Topic: Real Estate Settlement Procedures Act (RESPA)
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Is there a ceiling on the amount that can be placed into an escrow account? Would that ceiling apply to a savings account opened in lieu of an escrow account?
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The Mortgage Tax Escrow Account Act provides the ceiling for how much can be placed in escrow accounts. No agreement for the mortgage of a single-family residence shall contain any requirement that the mortgagor of the residence shall maintain in any escrow account for the payment of real property taxes or in any escrow-like arrangement…
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Can we hire a part-time mortgage lender if the lender also works as a real estate broker?
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While we are not aware of any regulations that would prevent you from hiring such an employee, both the RESPA kickback rules and Regulation Z’s loan originator compensation rules restrict the compensation that you can pay to the employee. We believe that a part-time employee who also works as a real estate broker could receive…
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Do we need to disclose loan release fees on the GFE and HUD-1 forms? How can we disclose the fee upfront, since it may have increased significantly by the time the loan is terminated?
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Yes, you should disclose a mortgage lien release fee in both the HUD-1 and in your TILA disclosures. The RESPA regulations require that you disclose all charges paid by the borrower on the HUD-1. 12 CFR 1024.8(b)(1). The HUD-1 instructions clarify that you must disclose “all charges imposed upon the Borrower and the Seller by…
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Do we need to issue a good faith estimate (GFE) if a customer completes a refinancing application but wants to delay the closing until interest rates drop?
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Due to the wording of the RESPA regulations, we believe it would be best to send such customers a GFE, even if customers say that they do not intend to move forward on an application. Under Section 3500.7, a lender must send a GFE after it “receives an application, or information sufficient to complete an…
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If we received a loan application that does not include a loan amount or an estimate of the value of the property to be a purchased, is that application considered complete? If so, do we have to issue a GFE?
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Without an estimate of the value of the property and the mortgage loan amount sought, the information you received from the customer is not sufficient to constitute an application. The RESPA regulations state that an “application” must include, in addition to the information you were provided, “an estimate of the value of the property, the…
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If our standard practice is to always to verify the income of every mortgage loan applicant, but a loan applicant’s reported income is insufficient to take out any loan, do we still have to go through the motions of documenting the applicant’s income?
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First, we note that the Real Estate Settlement Procedures Act (RESPA) and its regulations do not require a bank to verify income, and they prohibit a bank from requiring income verification as a prerequisite for issuing a good faith estimate (GFE). 12 CFR 1024.7(a)(5). We understand your concern in rejecting an applicant with public assistance…
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If we discover a violation of zero tolerance item (a Freddie Mac fee) on a good faith estimate (GFE), and more than thirty days have passed, what should we do to correct the violation?
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Because it has been more than thirty days since the zero-tolerance violation you identified, refunding won’t cure the violation. That said, you are bound by the GFE, and it would probably be best practice to refund to mitigate any arguable penalties for the violation. 12 CFR 1024.7(f).
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When we provide borrowers with a written list of settlement service providers (as required by RESPA), should the list include all service providers in our entire region, or can we provide county-specific lists to customers, with different lists for each county?
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While RESPA requires loan originators to provide borrowers with a “written list of settlement services providers at the time of the GFE, on a separate piece of paper” (24 CFR Appendix C—Instructions for Completing Good Faith Estimate (GFE) Form), we are not aware of any laws or regulations that touch on the format of such…
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Can we force borrowers to escrow their real estate taxes if they become delinquent on their real estate taxes? If so, do we need to send them an initial escrow account disclosure after we set up the escrow account?
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Whether your bank can require a delinquent borrower to escrow real estate tax payments depends on the terms of your loan documents. The Illinois Single Family Fannie Mae/Freddie Mac Uniform Mortgage provides that if a lender has previously waived escrowed payments, it can later revoke that waiver at any time by giving notice to the…