By Jim Hester
The Real Estate Settlement Procedures Act (RESPA) was signed into law in December 1974, and became effective on June 20, 1975. The law has gone through a number of changes and amendments since then, all with the intent of informing consumers of their settlement costs and prohibiting kickbacks that can increase the cost of obtaining a mortgage.
RESPA covers loans secured with a mortgage placed on one-to-four family residential properties. Originally enforced by the U.S. Department of Housing and Urban Development (HUD), RESPA enforcement and responsibilities were assumed by the Consumer Financial Protection Bureau CFPB) when it was created in 2011.
On November 20, 2013, the CFPB issued a final rule to integrate disclosures and regulations required by RESPA and the Truth in Lending ACT (TILA).The final rule integrates existing disclosures with new requirements from the Dodd-Frank Act to improve consumer understanding of the mortgage process, aid in comparison shopping, and help to prevent surprises at the closing table. When the rule and changes go into effect August 1, 2015, realtors and their clients will encounter new forms and procedures at the closing table.
The Good Faith Estimate and Truth-in-Lending disclosure (initial TIL) will be replaced by a Loan Estimate Document that must be provided to consumers within three business days after submission of a loan application. The HUD-1 and TIL initial and final, will be replaced by the Closing Disclosure document which must be received by consumers three business days before consummation of a loan.
Real Estate brokers will need to work closely with closing attorneys to assure the closing will take place in a timely manner as possible. At the time of this writing the August 1, 2015 deadline may be extended in order for all parties affected to become familiar with the new process and avoid penalties that can occur for errors in the mortgage and closing process.
The bottom line is it may take more time to secure a mortgage and close on a home in the near future.
Jim Hester, Broker/Realtor, Cell: 828-447-0354, firstname.lastname@example.org