Understanding the New RESPA Laws

The Real Estate Settlement Procedures Act or RESPA, requires that the lenders must provide complete and simple information at different points of the loan process so that the potential home owners of Atlanta real estate can make informed decisions for themselves.

New RESPA Act got into effect from October 1st, 2015 and it consolidated the four prior forms into the following two forms:

Loan Estimate

This single form of the new act has replaced the initial Loan Estimate and Truth-In-Lending Disclosure form. It’s mandatory for Atlanta real estate buyers to receive this form after three days of their loan application.

Closing Disclosure

This single form also replaces the prior HUD-1 Settlement Statement and the final Truth-In-Lending Disclosure form. It’s mandatory for lenders in Atlanta real estate to provide this document to their mortgage clients at least three days before closing.

Every mortgage lender or creditor must make sure to provide these latest, consolidated forms every time an application comes from a customer for a specific closed-end credit transaction. Such a transaction is required to be paid completely, including interest and all other fees. Prior to these changes in RESPA laws, the clients used to receive the old forms of HUD-1.

However, it must be understood that the new RESPA changes will not apply to reverse mortgages and HELOC. These changes also won’t apply to such loans which are made by a person who isn’t considered a lender, for instance, a person who makes less than five mortgages per annum.

People involved in Atlanta real estate should also note that the new RESPA rules will also contain some restrictions on certain activities before a customer gets the Loan Estimate form. Such activities include:

  • Applying proper fees to the clients prior to receiving the Loan Estimate form which will indicate that they can continue with their transaction.
  • Making sure to provide hard-copies of estimates of all the costs and terms specific for each client before they get the Loan Estimate form. The clients must also be notified via written statements that the stated costs and terms can change.
  • Making it mandatory to require the documents which verify all the details related to the loan application of the client, before providing the Loan Estimate form.

Less number of forms will help the customers in sifting through the details of the loan process and simple language of these forms will assist the customers in understanding the complexities associated with different type of mortgages. Moreover, these new forms will highlight those details which are most important for the clients, such as the total amount of monthly payments, interest rates, and their closing costs, on the very first page. The clients will also be informed that their monthly payments and current interest rates may change due to certain factors.

All this information will make the client understand if a certain mortgage is affordable for them and the amount of money they’ll need to save for completing their transaction.

The new RESPA laws are highly client-friendly and we hope that everyone dealing in Atlanta real estate takes complete advantage of them.

For further information, you can log on to lutherragsdale.com. I’m also hosting an amazing event that is a one-day free million-dollar producer workshop “To List Is To Last- How to list at least 3 properties in 90 days” on Saturday, March 5th, 2016, in Cob Galleria Center, 2 Galleria Parkway Southeast, Atlanta. Also download my e-book “Social Media Marketing for Real Estate Agents”.

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