RESPA Reform
RESPA - stands for: Real Estate Settlement Procedures Act. RESPA first passed in 1974, before that there were very few guidelines, and not much written forms. Buyers were even given their estimated settlement charges verbally. (Imagine that!) Obviously, that was a world ripe with abuse and no recourse for consumers.
RESPA requires that consumers receive disclosure about various settlement costs at various times. It prohibits the practice of changing costs, thereby protecting buyers from fraud. It also helps buyers compare fees among different lenders.
One of the problems with RESPA was that there was no universal form. It was required that lenders give buyers a "Good Faith Estimate" prior to closing, but that GFE could be any particular form, making it hard for buyers to compare apples to apples. With the recent mortgage debaucle and increase in mortgage fraud, the government needed to reform the reform. (I always cringe at the thought of the government coming to our rescue...)
Well, with the best of intentions, RESPA has delivered to the lending industry a universal RESPA form, a "Good Faith Estimate" that all lenders must use. (as of Jan. 1, 2010)
I attended a training class today on the new RESPA forms. I'm still baffled, and happy that I'm not the loan officer that has to explain it. But I'll boil down the form with 2 observations:
1. The new 4-page GFE, (when it first came out it didn't have a place to sign so they added a 4th signature page:), which replaces the 1-page form, is focused on helping the consumer compare fees. The fees are listed meticulously. The only problem is that you don't get the GFE until well into the process, most likely when the buyer is vested in the process and won't be likely to want to start all over again with a new lender.
2. The 2 items the buyers want most to see, the total loan amount and the monthly mortgage, so the buyer still needs to have the loan officer go through the forms step by step with a calculator. The settlement charges also need to be broken down as they don't neccessarily reflect the buyer's and seller's portions when there are negotiated splits.
I write all of this to say... don't be upset when you are more confused about settlement costs than you've ever been before. Just find a good, experienced, and patient lender to explain it to you. It seems to me that just when we need real, meaningful changes, we get this gobbledigook (yes, I'm dating myself), burocrat balonie that only serves to muddy up what's already confusing enough as it is.
And you might want to give your congressional representatives a call and tell them what you think about their brand of reform. Here you go:
Senator Ben Cardin: 202-224-4524, or Mail a letter to Senator Ben Cardin, 509 Hart Senate Office Building, Washington, DC 20510
Senator Barbara Mikulski: Washington office at (202) 224-4654
Congressman Roscoe Bartlett:
2412 Rayburn House Office Building
Washington, D.C. 20515-2006
Phone: 202-225-2721
Fax: 202-225-2193
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