Mortgage-related charges disclosed

The Real Estate Settlement Procedures Act (RESPA) mandates lenders active in the secondary mortgage market to disclose all mortgage related charges on mortgages used to purchase, refinance or improve one-to-four unit residential properties.

Mortgage related charges include:

  • origination fees;
  • credit report fees;
  • insurance costs; and
  • prepaid interest.

RESPA is administered and enforced by the Consumer Financial Protection Bureau (CFPB).

A RESPA-controlled lender provides the buyer with:

  • a Loan Estimate of all mortgage terms quoted by the lender within three business days of the lender’s receipt of the buyer’s mortgage application [See RPI Form 204-5; 12 Code of Federal Regulations §1026.37];
  • a special information booklet published by the CFPB to help the buyer understand the nature and scope of real estate settlement costs within three business days after the lender’s receipt of the buyer’s application [12 CFR §1026.19(g)];
  • a Closing Disclosure, which summarizes the “final” mortgage terms and details, provided by the lender at least three days before the consumer closes on the mortgage [See RPI Form 402; 12 CFR §1026.19(f)(ii)]; and
  • a list of homeownership counseling organizations.

Editor’s note: A list of homeownership counseling organizations approved by HUD can be found here.

If the buyer is arranging financing through a mortgage broker, the broker, not the lender, provides a copy of the special information booklet to the buyer. [12 CFR §1024.6(a)(1)]

However, the booklet does not need to be given to the buyer if the mortgage funds:

  • the refinance of an existing mortgage;
  • a closed-end mortgage in which the lender takes a subordinate lien;
  • a reverse mortgage; and
  • any federally related mortgage used to fund the purchase of other than a one-to-four unit residential property. [12 CFR §1024.6(a)(3)]

Also, on adjustable rate mortgages (ARMs), the lender informs the buyer not only of the interest rate, but also the index, margin and payment and interest rate floors and caps. [See RPI Form 320-1]