In a previous President’s Column, we shared basic information about the Real Estate Settlement Procedures Act (RESPA). To follow up, we provide answers to the following frequently asked questions, as compiled by the Tennessee Association of REALTORS and the U.S. Department of Housing and Urban Development (HUD).
I applied for a loan but did not receive a Settlement Costs Booklet or a Good Faith Estimate. What should I do?
Contact the lender and ask for these documents. The lender is required to send these items within three days of receiving and accepting the loan application. Should the lender deny your loan within three days, then the lender is not required to provide these documents. Only when you are purchasing a home is the lender required to give you a booklet.
Should I expect the Good Faith Estimate to list the exact charges that I will pay at settlement?
No. The Good Faith Estimate is only an estimate, or range, of charges, but the final charges should be close to those you pay at settlement. The lender might not know the costs for a settlement agent you choose or the exact amount that will be collected for an escrow account for taxes and insurance.
What rights do I have if the charges I must pay at settlement are higher than those listed on the Good Faith Estimate?
RESPA does not give a consumer the right to sue in this circumstance. The best protection is to let the lender and settlement agent know you will want to see the HUD-1 Settlement Statement one day in advance and to question any amount you don’t understand.
Can a builder pay my closing costs or give me an upgrade package if I agree to use his mortgage company?
Yes. While a builder cannot require you to use a specific mortgage company, a builder is allowed to offer you a discount if you use a specific company. The builder cannot charge you more for the home if you do not use his affiliated mortgage company.
Can my Realtor pay some of my closing costs?
No. While not a RESPA violation, this practice violates Tennessee law, which prohibits licensees from paying cash rebates, cash gifts, or cash prizes in conjunction with any real estate transaction.
Can a title company give the real estate agent a gift certificate or cash for every closing the agent brings to them?
No. A title company is not permitted to give the real estate agent a gift certificate or cash for every closing the agent sends to the title company.
HUD oversees the enforcement of RESPA, for which a violation is a crime under Federal law, potentially punishable by imprisonment for up to one year and/or a fine of up to $10,000. When someone gets paid solely for a referral, the cost of such a referral will eventually be passed on to the consumer. Persons who believe a settlement service provider has violated RESPA may wish to file a complaint. To learn more, visit www.hud.gov.
Buying and selling property is complicated. Rely on a Realtor to answer your questions and guide you through the process.
The Greater Chattanooga Association of Realtors is “The Voice of Real Estate in Greater Chattanooga.” The Association is a regional organization with more than 1,400 members and is one of more than 1,400 local boards and associations of Realtors nationwide that comprise the National Association of Realtors. The Greater Chattanooga Association of Realtors services Hamilton and Sequatchie counties in southeast Tennessee and Catoosa, Dade and Walker counties in northwest Georgia. For more information, visit www.gcar.net.