HUD Releases Final RESPA Rule
Beveridge & Diamond, P.C. - Massachusetts Environmental, Land Use & Real Estate Alert, 2009
On November 17, 2008, the Department of Housing and Urban Development (“HUD”) issued its final rule on the Real Estate Settlement Procedures Act (“RESPA”). For the first time in more than 30 years, HUD has issued mortgage reforms that will require lenders and mortgage brokers to provide consumers with a standardized Good Faith Estimate (“GFE”) disclosing key loan terms and closing costs making it easier to comparison shop among loan originators. RESPA applies to loans secured with a mortgage placed on a one-to-four family residential property. These include most purchase loans, assumptions, refinances, property improvement loans and equity lines of credit.
The goals of the new HUD rule are as follows: (i) provide more accurate estimates of costs of settlement services shown on the GFE; (ii) improve disclosure of yield spread premiums; (iii) facilitate comparison of the GFE and the HUD–1 / HUD-1A Settlement Statements; (iv) ensure that at closing borrowers are aware of final costs of their particular mortgage loan and transaction; (v) clarify HUD–1 instructions;(vi) expressly state that RESPA permits the listing of an average charge on the HUD–1; and (vii) strengthen the prohibition against requiring the use of affiliated businesses.
Under the new rule, HUD will require mortgage lenders and brokers to provide borrowers with a three-page Good Faith Estimate, including a summary of the loan, escrow account information and a summary of settlement charges. The standardized GFE includes a “trade-off table”, which will allow borrowers to compare similar loans with different settlement charges and interest rates. Lenders have the option of filling out this table. The third page also includes a “shopping chart,” which will allow the borrower to compare loans offered by different originators. Lenders and brokers will also be required to use the new HUD-1 form.
Although certain sections of the law took effect on January 16, 2009, the new standardized GFE and revised HUD-1 will not be required until Jan. 1, 2010. These forms may be used any time before then, however.
For more information on the final RESPA rule, please contact Deborah Eliason at deliason@bdlaw.com.
