Chicago Relocation

A Closer Look at the Real Estate Settlement Procedures Act

September 15, 2009

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Here’s some fantastic insight on some of the changes coming to RESPA, by my Rubloff colleague Ross Nemzin.  Ross can be reached at 

Another of the new federal requirements that will impact every mortgage operation in the country is the Real Estate Settlement Procedures Act (RESPA). RESPA is an HUD consumer protection law that was created in 1974 to help consumers become better purchasers of settlement services and to decrease the puffed up costs of real estate transactions due to kickbacks between lenders, realtors, construction companies, and title insurance companies. It also requires that lenders provide borrowers with a good faith estimate (GFE) for all the costs of a loan. RESPA reform has been going on since 1992 and at last a final rule for the act was recently created with a compliance date of January 1, 2010.

The final rule promotes RESPA’s functions by requiring more timely and useful disclosures about mortgage settlement costs and protecting borrowers from paying inflated settlement costs. According to the Federal Register, RESPA will do this by – Improving and standardizing the GFE form; guaranteeing that the first page of the GFE is understandable; allowing borrowers to ID a particular loan and make comparisons easier; providing more accurate estimates of settlement costs on the GFE; helping to more accurately compare the GFE with the HUD-1.   



It is important to note that the costs outlined on the GFE are only estimates. The HUD-1 Settlement Statement is a list of the actual fees charged to the borrower and can be reviewed by the borrower one day before settlement. The borrower should request to see the HUD-1 and should question any charge that is not understood.

After much consideration, the proposed changes to the definition of “required use” have been withdrawn from the final rule of RESPA. These changes would have eliminated incentives or discounts to borrowers that use affiliated settlement service providers.

It seems as though RESPA’s final rule is very beneficial to the homebuyer, yet only time will tell.  However, anyone relocating into or out of Chicago should certainly take note….