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Real Estate Closing Rules

Written By video massa on Senin, 20 Januari 2014 | 10.43

An improper real estate closing can be costly to all parties involved. Regulations exist to prevent fraud and misrepresentation and to protect the bank and the borrower. The bulk of these real estate closing rules fall under the Real Estate Settlement Procedures Act (RESPA) and the Truth-in-Lending Act (TILA). Failure to comply with these rules can result in penalties for the bank and the borrower.

Closing Costs

    A borrower must be fully aware of the costs incurred at closing. At closing, you will receive a HUD-1 settlement statement outlining final costs. Under RESPA, the bank must send a Good Faith Estimate (GFE) of closing costs after application. New rules enacted in 2010 divide the costs into three categories. Charges that cant increase at closing include items such as origination and rate lock-in fees. Charges that can increase by up to 10 percent at closing include title insurance, government recording charges and vendor service used by the lender. Charges that can change completely by the time of closing include escrow deposit, prepaid interest and vendors not recommended by the lender.

Truth-in-Lending

    A lender is required to provide the borrower with a Truth-in-Lending disclosure (TIL) after application. If the rate increases more than one-eighth of 1 percent, the borrower must receive a revised TIL a minimum of three business days prior to closing. The disclosure lists the loan amount, the interest rate and the total amount of interest to be paid over the life of the loan. The borrower must have time to review this disclosure prior to closing.

Right of Rescission

    In a residential real estate transaction, the deal is not final until three full business days after closing. This means if you close on a Monday, you do not receive funds until Friday. This right, provided under the TILA, gives the borrower time to back out of a loan, even after the documents have been executed. The clause is intended to protect borrowers against unscrupulous lenders. If the borrower exercises his right to rescind, the lender must give up all claims to collateral and refund fees within 20 days.

Servicing

    Under RESPA, you have the right to knowledge of the servicing of your loan post-closing. The original lender will continue to service your loan until payoff. If, for any reason, the loan is sold or transferred, the lender must provide you with written notice within 15 days. If you have a complaint, you have the right to submit that complaint in writing to the lender. RESPA dictates that the lender must resolve the complaint within 60 days of receipt.



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