RESPA, or Real Estate Settlement Procedures Act, was passed in 1974 and requires that lenders provide borrowers with certain disclosures prior to closing, at closing, and after closing.
Disclosures required at the time of loan application include:
- The special information booklet
- A Good Faith Estimate
- Mortgage Servicing Disclosure Statement
These three documents are required at the time of the loan application or within three days of receiving the loan application unless the borrower is turned down for the loan.
Disclosures required before closing:
- A Controlled Business Arrangement is required when a borrower’s loan servicing company refers the borrower to a service provider with whom the lender has a beneficial relationship through ownership or other interest
- HUD-1 Settlement Statement
Disclosures required at the time of settlement (closing):
- HUD-1 Settlement Statement - RESPA entitles the borrower an opportunity to see the HUD-1 Settlement Statement one day prior to closing, but the borrower should receive it in the closing documents as well.
- Initial Escrow Statement - Shows the borrower an itemized list of estimated taxes, insurance premiums, and other charges to be paid from the escrow account within the first 12 months of the loan.
Disclosures required after closing:
- Annual Escrow Statement - As the name states, required yearly
- Servicing Transfer Statement - Required if your loan is sold
While RESPA does not prescribe penalties for failure to provide all of these disclosures, some of them do lend themselves to heavy penalties to the lender and in some cases the borrower could receive a refund on some parts of the loan or interest.
Learn more about RESPA and other lender violations.
No one gives a loan audit like U.S. Lender Audit. If you’d like to see a few sample audits, we can provide them. Check these out:
Loan Audit No. 1 - Shows a missing Good Faith Estimate, Title Policy, Escrow Analysis, and several other documents. With possible violations of TILA, RESPA, FACTA, state requirements, and the Privacy Act, this loan audit gives a detailed overview of where the borrower’s mortgage company went wrong.
Loan Audit No. 2 - This loan audit shows a missing Title Policy, Right to Rescission Notices, and High Cost Mortgage Disclosures. These are required documents for some loans and this audit shows that there could be TILA violations that could work favorably toward the borrower.
These are just two examples of the comprehensive and accurate loan audits that are available to you as you seek a loan settlement for your client. Learn more about U.S. Lender Audit loan audits.
RESPA is the most comprehensive aspect of real estate law and one every consumer should become familiar with. It stands for Real Estate Supplement Procedures Act and outlines the documentation and disclosures every real estate transaction must have. Furthermore, RESPA prohibits certain actions in order to keep predatory lenders from preying on unsuspecting and innocent home buyers.
For instance, were you aware that loan servicers can’t split fees? And another thing that lenders and home sellers can’t do is require a home buyer to purchase title insurance from a particular company as a condition of the sale. In other words, you’re allowed to get your own title insurance.
If your lender has violated either of the above RESPA conditions then you could be due some damages or you could seek a rescission on your loan. A mortgage document review can determine whether your rights have been violated.
Learn more about the loan audit process from the most comprehensive loan auditors online.
