Federal Protections Against Fraud
You should never hesitate to ask questions if you have them on any other page of the mortgage documents you receive. Take your time. You're paying them tons of money to get a loan, so loan officers can wait while you get the answers you need.
With so many loan products out there in the marketplace, it really makes sense to have an outside expert — whether it's an attorney, a financial planner, or your tax preparer who's familiar with real estate transactions — eyeball any loan proposal you get. It may cost you a few dollars in time, but it will be well worth the money in knowledge and preventable mistakes.
The Real Estate Settlement Procedures Act was passed in 1974. It essentially exists to help consumers spot unnecessary service fees and illegal kickbacks from lenders to real estate brokers or other players in the home mortgage process. To comply with the law, lenders have to give the prospective borrower three things at the time of the mortgage application:
A special information booklet, which contains consumer information regarding various real estate settlement services at the time of a purchase
A good faith estimate (GFE) of settlement costs, which lists the charges the buyer is likely to pay at settlement. Keep a close eye on this because these charges may shift significantly by closing. You'll be looking for the final HUD-1 and HUD-1A statements to give you the final numbers.
A mortgage servicing disclosure statement, which discloses to the borrower whether the lender intends to service the loan or transfer it to another lender and also provides information about complaint resolution
The Home Ownership and Equity Protection Act (HOEPA), passed in 1994, requires lenders to identify if they're offering a high-cost mortgage. HOEPA defines high-cost mortgages as those with an annual percentage rate at least 8 percentage points higher than Treasury securities with comparable maturity dates to the loan. Lenders have to explain how much is being borrowed while disclosing how much of the payback amount involves interest and other fees.
