RESPA - Real Estate Settlement Procedures Act means big changes coming for home buyers, sellers and mortgage brokers
Big changes are in store for those involved in real estate transactions. These changes will make it easier for both sellers and buyers to know in advance the true costs involved in closing.
Effective January 1, 2010 a new Good Faith Estimate (GFE) and HUD-1 closing statement form will be required at every closing. The following changes have been made:
1. Lenders must calculate yield-spread premiums as part of their origination fee. This is the spread or as others have called the “vig” that compensated mortgage brokers. This was the difference between the interest rate the borrower actually qualified for and what they were locked into by the broker. Borrowers will now be able to see the spread allowing for more transparency. Not surprisingly, the National Association of Mortgage Brokers is challenging the new rules citing that smaller mortgage brokers will be hurt by the new regulations.
2. Lenders can no longer change origination fees and transfer taxes that are stated on the GFE.
3. Other third-party costs can only be changed a maximum of 10%. These include title searches and inspections. Each party has 30 days to reconcile the discrepancies (variances over 10% between estimated and actual costs).
It should be noted that lenders can start applying the new rules earlier than January 1,2010. If implemented, lenders are required to comply with the new cost discrepancies and yield-spread premium rules immediately.
Everyone involved in real estate transactions prior to January 1,2010 should be aware of these new rules and ask their lenders and attorneys if the new or old rules are applicable. To better prepare for the changes that are mandated as of January 1,2010 go to:
http://www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm
Keeping you posted…..
Bonnie and David
Source: RESPA Reform Lite by Robert Freeman REALTOR MAGAZINE February 2009.