MORTGAGE DISCLOSURE LAW REVISED
HOME LOANS, INDUSTRY NEWS, REAL ESTATE LEGISLATION, TIPS FOR BUYERS
November 16th, 2008
HUD Secretary Steve Preston announced RESPA rule changes to aid future borrowers by clearly disclosing
rates,fees, any prepayment penalties and the prospect of increased monthly payments. These revisions are in response to many borrowers making “uniformed decisions” in taking out loans, according to Secretary Preston.
Lenders opposed these modifications to the Real Estate Settlement Procedures Act, first enacted in 1974. The “good-faith estimate” has actually shrunk from four pages to three. The new rules also limit to 10% the maximum fees can change from the initial quote. The form is suppose to help consumers compare what was quoted and what was actually delivered in the way of loan fees.
The revised disclosure also is designed to help consumers understand the “yield spread premiums” which determine how much the loan broker is being paid. However, Rebecca Borne, a lawyer at the Center for Responsible Lending disagrees, indicating the new HUD forms still fail to make broker fees clear and will not hinder abuses by lenders.
Ironically, HUD lacks the power to enforce the rules but claim state and federal regulators of lenders can insist on compliance with federal rules and can use the threat of class-action lawsuits to keep lenders in line. The new rules are expected to save borrowers on average about $700. Lenders will not be required to use the new forms until January 1, 2010. HUD wanted a script to be read to borrowers at the closing table that detailed terms of the loan but dropped this requirement. The new rules faced stiff opposition from lenders and others involved with mortgage transactions according to James Hagerty of THE WALL STREET JOURNAL.
530-224-6767 or 530-941-7492
BRAD GARBUTT
REALTOR/BROKER ASSOCIATE
REAL ESTATE PROFESSIONALS GMAC
QUARTER CENTURY LOCAL REAL ESTATE EXPERIENCE
