Howard County Association of REALTORS^®
HCAR News

IMPORTANT RESPA RULE CHANGES
NOW IN EFFECT
MUST READ—MUST KNOW

NEW REAL ESTATE SETTLEMENT PROCEDURES ACT ("RESPA") RULES.

The purpose of the reform, according to HUD, is to improve the disclosure of the key loan terms and closing costs consumers pay when they buy or refinance their home. Every settlement service provider will be affected by the reform, including the mortgage industry, the title insurance industry, real estate brokers and agents, and homebuilders. All components of the new Real Estate Settlement Procedures Act (RESPA) Rule are in effect as of Friday, January 1, 2010.

For a more detailed discussion of the most significant provisions of HUD's new RESPA Rule, see FINAL RESPA RULE at mdrealtor.org or for the complete text of the final rule, visit www.hud.gov.

 
SUMMARY CHART OF THE FINAL RULE

Main Components of Final Rule	Final Rule	Effective Date
Use of Average Charges	Available to all settlement service providers with added flexibility for calculations	Jan. 16, 2009
Misc.	Misc. modifications regarding escrow accounts, servicing transfer notifications and the applicability of ESIGN	Jan. 16, 2009
Revised Definition of Required Use	Extended to both sellers and borrowers and allows legitimate consumer discounts. Requires discounts/incentives be given by the referred provider and not as an inducement by the referrer. So the real estate broker cannot give a gift card to use the mortgage company. The mortgage company must give the incentive directly	April 16, 2009
Good Faith Estimate	New three page GFE, including disclosure of yield spread premiums and the tolerance restrictions	Jan. 1, 2010
HUD-1	Expanded to three pages. Redesigned to look like GFE with additional cross references and a "cross-walk" chart comparing charges in the GFE with the final charges	Jan. 1, 2010
30-Day Cure Period	Loan originators may reimburse borrower for tolerance violations within 30 days of settlement	Jan. 1, 2010
Tolerance limitations on settlement charges	10% price tolerances for certain services packaged by lenders	Jan. 1, 2010
Application Process	One-stage application process with greater flexibility on selecting underwriting criteria	Jan. 1, 2010
No Volume-Based Discounts	Eliminates explicit volume-based discount language and reiterates HUD's contention that all settlement service providers may negotiate discounts as long as they go to the consumer

The Special Information Booklet which mortgage brokers and/or lenders must give borrowers when applying for a mortgage loan has also been updated. This booklet contains consumer information regarding various real estate settlement services, and is required for purchase transactions only.