HUD, (Housing and Urban Development), in an effort to improve disclosure of key loan terms and closing costs paid by the consumer when they buy or refinance a property, HUD has reformed the RESPA Rules.

Here is a summary of the final rule:

Good Faith Estimate – now it will be a three page document, including disclosure of yield spread premiums and the tolerance restriction. Effective date January 1, 2010.

Settlement Statement (HUD-1)- it will now also be a three page document. It will be redesigned to look like the Good Faith Estimate with cross references and a chart comparing charges in the Good Faith Estimate with the final charges appearing on the HUD-1.  Effective date January 1, 2010.

30 Day Cure Period – loan originators may reimburse the borrower for tolerance violations within 30 days of settlement.  Effective date January 1, 2010.

Tolerance limitations on settlement charges – 10% price tolerances for certain services packaged by lenders.  Effective date January 1, 2010.

No Volume-Based Discounts- this eliminates explicit volume based discount language and reiterates HUD’s contention that all settlement service providers may negotiate discounts as long as they go to the consumer.

Use Of Average Charges – this is available to all settlement service providers with added flexibility for calculations.  Effective date January 16, 2009.

*Revised Definition of Required Use – this is extended to both sellers and borrowers and allows legitimate consumer discounts.  Requires that discounts or incentives be given by the referred provider and not as an inducement by the referrer.  Effective date April 16, 2009.

Application Process – a one stage application process with greater flexibility on selecting underwriting criteria.  Effective date January 1, 2010.

Misc. – miscellaneous modifications regarding escrow accounts, servicing transfer notifications and the applicability of E-Sign.  Effective date January 16, 2009.

HUD has agreed to exercise restraint in enforcing these provisions for the first 120 days of 2010.

For more detailed information on the Final RESPA Rules go to:

http://www.hud.gov/offices/hsg/sfh/res/finalrule.pdf.