Compliance
Prior to Settlement/closing
The terms "settlement" and "closing" can be and are used interchangeably.An Affiliated Business Arrangement (AfBA) Disclosure is required whenever a settlement service provider involved in a RESPA covered transaction refers the consumer to a provider with whom the referring party has an ownership or other beneficial interest.
The referring party must give the AfBA disclosure to the consumer at or prior to the time of referral. The disclosure must describe the business arrangement that exists between the two providers and give the borrower an estimate of the second provider's charges. Except in cases where a lender refers a borrower to an attorney, credit reporting agency or real estate appraiser to represent the lender's interest in the transaction, the referring party may not require the consumer to use the particular provider being referred.
The HUD-1 Settlement Statement is a standard form that clearly shows all charges imposed on borrowers and sellers in connection with the settlement. RESPA allows the borrower to request to see the HUD-1 Settlement Statement one day before the actual settlement. The settlement agent must then provide the borrowers with a completed HUD-1 Settlement Statement based on information known to the agent at that time.
Disclosures at Settlement
The HUD-1 Settlement Statement
This disclosure shows the actual settlement costs of the loan transaction. Separate forms may be prepared for the borrower and the seller. Where it is not the practice that the borrower and the seller both attend the settlement, the HUD-1 should be mailed or delivered as soon as practicable after settlement.
The Initial Escrow Statement itemizes the estimated taxes, insurance premiums
and other charges anticipated to be paid from the Escrow Account during the first
twelve months of the loan. It lists the Escrow payment amount and any required
cushion. Although the statement is usually given at settlement, the lender has 45
days from settlement to deliver it.
Disclosures Post Settlement
Loan servicers must deliver to borrowers an Annual Escrow Statement once ayear. The annual Escrow account statement summarizes all escrow accountdeposits and payments during the servicer's twelve month computation year.It also notifies the borrower of any shortages or surpluses in the account and advisesthe borrower about the course of action being taken.A Servicing Transfer Statement is required if the loan servicer sells or assigns the servicing rights to a borrower's loan to another loan servicer. Generally, theloan servicer must notify the borrower 15 days before the effective date of theloan transfer.
As long the borrower makes a timely payment to the old servicerwithin 60 days of the loan transfer, the borrower cannot be penalized. The noticemust include the name and address of the new servicer, toll-free telephonenumbers, and the date the new servicer will begin accepting payments.
RESPA'S statutes:
consumer protections
and prohibited practices
A Servicing Transfer Statement is required if the loan servicer sells or assignsthe servicing rights to a borrower's loan to another loan servicer. Generally, theloan servicer must notify the borrower 15 days before the effective date of theloan transfer. As long the borrower makes a timely payment to the old servicerwithin 60 days of the loan transfer, the borrower cannot be penalized. The notice must include the name and address of the new servicer, toll-free telephonenumbers, and the date the new servicer will begin accepting payments.