| The Real Estate Settlement Procedures Act
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| | Prohibited PracticesSection 8: Kickbacks,
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| (RESPA) is a consumer protection statute,
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| | Fee-Splitting, Unearned FeesSection 8 of
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| first passed in 1974. One of its purposes
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| | RESPA prohibits anyone from giving or
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| is to help consumers become better
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| | accepting a fee, kickback or any thing of
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| shoppers for settlement services. Another
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| | value in exchange for referrals of
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| purpose is to eliminate kickbacks and
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| | settlement service business involving a
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| referral fees that increase unnecessarily
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| | federally related mortgage loan. In
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| the costs of certain settlement services.
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| | addition, RESPA prohibits fee splitting
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| RESPA requires that borrowers receive
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| | and receiving unearned fees for services
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| disclosures at various times. Some
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| | not actually performed.Violations of
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| disclosures spell out the costs
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| | Section 8's anti-kickback, referral fees
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| associated with the settlement, outline
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| | and unearned fees provisions of RESPA are
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| lender servicing and escrow account
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| | subject to criminal and civil penalties.
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| practices and describe business
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| | In a criminal case a person who violates
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| relationships between settlement service
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| | Section 8 may be fined up to $10,000 and
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| providers.RESPA also prohibits certain
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| | imprisoned up to one year. In a private
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| practices that increase the cost of
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| | law suit a person who violates Section 8
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| settlement services. Section 8 of RESPA
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| | may be liable to the person charged for
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| prohibits a person from giving or
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| | the settlement service an amount equal to
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| accepting any thing of value for
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| | three times the amount of the charge paid
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| referrals of settlement service business
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| | for the service.Section 9: Seller
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| related to a federally related mortgage
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| | Required Title InsuranceSection 9 of
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| loan. It also prohibits a person from
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| | RESPA prohibits a seller from requiring
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| giving or accepting any part of a charge
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| | the home buyer to use a particular title
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| for services that are not performed.
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| | insurance company, either directly or
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| Section 9 of RESPA prohibits home sellers
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| | indirectly, as a condition of sale.
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| from requiring home buyers to purchase
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| | Buyers may sue a seller who violates this
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| title insurance from a particular
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| | provision for an amount equal to three
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| company.Generally, RESPA covers loans
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| | times all charges made for the title
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| secured with a mortgage placed on a
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| | insurance.Section 10: Limits on Escrow
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| one-to-four family residential property.
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| | AccountsSection 10 of RESPA sets limits
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| These include most purchase loans,
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| | on the amounts that a lender may require
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| assumptions, refinances, property
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| | a borrower to put into an escrow account
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| improvement loans, and equity lines of
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| | for purposes of paying taxes, hazard
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| credit. HUD's Office of Consumer and
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| | insurance and other charges related to
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| Regulatory Affairs, Interstate Land Sales
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| | the property. RESPA does not require
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| RESPA Division is responsible for
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| | lenders to impose an escrow account on
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| enforcing RESPA.More RESPA
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| | borrowers; however, certain government
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| FactsDISCLOSURES:Disclosures At The Time
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| | loan programs or lenders may require
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| Of Loan ApplicationWhen borrowers apply
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| | escrow accounts as a condition of the
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| for a mortgage loan, mortgage brokers and
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| | loan.At settlement, Section 10 of RESPA
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| or lenders must give the borrowers:a
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| | prohibits a lender from requiring a
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| Special Information Booklet, which
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| | borrower to deposit more than the
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| contains consumer information regarding
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| | aggregate amount needed to cover escrow
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| various real estate settlement services.
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| | account payments for the period since the
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| (Required for purchase transactions
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| | last charge was paid, up until the due
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| only).a Good Faith Estimate (GFE) of
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| | date of the first mortgage
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| settlement costs, which lists the charges
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| | installment.During the course of the
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| the buyer is likely to pay at settlement.
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| | loan, RESPA prohibits a lender from
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| This is only an estimate and the actual
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| | charging excessive amounts for the escrow
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| charges may differ. If a lender requires
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| | account. Each month the lender may
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| the borrower to use of a particular
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| | require a borrower to pay into the escrow
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| settlement provider, then the lender must
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| | account no more than 1/12 of the total of
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| disclose this requirement on the GFE.a
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| | all disbursements payable during the
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| Mortgage Servicing Disclosure Statement,
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| | year, plus an amount necessary to pay for
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| which discloses to the borrower whether
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| | any shortage in the account. In addition,
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| the lender intends to service the loan or
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| | the lender may require a cushion, not to
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| transfer it to another lender. It also
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| | exceed an amount equal to 1/6 of the
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| provides information about complaint
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| | total disbursements for the year.The
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| resolution.If the borrowers don't get
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| | lender must perform an escrow account
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| these documents at the time of
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| | analysis once during the year and notify
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| application, the lender must mail them
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| | borrowers of any shortage. Any excess of
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| within three business days of receiving
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| | $50 or more must be returned to the
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| the loan application. If the lender turns
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| | borrower.Respa EnforcementCivil law
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| down the loan within three days, however,
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| | suitsIndividuals have one (1) year to
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| then RESPA does not require the lender to
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| | bring a private law suit to enforce
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| provide these documents. The RESPA
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| | violations of Section 8 or 9. A person
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| statute does not provide an explicit
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| | may bring an action for violations of
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| penalty for the failure to provide the
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| | Section 8 or 9 in any federal district
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| Special Information Booklet, Good Faith
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| | court in the district in which the
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| Estimate or Mortgage Servicing Statement.
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| | property is located or where the
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| Bank regulators, however, may impose
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| | violation is alleged to have occurred.
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| penalties on lenders who fail to comply
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| | HUD, a State Attorney General or State
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| with federal law.Disclosures Before
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| | insurance commissioner may bring an
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| Settlement (Closing) OccursA Controlled
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| | injunctive action to enforce violations
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| Business Arrangement (CBA) Disclosure is
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| | of Section 8 or 9 of RESPA within three
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| required whenever a settlement service
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| | (3) years.Loan Servicing
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| provider involved in a RESPA covered
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| | ComplaintsSection 6 provides borrowers
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| transaction refers the consumer to a
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| | with important consumer protections
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| provider with whom the referring party
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| | relating to the servicing of their loans.
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| has an ownership or other beneficial
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| | Under Section 6 of RESPA, borrowers who
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| interest.The referring party must give
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| | have a problem with the servicing of
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| the CBA disclosure to the consumer at or
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| | their loan (including escrow account
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| prior to the time of referral. The
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| | questions), should contact their loan
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| disclosure must describe the business
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| | servicer in writing, outlining the nature
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| arrangement that exists between the two
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| | of their complaint. The servicer must
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| providers and give the borrower estimate
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| | acknowledge the complaint in writing
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| of the second provider's charges. Except
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| | within 20 business days of receipt of the
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| in cases where a lender refers a borrower
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| | complaint. Within 60 business days the
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| to an attorney, credit reporting agency
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| | servicer must resolve the complaint by
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| or real estate appraiser to represent the
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| | correcting the account or giving a
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| lender's interest in the transaction, the
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| | statement of the reasons for its
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| referring party may not require the
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| | position. Until the complaint is
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| consumer to use the particular provider
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| | resolved, borrowers should continue to
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| being referred.The HUD-1 Settlement
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| | make the servicer's required payment.A
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| Statement is a standard form that clearly
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| | borrower may bring a private law suit, or
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| shows all charges imposed on borrowers
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| | a group of borrowers may bring a class
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| and sellers in connection with the
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| | action suit, against a servicer who fails
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| settlement. RESPA allows the borrower to
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| | to comply with Section 6's provisions.
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| request to see the HUD-1 Statement one
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| | Borrowers may obtain actual damages, as
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| day before the actual settlement. The
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| | well as additional damages if there is a
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| settlement agent must then provide the
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| | pattern of noncompliance.Other
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| borrowers with a completed HUD-1
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| | Enforcement ActionsUnder Section 10, HUD
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| Settlement Statement based on information
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| | has authority to impose a civil penalty
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| known to the agent at that
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| | on loan servicers who do not submit
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| time.Disclosures at SettlementThe HUD-1
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| | initial or annual escrow account
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| Settlement statement shows the actual
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| | statements to borrowers. Borrowers should
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| settlement costs of the loan transaction.
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| | contact HUD's Office of Consumer and
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| Separate forms may be prepared for the
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| | Regulatory Affairs to report servicers
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| borrower and the seller. it is not the
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| | who fail to provide the required escrow
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| practice that the borrower and seller
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| | account statements.Filing a RESPA
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| attend settlement, the HUD-1 should be
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| | ComplaintPersons who believe a settlement
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| mailed or delivered as soon as
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| | service provider has violated RESPA in an
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| practicable after settlement.The Initial
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| | area in which the Department has
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| Escrow Statement itemizes the estimated
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| | enforcement authority (primarily sections
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| taxes, insurance premiums and other
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| | 8 and 9), may wish to file a complaint.
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| charges anticipated to be paid from the
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| | The complaint should outline the
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| escrow account during the first twelve
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| | violation and identify the violators by
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| months of the loan. It lists the escrow
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| | name, address and phone number.
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| payment amount and any required cushion.
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| | Complainants should also provide their
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| Although the statement is usually given
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| | own name and phone number for follow up
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| at settlement, the lender has 45 days
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| | questions from HUD. Requests for
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| from settlement to deliver it.Disclosures
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| | confidentiality will be honored.
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| After SettlementLoan servicers must
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| | Complaints should be sent to:Director,
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| deliver to borrowers an Annual Escrow
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| | Interstate Land Sales/RESPA
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| Statement once a year. The annual escrow
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| | DivisionOffice of Consumer and Regulatory
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| account statement summarizes all escrow
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| | Affairs
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| account payments during the servicer's
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| | U.S. Department of Housing and Urban
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| twelve month computation year. It also
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| | Development
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| notifies the borrower of any shortages or
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| | Room 9146
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| surpluses in the account and advises the
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| | 451 7th Street, SW,
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| borrower about the course of action being
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| | Washington, DC 20410More information
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| taken.A Servicing Transfer Statement is
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| | about RESPA, including the complete text
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| required if the loan servicer sells or
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| | of the statute, updates, proposed
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| assigns the servicing rights to a
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| | modifications, etc, can be found at the
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| borrower's loan to another loan servicer.
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| | RESPA Home Page, which is part of the FHA
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| Generally, the loan servicer must notify
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| | Housing Web site.Neda Dabestani-Ryba is a
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| the borrower 15 days before the effective
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| | licensed Realtor in Maryland. She is a
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| date of the loan transfer. As long the
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| | member of the President's Circle of Top
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| borrower makes a timely payment to the
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| | Real Estate Professionals. She can be
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| old servicer within 60 days of the loan
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| | reached at (800) 536-3806 or visit her
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| transfer, the borrower cannot be
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| | website for more information:
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| penalized. The notice must include the
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| | Carruthers REALTORS is an independently
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| name and address of the new servicer,
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| | owned and operated member of Prudential
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| toll-free telephone numbers, and the date
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| | Real Estate Affiliates, Inc., a
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| the new servicer will begin accepting
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| | Prudential Financial company.
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| payments.Respa's Consumer Protections And
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