| 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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