A proposed mortgage reform package was recently released by HUD Secretary, Alphonso Jackson for helping borrowers clearly understand terms of mortgage loan they want to take. If enacted, the changes will reform the GFE & thirty year old RESPA, but before that it has to go through a mandatory period of public comment.
One of the main changes is a proposal that lenders & brokers provide borrowers with a standard GFE. The standard GFE when used will enhance disclosure of major aspects of mortgage loan such as,
a.Interest rate & monthly payments
b.Whether mortgage contains balloon payment or prepayment penalty
c.Whether rate & principal balance can go up, if yes, by how much
The new proposals also specify charges which can & cannot change at settlement and if any fee changes, there will be a limit on the amount by which it can change. Another significant feature in the GFE being proposed is that lender payments to brokers known as yield spread premiums will have to be disclosed.
HUD has also proposed legislative changes in RESPA which will give it authority of imposing penalties if some specific sections of RESPA are violated.
The specific sections for which HUD will have authority would be those which deal with:
a.Loan servicing
b.Referral & unearned fees
c.Prohibition against kickbacks
d.Good faith estimate
e.Settlement cost booklet
f.Title insurance
g.Escrow accounts
HUD also wants that
- Secretaries of State as well as other regulators are allowed to seek equitable & injunctive relief if RESPA regulations are violated.
- HUD-1 be delivered to borrowers 3 days before closing
- A uniform statute of limitations be established which would be applicable to both private as well as governmental actions under RESPA.
