Real
Estate Settlement Procedures Act
The
Department of Housing and Urban Development (HUD) and the Board
of Governors of the Federal Reserve System issued a Joint
Report on July 17, 1998 to Congress proposing consumer protections
which would help borrowers save millions of dollars. The Report
recommends changes to the Real Estate Settlement Procedures Act
(RESPA) and the Truth in Lending Act (TILA) which would reduce settlement
costs, eliminate predatory lending abuses, and strengthen enforcement
provisions.
Specifically,
HUD recommends:
Developing
new educational booklets to cover refinancings and property improvement
loans; and requiring all educational booklets be distributed by
whomever has first contact with the consumer-- lender, broker, real
estate agent or builder.
- Combining
and simplifying RESPA and TILA disclosures that are provided to
consumers; and requiring information about the loan originator's
role and any requirements for escrow accounts and private mortgage
insurance.
- Providing
consumers with the opportunity to shop effectively by requiring
accurate loan and settlement costs information (by limiting cost
increases above Good Faith Estimate tolerances or by guaranteeing
a price for a package of services) and by advocating that this
information be given earlier in the loan process.
- Requiring
that consumers receive a copy of the settlement statement with
all final loan and settlement costs three days prior to closing
and establishing new and simplified remedies to protect consumers
against inaccurate disclosures and the failure to provide disclosures.
- Promoting
better loan servicing practices by providing penalties for servicers
who fail to make timely payments out of the escrow account, prohibiting
servicers from receiving any portion or rebate from force-placed
insurance and requiring servicers to return escrow funds after
loan payoff within a specified time frame.
- Prohibiting
loan flipping, advance collection of credit insurance premiums,
balloon payments and other abusive practices for certain types
of loans and establishing a federal "unfair and deceptive acts
and practices" standard to provide a remedy in transactions that
are unfair or unconscionable.
- Requiring
certain minimum standards for procedures creditors must follow
in home foreclosures, including a written notice of the consumer's
legal rights, an explanation of the foreclosure process and the
availability of third-party credit counseling.