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The RESPA regulation is the biggest single change in the settlement services or real estate industries since the inception of RESPA. The onset of the new regulation will mean redefining sales and marketing strategies for your business. So what is RESPA? The Real Estate Settlement Procedures Act (RESPA) was first established with the goal of standardizing the purchase of residential real estate. The first significant reform came in 1996, which heightened the level of disclosure to consumers and further streamlined some loan processes. There are no participants in a real estate transaction that RESPA doesn't impact.
The key underlying principle of the new RESPA regulation is to benefit the consumer by virtue of cost savings and a greater disclosure of loan costs, loan terms and settlement fees. With regard to cost savings, HUD is using the simple economics premise that "price shopping = competition = lower prices." On the disclosure side of the equation, HUD's philosophy is that greater consistency among fees and terms from loan application through settlement will result in a more informed, prepared, and engaged consumer. HUD also has an objective of preserving a competitive market for all settlement service providers.
The main components of the final RESPA rule include:
- Changes and expansions to the Good Faith Estimate (GFE) and the HUD-1 forms.
- Yield spread premiums that a lender pays on a loan now must be credited to the borrower at closing.
- Clarifications to the definition of Required Use.
Other important features of the new regulation include a required disclosure of the agent/underwriter premiums split on the settlement statement. The lender is also responsible for curing any tolerance violations within 30 days of loan closing RESPA also gives us in this regulation a new definition of what constitutes "Title Services".
The implementation period for all parties to be utilizing the new GFE and HUD-1 forms is "not later than January 1, 2010". It is clear that most lenders are taking a slow approach to implementing the new forms – taking time for restructuring their business processes accordingly before they can move forward with this implementation. The new GFE and HUD-1 forms will result in sweeping industry wide changes. All settlement service providers, including title agents, settlement agents, lenders, brokers and realtors, will have to adopt new procedural, operational and legal practices.
So, what should you do next? We suggest that you begin today, if you have not already, taking steps down your RESPA Ready path. Familiarize your entire organization with the new regulation, as this will help your organization become more prepared to adapt as the RESPA regulation becomes further clarified in the adoption process. Also, be sure to discuss the implications of RESPA reform with your customers. To stay on top of the latest information and engage in discussions regarding the implementation of RESPA, we recommend visiting RESPAready.com on a regular basis to join in relevant discussions, to communicate with others who are members, and to share your opinions and gain access to industry thought leaders in an interactive environment driven by the community.
About the Author:
Mary Schuster joined RamQuest, Inc., in October 2008, as Director of Operations. In this role, Schuster will direct and lead the efforts of the RamQuest Customer Support, Implementation and Training teams as the Company continues to drive forward in the market, forming partnerships with customers and working to help them do business more effectively and efficiently. She is also a blog author on the RESAPAready.com community forum.
Schuster brings to this role over 15 years of experience in the real estate and title industries, blending strengths from her background in production, operations and management. Her industry experience spans Agency Management, Escrow and Title, Customer Service and Marketing.
Prior to joining RamQuest, Schuster served in a consulting role for title companies nationwide, directing them in the areas of production modernization, strategic management, revenue development, marketing strategy, infrastructure development, employee training and customer service.
Schuster currently serves on the ALTA Implementation Task Force, a group designed to help to shape the standards for the industry integration of the regulation changes. She has also been a long-standing member American Land Title Association, the Kansas Land Title Association and is a former licensed Realtor in the state of Kansas and a licensed Title Agent in both Kansas and Missouri.
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