Starting January 1, 2010 the federal government will fully implement the new regulations that were published on November 17, 2008.
What is RESPA? 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.
HUD is requiring that loan originators provide borrowers with a standard Good Faith Estimate that must clearly disclose key loan terms and closing costs and that closing agents provide borrowers with a new HUD-1 settlement statement. If you are interested in reading HUD’s “New RESPA Rule FAQs” click here. The FAQ’s were comprised from industry questions.
Why was RESPA created? It was created because various companies associated with the buying and selling of real estate, such as lenders, realtors, construction companies and title insurance companies were often engaging in providing undisclosed Kickbacks to each other, inflating the costs of real estate transactions and obscuring price competition by facilitating bait-and-switch tactics.
For example, a lender advertising a home loan might have advertised the loan with a 5% interest rate, but then when one applies for the loan one is told that one must use the lender’s affiliated title insurance company and pay $5,000 for the service (whereas the normal rate is $1,000). The title company would then have paid $4,000 to the lender. This was made illegal. The reason is to make prices for the services clear so as to allow price competition by consumer demand and to thereby drive down prices.
For more information on RESPA contact Helen Adams Realty at 1-800-851-5253 or visit our website.