When you apply for a loan there a number of disclosures you are required to receive from the broker/lender within certain time frames. These are covered by the Real Estate Settlement Procedures Act (RESPA) and if not delivered in a timely fashion can result in serious fines to the broker/lender.

There are four time during the loan process you are required to get disclosures. At the time of application, before settlement/closing occurs, at settlement, & after settlement.

At the time of application a borrower must receive from the broker/lender the following three things. A Special Information booklet containg various real estate settlement services for the borrower (only required for a purchase), a Good Faith Estimate of settlement costs listing all the various costs that will be associated with the loan (a good broker will be able to get this estimate within a few hundred dollars of the actual amount), and finally a Mortgage Servicing Disclosure Statement which discloses whether the lender is going to transfer the loan to another lender or service the loan themselves.

If the broker/lender takes the application over the phone then they have 3 days in which to mail the customer the associated disclosures.

If the loan is turned down then the broker/lender is not required to provide these documents.

There are two disclosures needed before settlement or closing occurs. The first is whether an ABA (affiliated business arrangement) is in place between any of the settlement and either broker or real estate agent. This must be dislosed at or before the time of referral. The other disclosure is the HUD-1 or Settlement Statement. This must be given one day before settlement is to occur. The HUD-1 must show all charges relating to the settlement imposed on both borrowers and sellers. It must be disclosed by the settlement agent based upon all charges the agent is aware of up until that time.

The two disclosures that must be presented at time of closing are the completed HUD-1 and the Initial Escrow Statement. The inital escrow statement must show estimated taxes, insurance premiums and other charges that are to be collected and paid from the escrow account for the 1st year of the loan. Although the escrow settlement statement is normally deliver at time of settlement, it can be delivered within forty-five days of closing.

After settlement occurs then the borrower is required to receive two disclosures. One is the annual escrow statement which shows how much is in the escrow account and how much has been disbursed from the account to the appropriate agencies. The other is the Servicing Transfer Statement given out any time the loan is transfered from one lender to the other. Both the selling and buying lenders are to disclose the sale of the loan. The borrower has 60 days to comply with the transfer and cannot be penalized any time in those 60 days for sending the payment to the incorrect company.

 

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