of the purposes of RESPA is to help consumers become better shoppers
for settlement services. RESPA requires that borrowers receive disclosures
at various times. Some disclosures spell out the costs associated
with the settlement, outline lender servicing and escrow account
practices and describe business relationships between settlement
Faith Estimate of Settlement Costs. RESPA
requires that, when you apply for a loan, the lender or mortgage
broker give you a Good Faith Estimate of settlement service charges
you will likely have to pay. If you do not get this Good Faith Estimate
when you apply, the lender or mortgage broker must mail or deliver
it to you within the next three business days.
aware that the amounts listed on the Good Faith Estimate are only
estimates. Actual costs may vary. Changing market conditions can
affect prices. Remember that the lender's estimate is not a guarantee.
Keep your Good Faith Estimate so you can compare it with the final
settlement costs and ask the lender questions about any changes.
Disclosure Statement. RESPA requires the
lender or mortgage broker to tell you in writing, when you apply
for a loan or within the next three business days, whether it expects
that someone else will be servicing your loan (collecting your payments).
Business Arrangements. Sometimes, several
businesses that offer settlement services are owned or controlled
by a common corporate parent. These businesses are known as "affiliates."
When a lender, real estate broker, or other participant in your
settlement refers you to an affiliate for a settlement service (such
as when a real estate broker refers you to a mortgage broker affiliate),
RESPA requires the referring party to give you an Affiliated Business
Arrangement Disclosure. This form will remind you that you are generally
not required, with certain exceptions, to use the affiliate and
are free to shop for other providers.
Settlement Statement. One business day before the
settlement, you have the right to inspect the HUD-1 Settlement Statement.
This statement itemizes the services provided to you and the fees
charged to you. This form is filled out by the settlement agent
who will conduct the settlement. Be sure you have the name, address,
and telephone number of the settlement agent if you wish to inspect
this form. The fully completed HUD-1 Settlement Statement generally
must be delivered or mailed to you at or before the settlement.
In cases where there is no settlement meeting, the escrow agent
will mail you the HUD-1 after settlement, and you have no right
to inspect it one day before settlement.
Account Operation & Disclosures. Your lender
may require you to establish an escrow or impound account to insure
that your taxes and insurance premiums are paid on time. If so,
you will probably have to pay an initial amount at the settlement
to start the account and an additional amount with each month's
regular payment. Your escrow account payments may include a "cushion"
or an extra amount to ensure that the lender has enough money to
make the payments when due. RESPA limits the amount of the cushion
to a maximum of two months of escrow payments.
the settlement or within the next 45 days, the person servicing
your loan must give you an initial escrow account statement. That
form will show all of the payments which are expected to be deposited
into the escrow account and all of the disbursements which are expected
to be made from the escrow account during the year ahead. Your lender
or servicer will review the escrow account annually and send you
a disclosure each year which shows the prior year's activity and
any adjustments necessary in the escrow payments that you will make
in the forthcoming year.