RISMEDIA, May 15, 2010—There has been some debate and confusion across the industry over the new RESPA rules from HUD that took effect Jan. 1 for lenders. While the key players iron out the wrinkles, you can focus on supporting the intent of the guidelines by bringing more clarity and transparency to your clients’ closings.
In November 2008, the Department of Housing and Urban Development added the new regulations to the Real Estate Settlement Procedures Act, including new Good Faith Estimate and HUD-1 forms, along with rules and timelines for their use. You may have noticed that some lenders implemented them last year. As of the first of this year, however, all lenders must comply with the new procedures for providing GFEs and transparent accounting of closing terms.
Your role as an adviser to buyers can include informing clients of their options and helping frame proper expectations from pre-approval to closing. That said, you should definitely understand these basic points in order to appropriately educate them:
Lenders must now provide borrowers with a GFE within three days of receiving a loan application. HUD does allow lenders to provide general information worksheets in lieu of the GFE during the pre-approval process as long as no specific property is identified. If consumers ask for a GFE, however, one must be provided whether the borrower is ready to buy or not.
The new GFE includes three categories of closing fees that your clients need to understand. They are (1) fees that cannot change at closing, such as origination fees; (2) a group of charges that collectively can increase up to 10% only, such as government recording fees; and (3) costs that are permitted to change if a buyer chooses to shop around for services, such as homeowner’s insurance.
Checks and Balances
Consumers should confirm their lender’s compliance with the new RESPA rules by carefully reading and reviewing the GFE and HUD-1 forms. Remember, your expertise can be invaluable as buyers verify the fees and other information in preparation for their closing.
These items only scratch the surface of new RESPA rules and their impacts. HUD appears to be proactive in addressing any snags in the new process through webinars and other training materials, and you can be proactive by taking advantage of these resources to expand your knowledge of the guidelines to better assist your clients. For more information, visit www.hud.gov/respa or search “RESPA” at www.realtor.org.
Margaret Kelly, CRB, is chief executive officer of RE/MAX International, Inc. For more information, please visit www.remax.com.