FHA and Investor Specialist

RESPA was passed in 1974 to help consumers in becoming better shoppers for settlement services and to eradicate kickbacks and referral fees that needlessly raise the costs of settlement services. You should know the guidelines of RESPA (The Real Estate Settlement Procedures Act) if you are a first time home buyer. RESPA specifies the guidelines that mortgage brokers or lenders have to abide by when borrowers apply for a mortgage loan.

RESPA required disclosures

At the time of loan application, mortgage brokers must provide the following disclosures to the borrowers:

           o Special Information Booklet that contains consumer information about different real estate settlement services.

          o Good faith estimate (GFE) of settlement costs, which document the charges the home buyer is expected to pay at settlement. However, it is imperative to know that this is only an estimate and the actual charges might be different.

          o Mortgage Servicing Disclosure Statement, which reveals to the borrower whether the lender plans to service the loan or transfer it to a different lender. It also contains information regarding complaint resolution.

The lenders are required to mail these documents within 3 business days of receiving the loan applications. If the lender rejects the loan application within 3 days, then lender does not have to give these documents.

The first time home buyers

RESPA statute does not impose penalty on the mortgage brokers/ lenders if they fail to supply the Special Information Booklet, Good Faith Estimate, and Mortgage Servicing Statement. However, bank regulators can impose penalties on lenders who fail to obey the federal law. You can go through the section on RESPA enforcement for more information.