPA
Real Estate Settlement Procedures Act
Settlement Services
Settlement services means any service provided in connection with a real estate settlement. (acuerdo de bienes raices) The types of services include the work involved with providing title insurance, attorney services, document preparation, property surveys, credit reports, appraisals, inspections, commissions/fees to real estate agents or mortgage lenders, and closing/settlement services.
Disclosures at Time of Application
Special Information Booklet Good Faith Estimate (GFE) Affiliated Business Arrangements (AfBA).
Kickbacks, Fee Splitting, and Unearned Fees
This applies to almost every loan made for residential property. RESPA also prohibits fee splitting and receiving fees for services not actually performed. Violation of these RESPA provisions can be punished with criminal and civil penalties.
Types of loans not covered by RESPA
Types of loans not covered by RESPA Cash sale, Rental property transaction, 25 acres (Agricultural) Vacant land (unless a dwelling will be constructed or moved onto the property within 2 years) Commercial properties, Temporary (bridge, construction)
escrow account
an account where money is held in trust until it can be delivered to a designated party
good faith exception
an error in gathering evidence sufficiently minor that it may be used in a trial
PAGE 2 of CLOSING DISCLOSURE
• Loan Costs table • Other Costs table
Main Sections of Page 2 of the Loan Estimate
• Loan Costs table • Other Costs table • Calculating Cash to Close table
Page 3 of the closing disclosure
(1) "Calculating Cash to Close" table (2) "Summaries of Transactions" tables (if not Sold: it'll be "Payoffs and Payments" table
Page 4 of the closing disclosure
(1) Loan Disclosures (2) Adjustable Payment (AP) & Adjustable Interest Rate (AIR) tables (if applicable) under "Additional Information about this Loan"
Servicing transfer include:
*the name and address of new servicer, *toll-free telephone number, *contact information for new servicing company, *the date and location to which borrower should send *next payment.
Charges That May Exceed the Disclosed Amount
-prepaid interest, -property insurance premiums, -amounts placed into an escrow, impound, reserve, or similar account. • Charges paid to third-party service providers for services not required by the lender. • Services required by the lender if the lender permits the borrower to shop and the borrower selects a third-party service provider not on the lender's written list of service providers.
1d Types of loans to which RESPA is applicable
1-4 unit residential properties (Owner occupied) -loans intended for sale to Fannie Mae or Freddie Mac - Made with funds insured by the federal government (FHA) "With such a broad definition of "federally-related mortgage loans," the requirements of RESPA apply to virtually every home loan secured by a mortgage.(cada préstamo de casa garantizado por una hipoteca) "RESPA applies to all federally related home loans (with some exemptions) used to purchase, refinance or improved real property of one-to-four units, owner occupy, These include: *most home purchase loans, *lender-approved assumptions, *refinances, *property improvement loans, *equity lines of credit, *and reverse mortgages.
Elements in the Reg. Z Definition of Application
1. Borrower's name 2. Borrower's monthly income 3. Borrower's social security number to obtain a credit report 4. Property address 5. Estimate of the value of the property 6. Mortgage loan amount
A lender must ensure that the borrower receives the revised Loan Estimate
4 business days prior to consummation.
The TILA-RESPA rule defines a prepayment penalty
A charge imposed for paying "all or part of" a transaction's principal before the date on which the principal is due.
Loan Estimate (LE)
A disclosure to inform the borrower on the cost of closing and the cost of getting a loan. This replaces the TIL and GFE on purchase and refinance transactions.
Limitation on Imposing Fees
A lender (or other person such as a MLO) may not charge a borrower any fee for a loan until the borrower has received the Loan Estimate exempt the fee for credit report
Title Insurance
A seller is prohibited from requiring a homebuyer to use a particular title insurance company.
Closing Disclosure (CD)
A settlement form required in most residential mortgage loans required by the TRID rules since October 2015.The Closing The Closing Disclosure integrates and replaces the existing HUD-1 and the final TILA disclosure. For loans that require a Loan Estimate and that go to closing, lenders must provide borrowers with the Closing Disclosure reflecting the actual terms of the transaction.
Methods of Communicating Intention to Proceed
After the Loan Estimate has been delivered, a borrower indicates his or her intention to proceed ; • Oral communication in person immediately upon delivery of the Loan Estimate • Oral communication over the phone, -written communication via email, -or signing a pre-printed form after receipt of the Loan Estimate. The lender must retain record of this communication.
Conditions to use an Affiliate Business Arrangement without violating RESPA :
An affiliated business arrangement does not violate RESPA or Reg. X if the following conditions are satisfied. • Prior to the referral, the person making the referral must give the borrower an Affiliated Business Arrangement Disclosure Statement. • The statement must state the nature of the financial relationship between the provider and the loan originator, and the estimated charge or range of charges generally made by such provider. • The disclosure must be provided on a separate piece of paper either at the time of loan application, or with the GFE, or at the time of the referral.
Changed Circumstance Affecting Settlement Charges
An extraordinary event beyond the control of any interested party Information that have been changed after the disclosures were provided. New information or transaction that the lender did not rely on when providing the Loan Estimate.
Annual Escrow Statement
Annual Escrow Statement. The annual escrow statement details the activity in the escrow account. This statement shows deposits into the account and the account balance. It also reflects remittances (REMESAS o tranferencias) of property taxes and homeowners insurance. It accounts (da centas) for any shortages or surpluses (escasez o excedentes) in the account and helps advise the borrower about the course of action being taken.
Affiliated Business Arrangements (AfBA).
Any affiliated business arrangements must be disclosed to the consumer using the Affiliated Business Arrangements disclosure
Charges Subject to a 10% Cumulative Tolerance
Charges Subject to a 10% Cumulative tolerance are: *Charges for third-party services *and recording fees paid by the borrower. This means the lender may charge the borrower more than the amount disclosed on the Loan Estimate for any of these charges so long as the total sum of the charges added together does not exceed the sum of all such charges disclosed on the Loan Estimate by more than 10%.
Who implements RESPA?
Currently the CFPB implements RESPA through Regulation X.
Mortgage Broker
Definition of "mortgage broker" An individual or company which brings borrowers and lenders together for a purpose of loan origination, but does not originate or service the mortgages. (arranger) Mortgage broker means a person (other than an employee of a lender) that renders origination services and serves as an intermediary between a borrower and a lender in a transaction involving a federally related mortgage loan, including such a person that closes the loan in its own name in a table-funded transaction.
The HUD-1 or the HUD-1A Settlement Statement is
Due at the time of closing, but the borrower may request a copy one business day prior to settlement.
Federally related mortgage loans
Federally related mortgage loans are defined as loans, including refinancings, that satisfy the following two criteria: 1-Loans subordinated to first liens and within the state: • a one-to-four family structure is located or is to be constructed • a manufactured home is located or is to be constructed 2. Second, the loan falls within one of the following categories: • loans made by a lender, creditor, dealer; • loans of agency of the federal government; • loans of housing or urban development program administered by an agency of the federal government; • loans made to be sold by the originating lender or creditor to Fannie Mae, Freddie Mac, Ginnie Mae, (or its successor); or • loans that are the subject of a home equity conversion mortgage or reverse mortgage issued by a lender or creditor subject to the regulation. (prestamos que son objeto de una hipoteca de conversión de capital de vivienda o hipoteca inversa emitida por un prestamista o acreedor sujeto a la regulación)
How long does the lender, must retain the Post‐Consummation Escrow Cancellation Notice (Escrow Closing Notice) and the Post‐Consummation Partial Payment Policy disclosure?
For 2 years
good‐faith estimates of credit costs and transaction terms on the Loan Estimate is given for:
For closed‐end credit transactions secured by real property (other than reverse mortgages),
Closing Disclosure (CD)
For loans that require a Loan Estimate and that go to closing, lenders must provide borrowers with a new final disclosure reflecting the actual terms of the transaction called the Closing Disclosure this contains general requirements, integrates sample disclosure forms, and contains additional disclosure information.
RESPA Disclosure Requirements
GFE - Good Faith Estimate - booklet given to loan applicant by lender with info. so they can use to compare loans. Only fee lender can collect prior to GFE is for credit report. HUD-1 (Uniform Settlement Statement) - our form is Closing worksheet - shows all charges paid by borrower and seller at closing.
Business Day
General Definition - Used for Loan Estimate. A business day is a day on which the lender's offices are open to the public for carrying out substantially all of its business functions. Specific Definition - Used for Rescission and Waiting Periods. A business day means all calendar days except Sundays and the Federal legal public holidays. (Dice especificamente no los domingos no los dias de fiesta)
Good Faith Estimate (GFE)
Good Faith Estimate (GFE). The GFE of settlement costs lists the charges the buyer is likely to pay at settlement. This is only an estimate and the actual charges may differ. If a lender requires the borrower to use of a particular settlement provider, then the lender must disclose this requirement on the GFE.
RESPA Disclosures at Settlement
HUD-1 or HUD-1A settlement statement. Initial Escrow Statement. Annual Escrow Statement. Mortgage Servicing Transfer Statement.
Limitation on Requiring Additional Information Prior to Providing a Loan Estimate
If a borrower provides the six required items for a loan application, a lender (or other person) cannot require additional documents verifying information related to the borrower's mortgage loan application before providing the Loan Estimate.
Affiliated Business Arrangements
If a loan originator (or an associate) has either an affiliate relationship or a direct or beneficial ownership interest of more than 1% in a provider of settlement services and the loan originator directly or indirectly refers business to the provider it is an affiliated business arrangement.
corrected disclosure
If the lender provides a corrected disclosure, it may also be required to provide the borrower with an additional 3‐business‐day waiting period prior to consummation.
Mortgage Servicing Transfer Statement.
If the originating lender or subsequent loan servicer sells the servicing rights to a borrower's loan to another loan servicer, a Servicing Transfer Statement must be sent to the borrower. The loan servicer must notify the borrower 15 days before the effective date of the loan transfer.
Changed Circumstances
Inaccurate GFE, Acts of God war, disaster, or other emergency, boundary disputes, the need for flood insurance, or environmental problems. Revised GFE must be issued within three business days of the loan originator becoming aware of changed circumstances
Initial Escrow Statement
Initial Escrow Statement. Although the initial escrow statement is usually given at settlement, the lender has 45 days from settlement to deliver it.
Finance Charges/Fees
Is "the cost of borrower credit as a dollar amount. It includes any charge payable directly or indirectly by the borrower and imposed directly or indirectly by the lender as an incident to or a condition of the extension of credit".
Waiting Period
Lenders must allow applicants to have a 7-business day waiting period after mailing or delivering the Loan Estimate prior (antes) to closing the loan Borrowers may modify or waive the 7-day waiting period if they can show that it is a bona fide personal financial emergency Lenders are advised to follow strict procedures for proper documentation and borrower signatures. For purchase transactions that a "time is of the essence" clause, the closing date should be amended (modificarse) to accommodate the full waiver requirements. (para acomodar los requisitos de exencion completa)
Delivering the Closing Disclosure
Lenders must ensure that borrowers receive the Closing Disclosure no later than 3 business days before consummation. For timeshare transactions, the lender must ensure that the borrower receives the Closing Disclosure no later than consummation
Good Faith Requirements
Lenders must ensure that the figures (cifras) stated in the Loan Estimate are made in good faith and are consistent with the best information reasonably available to the lender at the time they are disclosed. -Determine if Loan Estimate was made in good faith by calculating the difference between the original charges provided in the Loan Estimate and the actual charges paid by or imposed on the borrower in the Closing Disclosure.
List of homeownership counseling organizations
Lenders must give applicants for federally related mortgages (whether or not a high-cost mortgage or negative-amortization) a written list of homeownership counseling organizations within three days of receiving an application. this must be obtained in the CFPB website or data made available by the CFPB or HUD for lenders to use in complying with the counseling requirements.
Early Foreclosure Intervention
Live Contact Not later than the 36th day of the borrower's delinquency, servicers must make good faith efforts to contact the delinquent borrower and inform the borrower about the availability of loss mitigation options, if appropriate. Written Notice Not later than the 45th day of the borrower's delinquency, the servicer must send the delinquent borrower a written notice encouraging the borrower to contact the servicer.
business day
Monday through Saturday except holidays.
Page 2 of the Loan Estimate
Page 2 of the Loan Estimate Page 2 of the Loan Estimate includes closing cost details. For transactions with adjustable payments or adjustable interest rates, an Adjustable Payment (AP) table or an Adjustable Interest Rate (AIR) table is provided.
Page 3 of the Loan Estimate
Page 3 of the Loan Estimate provides additional information about the loan. Comparisons, Other Considerations and Confirm Receit
Special Information Booklet (required for purchase transactions).
Special Information Booklet -given at the time application is summited or 3 business days after the application is received. For closed-end loans, the booklet entitled, "Your Home Loan Toolkit", For open-end equity line of credit (HELOC),the booklet entitled, "When Your Home is On the Line: What You Should Know About Home Equity Lines of Credit". Booklet is not required for refinances, junior loans, or reverse
Model Form H-25
The Closing Disclosure must be in writing and contain the information prescribed in 12 CFR §1026.38(a) through (s) as shown in Model Form H-25.
Mortgages Covered by the TRID (TILA-RESPA integrated disclosures que son el Loan Estimate y Closing Disclosure) rule
The TILA-RESPA rule applies to most closed-end residential mortgages. *construction-only loans, *vacant-land loans, *and 25-acre loans,.
Application most include:
The borrower's name the borrower's mostly income the borrower's social security number to obtain credit report the property address The estimate value of the property the mortgage loan amount sought and any other information deemed necessary by the loan originator
Escrow account shortage or surpluses (escasez o exedentes)
The lender must notify the borrower annually of any escrow account shortage and return any excesses of $50 or more.
application (RESPA)
The submission of a borrower financial information in anticipation of credit decision relation to a federally related mortgage loan
Page one of the Loan estimate
The top of page 1 of the Loan Estimate includes the name and address of the lender. It also includes the title "Loan Estimate" and the statement "Save this Loan Estimate to compare with your Closing Disclosure." The applicant's name, property address, and sales price are written in the upper left side of the form. The upper right side has space to state the type of loan, its term, purpose, ID number, and whether it has a rate lock.
Tolerance
Tolerance means the maximum amount by which the charge for a category or categories of settlement costs may exceed the amount of the estimate for such category or categories on a GFE.
To comply with the TIRD rule when does the lender must provide the borrower with the Closing Disclosure Form?
at least 3 business days before consummation of the loan.
HOW LONG does the lender must retain copies of the Closing Disclosure (and all documents related to the Closing Disclosure)?
for 5 years after consummation
Use of Form H-26 for Estimates of Costs and Terms
if a written estimate of terms or costs is given to borrower, before the borrower receives the Loan Estimate, the form must conform to the CFPB Model Form H-26.
Kickbacks (sobornos)
is an illegal payment made in return for a referral that results in a transaction.
Integrated Disclosure
lenders must maintain records for three years after consummation of the transaction.
HUD-1 settlement statement (also HUD-1)
means the settlement statement used for the purchase or the refinancing of 1- to 4-family residential property.
TILA-RESPA Application definition
submission of a borrower's financial information for the purposes of obtaining an extension of credit.
Which are the mandatory CFPB designed integrated model forms?
the Loan Estimate Form (H-24) and the Closing Disclosure Form (H-25)—to replace existing RESPA and TILA-related disclosures. For any loans subject to the TRID Rule that are federally related mortgage loans subject to RESPA (which will include most mortgages), forms H‐24 and H-25 are standard forms, meaning lenders must use forms H‐24 and H-25.
The Closing Disclosure generally must contain
the actual terms and costs of the transaction.
Closing Disclosure replaces:
the existing HUD‐1 and the final TILA disclosure.
Settlement
the process of executing legally binding (vincular) documents regarding a lien on property that is subject to a federally related mortgage loan. (respecto a un gravamen sobre bienes sujetos a un préstamo hipotecario relacionado con el gobierno federal) This process may also be called "closing" or "escrow" in different jurisdictions.
consummation
when the borrower becomes contractually obligated to the lender on the loan
Settlement,
which is known as closing in some states, is the process by which ownership of real property or title to the property is passed from seller to buyer.
When does the lender have to provide the loan estimate ?
within 3 business days of the receipt of the borrower's loan application. Lenders must allow applicants to have a 7-business day waiting period after mailing or delivering the Loan Estimate to close the loan.
a written estimate
written estimate must clearly and conspicuously state at the top of the front of the first page of the written estimate: "Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing the loan." THIS FORM MUST NOT LOOK SIMILAR TO THE LOAN ESTIMATE OR CLOSING DISCLOSURE
Main Sections of Page 3 of the Loan Estimate
• Contact information • Comparisons table • Other Considerations table • Confirmation Receipt of the Form The lender may add a signature statement and have the borrower sign Page 3 of the Loan Estimate in order to Confirm Receipt of the Loan Estimate by the borrower.
EXAMPLES of Charges Subject to Zero Tolerance
• Fees paid to the lender, mortgage broker, or an affiliate of them. A charge is paid to the lender, mortgage broker, or an affiliate of them if it is retained by that person or entity. • Fees paid to an unaffiliated third party. • Transfer taxes.
Loan Exempt from the TILA-RESPA Rule
• Home-equity lines of credit (HELOCs) • Reverse mortgages • Mortgages secured by a mobile home or a dwelling that is not attached to real property The rule also does not apply to loans made by a person who is not a creditor as defined by Regulation Z (e.g., a person who makes 5 or fewer mortgages in a year).
Restricted Activities Prior to Borrower Receiving Loan Estimate
• Imposing fees on a borrower before the borrower has received the loan estimate. • Providing written estimates of terms or costs specific to borrowers before they receive the loan estimate without a written statement informing that the terms and costs may change. • Requiring submission of documents verifying information related to the borrower's application before providing the loan estimate.
Requirements for Loan Estimates
• Loan Estimate must be in writing. •Must contain a good faith estimate of credit costs and terms. • Must be deliver or place it in the mail no later than the third business day after receiving the application. -Either the lender or the mortgage broker may provide the Loan Estimate; but the lender remains responsible for its accuracy. -Lenders can issue revised Loan Estimates only in certain situations such as when changed circumstances result in increased charges. • Circumstances result in increased charges.
Main Sections of Page 1 of the Loan Estimate
• Loan Terms table • Projected Payments table • Costs at Closing table
Page 5 of the closing disclosure
• The Loan Calculations table • Other Disclosures • Contact Information
