by Grant W. Kehres* | Posted 11/01/2010
Since January 1, 2010, the public and real estate professionals have experienced significant changes in the Federal Real Estate Settlement Procedures Act (RESPA) which regulates every residential real estate transaction in the United States involving a federally related mortgage loan. The new rules are designed to protect consumers from unnecessarily high settlement costs by requiring disclosures related to mortgage settlement costs. The Federal department of Housing and Urban Development has revised the form of the required Good Faith Estimate and the HUD-1 Settlement Statement.
The GFE is now a three-page document. It must be provided to qualified borrowers within three business days of the borrower’s application. The focus on the new GFE is how much a charge for a settlement service may or may not change. If the charge exceeds the permissible or maximum amount, there is a tolerance violation. The lender has 30 days after the closing to correct the tolerance violation or risk facing fines and penalties for a RESPA violation.
The New HUD-1 consists of three pages, one more than the previously required version. The first page of the new HUD-1 is not significantly different from before. But page two and three are different in that page two ties the settlement charges into the GFE and page three provides a comparison chart between the estimated charges from the GFE to the actual charges, thereby testing whether there is a tolerance violation.
The effect these new regulations will have on settlement charges remains unknown and whether or not the consumer will ultimately benefit. Some have suggested the new regulations will result in higher compliance costs, which will be passed on to the consumer, and greater lender-related closing delays. What is known is that there will be a substantial learning curve for real estate professionals who must use and explain these documents to the consuming public.
If you need help with the new RESPA, HUD and GFE rules, feel free to contact our office.
*Grant Kehres is Board Certified by the Florida Bar Board of Legal Specialization as a Real Estate Law Specialist. He holds a doctorate in jurisprudence from Vanderbilt University, an MBA (finance) from Babson College and a dual undergraduate degree in investments and economics from Babson College. Admitted to The Florida Bar in 1978, he has handled nearly 10,000 closings for more than 6,000 clients. For more information on our services and what distinguishes our office from other law firms and title companies, call (561) 392-5200.