Someone who is planning to apply for mortgage in order to refinance his/her home must have a clear knowledge of the rights he/she enjoys under the Real Estate Settlement Procedures Act, also known as RESPA. RESPA happens to be a consumer protection statute. This act was first passed in the year 1974. It enables consumers to fetch better bargains for settlement services. Moreover, RESPA helps in getting rid of any kind of referral fee or bribe that needlessly adds to the total cost of some settlement services.
Under the Real Estate Settlement Procedures Act, borrowers are entitled to obtain disclosures at several points of time. Certain disclosures also state the costs that are related to the settlement. Other than that, the disclosures also sketch out the lender servicing as well as the escrow account practices, and elucidate the trade terms amongst the settlement service providers.
In short, they protect borrowers from deceptive lenders who want to deceive you. The Real Estate Settlement Procedures Act has been specially crafted to offer borrowers adequate protection from shoddy lenders in the United States of America. It helps you to avoid any kind of unjust lending practices.
However, RESPA covers only certain kinds of settlement services. Settlement services are the ones that take place before buying a home. Some of these are mortgage loans, title insurance, home inspections as well as appraisals. Thus, the ones covered by RESPA include:
Home warranty companies
Mortgage bankers and mortgage brokers
Real estate brokers and agents
Hazard Insurance agents
Title companies and title agents
Flood and tax-service providers
Home and Pest Inspectors
RESPA empowers the borrower with several rights:
The lender must provide certain information to the borrower when he/she is placing the loan application.
The consumer/borrower must be provided with a Special Information Booklet, which presents all information related to real-estate settlement service (purchase dealing only).
The borrower must receive a Good Faith Estimate from the lender that outlines all kinds of settlement costs required to be paid by the borrower at the time of settlement.
The lender must reveal the entire fees and costs of the loan to the borrower. The disclosure must include fees of the lender, interest rate, and the closing costs as well.
Other than this, the lender must inform the borrower, which application fees are not refundable. Accordingly, this particular information is necessary, in case the borrower plans to cancel the loan application.
The borrower can put up questions related to the fees and terms that seem confusing to him to the lender. The questions can be put up on the loan contract or supporting documents.
Any lending discrimination on grounds of sex, color, religion, national origin, age, and marital status is prohibited.
If the lender assigns or sells the servicing rights to another lender, a Servicing Transfer Statement must be offered to the borrower stating all details of the new loan service provider to whom the servicing rights are assigned.
Now, if the lender is unable to give the borrower all related documents while the application is made, the documents must be sent to the borrower within three business days. But then, if the loan is not accepted within these three days by the lender, then he is not required to send these documents.
Real Estate Settlement Procedures Act is enforced by the Department of Housing and Urban Development. Real Estate agents and brokers must abide by the Real Estate Settlement Procedures Act (RESPA). The people violating the act might face harsh penalties. This might include fines, triple damages and can lead to imprisonment too.