Your Rights As A Consumer
In addition to the right to view your credit report and know your FICO score, you also are protected by RESPA, the Real Estate Settlement Procedures Act passed by Congress. RESPA requires your lender to provide you with a “Good Faith Estimate of Settlement Costs” early in the loan process. Be aware, however, that the amounts contained are only estimates. Keep your Good Faith Estimate so you can compare it with the final settlement costs, and ask the lender questions about any changes.
Through a Servicing Disclosure Statement, which will be given to you by your lender, RESPA also requires your lender to tell you if it expects someone else to be servicing your loan. Your lender will have three days from the time you apply for the loan to let you know about this.
RESPA regulations also require all parties involved in your transaction to disclose affiliated business arrangements. If anyone involved in your transaction (your lender, agent or title officer, for example), refers you to another service provider (including lenders, title officers, inspectors, etc.), the “Servicing Disclosure Statement” indicates that you generally are not required to use these providers, and are free to shop for other affiliates.
HUD-1 Settlement Statement
The U.S. Department of Housing and Urban Development also provides protection via the HUD-1 Settlement Statement. One business day before closing, you have the right to inspect this statement, which itemizes the services provided to you and the accompanying fees charged. Be sure to call the settlement agent if you wish to inspect this form. The form generally must be delivered or mailed to you at or before the settlement.
Escrow Account Operation and Disclosures
Your lender may require you to establish an escrow or impound account to insure that your taxes and insurance premiums are paid on time. You probably will have to pay an initial amount at the settlement to start the account and an additional amount with each month’s regular payment. Your payments may include a “cushion” or extra amount to ensure that the lender has enough money to make the payments when due. RESPA limits the amount of the cushion to a maximum of 2 months of escrow payments.
At closing or within the next 45 days, the person servicing your loan must give you an initial escrow account statement. That form will show all of the payments which will be expected to be deposited into the escrow account, and all of the disbursements that are expected to be made from the escrow account during the year ahead. Your lender or servicer will review the escrow account annually and send you a disclosure each year, which shows the prior year’s activity and any adjustments necessary in the escrow payments that you will make in the forthcoming year.
For more information on RESPA
Visit the web page at http://www.realtor.org or call (800) 217-6970 for a local counseling referral.
There are several Federal laws, which provide you with protection during the processing of your loan. T he Equal Credit Opportunity Act (ECOA), the Fair Housing Act and the Fair Credit Reporting Act (FCRA) prohibit discrimination.
ECOA prohibits lenders from discriminating against you on the basis of race, color, religion, national origin, sex, marital status, age, if any or all of your income comes from any public assistance program or if you have exercised any right under any Federal consumer credit protection law.
The Fair Housing Act also prohibits discrimination in real estate transactions on the basis of race, color, religion, sex, handicap, familial status or national origin. Frequently, there are differences in the amounts of settlement costs charged to you – they may be based on your credit worthiness or they may be unlawfully discriminatory. It is important that you examine your settlement documents closely, especially lines 808-811 on the HUD-1 settlement statement. If you feel you have been discriminated against by a lender or anyone else in the homebuying process, you may file a private legal action or complain to a state, local or Federal administrative agency.