How Will the New RESPA Regulations Affect Real Estate Transactions?
RESPA is a federal law that is administered and enforced by the Consumer Financial Protection Bureau, or CFPB. For a prospective borrower or a lender, the most important provisions of RESPA are the disclosures required at various times during the mortgage loan process. Within three days of submitting a mortgage loan application to a lender the lender must provide a “Good Faith Estimate”, or GFE, that provides the prospective borrower with the loan terms as well as with the lender’s estimate of what the closing costs will be. The GFE should include at least the following:
- The loan amount
- The “term” of the loan, meaning how many years the borrower has to repay the loan.
- The initial interest rate
- The monthly principal and interest payment on the loan
- Whether or not the principal balance can increase, for example if the loan includes negative amortization loan or if the loan is a reverse mortgage.
- Whether or not there is a prepayment penalty
- Whether the loan is a balloon loan, meaning there will be a large sum due at the end of the loan.
- Whether or not the lender is going to require the borrower to establish an escrow account to pay property taxes and/or the annual homeowner’s hazard insurance payment.
In addition, the GFE should also separate fees and costs into three categories – those that cannot change prior to closing, those that could increase up to 10 percent at closing, and those that could increase more than 10 percent at closing.
Along with the GFE, a consumer must also be given a “Special Information Booklet” which contains consumer information regarding various real estate settlement services as well as a “Mortgage Servicing Disclosure Statement,” disclosing to the borrower whether the lender intends to service the loan or transfer it to another lender
If you have specific questions or concerns about any of the requirement found in RESPA, contact an experienced Pennsylvania real estate law attorney as soon as possible to discuss your options. Contact the real estate law attorneys at Curley & Rothman, LLC by calling 610-834-8819