Highlights of Updated RESPA Rules

Starting in January of this year new guidelines went into effect surrounding the RESPA (Real Estate Settlement Procedures Act) statutes. RESPA exists as a protection for consumers and covers closing costs and settlement procedures. Among the many protections offered to buyers is a ban on kickbacks which increase the cost of settlement services. RESPA also requires that buyers receive disclosures at various stages of the process, including a Good Faith Estimate (GFE) at the time of loan application which covers estimated settlement costs the buyer is likely to incur at closing. The other noteworthy disclosure that recieves significant attention is the HUD-1 Settlement Statement which clearly discloses the actual charges to the buyer and seller at the closing.

The GFE and HUD-1 underwent some revisions as part of this update recently taken effect and in particular the HUD-1 allows borrowers to view a comparison table of the estimated settlement costs listed on the GFE compared with the actual cost included on the HUD-1. These are standardized forms in an effort to make the process as transparent as possible. Ultimately the goal of these revisions is to allow borrowers to become better consumers by being provided with more information on the costs they will encounter in buying a home. This primary goal hopefully is accomplished by proper implementation of the following smaller goals in conjunction with these new forms:

• Allow the forms to be used as a means of comparison shopping for their mortgages
• Clarify and simplify the trade-off between the interest rate and up-front fees
• More clearly distinguish the role of the originator as that of lender or broker
• Provide a clear understanding of the different settlement fees to the borrower
• Allow borrowers to match the numbers from the GFE to the HUD-1

Every effort made to inform borrowers of the costs associated with settlement services and to allow a more clear comparison from lender to lender is a positive one. Ultimately this should result in more educated buyers who have a better understanding of the loan product they choose and its details.

Stephen Woodall

REALTOR, GRI @ Long Realty Company

Stephen has made real estate his full-time career and passion since 2008, primarily specializing in the Foothills & the Northwest Tucson areas of Oro Valley and Marana. He is a multi-million dollar producer, representing both sellers & buyers. Stephen has tremendous experience in new home sales, listing & selling primary residences, listing & selling vacant land, listing & selling luxury homes, investment properties, rentals, and real estate development parcels.