Since 1974 one set of documents has remained relatively unchanged. These documents are a federal requirement to every conventional and government home mortgage issued on primary residences in the United States. Before these documents, it is claimed, bankers were able to charge unlimited fees, unlimited interest rates and it was difficult for home owners and buyers to shop mortgages.
Real Estate Settlement and Procedures Act
The Real Estate Settlement and Procedures Act of 1974 (RESPA) was enacted by Congress with the directive of protecting the mortgage consumer by helping them to better understand the costs of buying a home using a conventional or government insured mortgage. In the years since then countless numbers of loan officers and mortgage professionals have been questioned by mortgagors about the content of two documents call the Good Faith Estimate (GFE) and the Truth In Lending (TIL).
Many lenders, primarily federally chartered banks, have often skipped using the required forms within the specified time frame, three business days from a completed application, and instead sent their own modified versions. Changes made mandatory and effective January 1, 2010, seek to standardized and simplify these two forms. Additionally the goal is to help the consumer better match the costs on the GFE and TIL with the HUD1 Settlement Statement, or simply HUD1 for short.
Instead of doing away with the opportunity for abuse the federal agencies are attempting to provide the information in plain English (and foreign languages) the costs and terms associated with the mortgaging of a home. What it fails to provide, according to Gerry Suarez a seasoned mortgage professional in Florida, is a monthly payment. "What is the shopper supposed to do, add up some fees and come up with a monthly payment?"
Leveling the playing field between brokers and bankers
Most professionals agree RESPA does not provide a level playing field. Instead of taking the time to address the issue of mortgage brokers being required to disclose their commission and bankers being able to make as much profit as legally allowed without disclosing their commission is a heated issue between the National Association of Mortgage Brokers (NAMB) and the Mortgage Bankers Association (MBA). Federal regulators are in a public comment period right now about whether or not to completely outlaw mortgage broker compensation from the lender, well known as Yield Spread Premium (YSP).
Links to the new RESPA forms and additional comments can be found at this link.
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