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One of the purposes of RESPA is to
help consumers become better shoppers for settlement services. RESPA
requires that borrowers receive disclosures at various times. Some
disclosures spell out the costs associated with the settlement,
outline lender servicing and escrow account practices and describe
business relationships between settlement service providers.
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. Keep your Good Faith Estimate
so you can compare it with the final settlement costs and ask the
lender questions about any changes.
Servicing Disclosure
Statement. RESPA requires the lender or
mortgage broker to tell you in writing, when you apply for a loan or
within the next three business days, whether it expects that someone
else will be servicing your loan (collecting your payments).
Affiliated Business
Arrangements. 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.
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 and the fees charged to you. This form 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. In cases where there is no settlement meeting, the
escrow agent will mail you the HUD-1 after settlement, and you have no
right to inspect it one day before settlement.
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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