RESPA Required Disclosures at Time of Loan Application

RESPA mandates that consumer borrowers receive disclosures their lender with specific content at specific times in the residential loan settlement process. This post will address disclosures mandated at the time of loan application, while the next post will address disclosures made before settlement/closing occurs.

When borrowers first apply for a mortgage loan, either the mortgage broker or the lender must provide the borrower with the following disclosures. First, if the transaction is for the purchase of improved residential real estate (1-4 family), the borrower must receive a Special Information Booklet which contains consumer information regarding various real estate settlement services. Second, the borrower must receive a Good Faith Estimate (GFE) of settlement costs, which lists the charges the buyer is likely to pay at settlement. This is only anestimate and the actual charges may differ. If a lender requires the borrower to use a particular settlement provider, then the lender must disclose this requirement on the GFE. Finally, the borrower must receive a Mortgage Servicing Disclosure Statement, which discloses o the borrower whether the lender intends to service the loan or transfer it to another lender. It also provides information about complaint resolution.

If borrowers do not receive these documents at the time of application for the loan, the lender must mail them within three days of receiving the loan application. However, if the lender turns down the loan within three days of application, RESPA does not require the lender to provide these documents.

Although RESPA does not provide an explicit remedy to borrowers for the failure of a lender to provide the Special Information Booklet, Good Faith Estimate, or Mortgage Servicing Statement at the time of application, regulatory agencies charged with enforcing RESPA have the ability to impose penalties on lenders who fail to comply with federal law.

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