Robert G Lowe, PL
Attorney and Counselor at Law
Clearwater, Florida
Phone: 727.647.3700


REAL ESTATE SETTLEMENT PROCEDURES ACT(RESPA) FAQ

        For personalized answers to your specific situation please contact Bob by e-mail or by phone at 727-647-3700.


Consumer Benefits

          The Real Estate Settlement Procedures Act (RESPA) is a consumer protection law enforced by the Department of Housing and Urban Development (HUD) and designed to help home buyers to become informed consumers and better shoppers. RESPA also outlaws certain practices by settlement service providers which historically, needlessly increased consumer's closing costs. The purchase and / or sale of a residential property is a complicated process with many different players each vying for you service dollars. In order to understand the steps and your rights under RESPA, HUD published the booklet Buying your Home, Settlement Costs and Helpful Information to help demystify the process. The booklet is a must for first time or in-frequent home buyers looking to finance the purchase of a home.

          Another way RESPA helps consumers is by requiring settlement service providers to make disclosures including a Good Faith Estimate of Settlement Costs, identification of Affiliated Businesses and notices pertaining to Escrow Account Operations, including initial funding and schedule of disbursements. RESPA also requires use of the HUD-1 Settlement Statement which uniformly presents a complete financial summary of the residential real estate transaction. After closing, RESPA protections address the acts of companies who collect mortgage payments called servicers and provide certain protections in case the servicing of your loan is sold or transferred to another entity.

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Good 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.

          Be 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. That said, any changes should not be material to the transaction or of such a nature that their presence would have affected your lending / borrowing decision. Keep your Good Faith Estimate so you can compare it with the your Settlement Statement and ask the lender questions about any changes.

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Affiliated Businesses

          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.

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HUD-1 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, the fees charged to each party and 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. While there may be multiple HUD-1 settlement statements to be signed for each mortgage or loan, all of the statements should be consistent; sellers and buyers should be extremely concerned if there are multiple HUD-1 settlement describing a single loan.

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Escrow 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.

          At 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.

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Mortgage Borrower's Rights

          If you feel that your lender, mortgagor, mortgage broker and / or settlement agent has not provided services or conducted themselves in accordance with RESPA requirements by violating any of the Mortgage Borrower's Rights listed below use the HUD provided complaint form to contact the real estate service provider to resolve the situation.
  • You have the RIGHT to shop for the best loan for you and compare the charges of different mortgage brokers and lenders.

  • You have the RIGHT to be informed about the total cost of your loan including the interest rate, points and other fees.

  • You have the RIGHT to ask for a Good Faith Estimate of all loan and settlement charges before you agree to the loan and pay any fees.

  • You have the RIGHT to know what fees are not refundable if you decide to cancel the loan agreement.

  • You have the RIGHT to ask your mortgage broker to explain exactly what the mortgage broker will do for you.

  • You have the RIGHT to know how much the mortgage broker is getting paid by you and the lender for your loan.

  • You have the RIGHT to ask questions about charges and loan terms that you do not understand.

  • You have the RIGHT to a credit decision that is not based on your race, color, religion, national origin, sex, marital status, age, or whether any income is from public assistance.

  • You have the RIGHT to know the reason if your loan was turned down.

  • You have the RIGHT to ask for the HUD settlement costs booklet Buying your Home, Settlement Costs and Helpful Information.

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Where can I go to obtain legal advice on this issue?

        The material on this web site represents general legal advice. Since the law is continually changing, some provisions may be out of date. It is always best to consult an attorney about your legal rights and responsibilities regarding your particular case. If you believe you need legal advice, call your attorney. If you do not have an attorney, please contact rgllaw® by e-mail or by phone at 727-647-3700. Or call The Florida Bar Lawyer Referral Service at 1-800-342-8011, or the local lawyer referral service or legal aid office listed in the yellow pages of your telephone book.

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        For personalized answers to your specific situation please contact Bob by e-mail or by phone at 727-647-3700.


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This site was last updated August 2015.