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One of the purposes of RESPA is to help consumers
become better shoppers for settlement services.
RESPA requires that borrowers receive disclosures at various times.
Some disclosures spell out the costs associated with the settlement;
outline lender servicing and escrow account practices and describe business
relationships between settlement service providers.
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Good Faith Estimate of Settlement Costs:
RESPA requires that, when you apply for a loan, the lender or mortgage
broker give you a Good Faith Estimate of settlement service charges you will
likely have to pay. If you do
not get this Good Faith Estimate when you apply, the lender or mortgage
broker must mail or deliver it to you within the next three business days.
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Be aware that the amounts listed on the Good Faith
Estimate are only estimates. Actual
costs may vary. Changing market
conditions can affect prices. Remember
that the lender’s estimate is not a guarantee.
Keep your Good Faith Estimate so you can compare it with the final
settlement costs and ask the lender questions about any changes.
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Servicing Disclosure Statement: RESPA
requires the lender or mortgage broker to tell you in writing, when you
apply for a loan or within the next three business days, whether it expects
that someone else will be servicing your loan (collecting your payments).
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Affiliated Business Arrangements:
Sometimes, several businesses that offer settlement services are owned or
controlled by a common corporate parent.
These businesses are known as “affiliates.”
When a lender, real estate broker, or other participant in your
settlement refers you to an affiliate for a settlement service (such as when
a real estate broker refers you to a mortgage broker affiliate), RESPA
requires the referring party to give you an Affiliated Business Arrangement
Disclosure. This form will
remind you that you are generally not required, with certain exceptions, to
use the affiliate and are free to shop for other providers.
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HUD-1 Settlement Statement: One business
day before the settlement, you have the right to inspect the HUD-1
Settlement Statement. This
statement itemizes the services provided to you and the fees charged to you. The settlement agent who will conduct the settlement fills
out this form. Be sure you have
the name, address, and telephone number of the settlement agent if you wish
to inspect this form. The fully
completed HUD-1 Settlement Statement generally must be delivered or mailed
to you at or before the settlement. In
cases where there is no settlement meeting, the escrow agent will mail you
the HUD-1 after settlement, and you have no rights to inspect it one day
before settlement.
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Escrow Account Operation & Disclosure:
Your lender may require you to establish an escrow or impound account to
assure that your taxes and insurance premiums are paid on time.
If so, you will probably have to pay an initial amount at the
settlement to start the account and an additional amount with each moth’s
regular payment. Your escrow
account payments may include a “cushion” or an extra amount to ensure
that the lender has enough money to make the payments when due.
RESPA limits the amount of the cushion to a maximum of two months of
escrow payments.
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At the settlement or within the next 45 days, the
person servicing your loan must give you an initial escrow account
statement. That form will show
all of the payments, which are expected to be deposited into the escrow
account and all of the disbursements, which are expected to be made from the
escrow account during the year ahead. Your
lender or servicer will review the escrow account annually and send you a
disclosure each year, which shows the prior year’s activity, and any
adjustments necessary in the escrow payments that you will make in the
forthcoming year.
