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What is Included in RESPA and TILA Mortgage Disclosures?

By Arvin Sahakian · Apr 29, 2015 · Mortgage

What is Included in RESPA and TILA Mortgage Disclosures?

Image courtesy of Flickr, U.S. Army Corps of Engineers

RESPA and TILA disclosures display the rate, terms, fees and costs associated with a mortgage loan. They can be used to shop around for a better deal with a different lender.

Every mortgage loan issued must come with a set of documents given to borrowers by lenders and brokers known as RESPA and TILA mortgage disclosures. These disclosures include the rates, terms, fees and costs associated with mortgage loans.

RESPA and TILA disclosures also assist borrowers in shopping for a mortgage loan with different lenders by displaying the rates, terms and fees to be easily compared with offers from other lenders.

The government’s primary reason for requiring these disclosures is to eliminate borrowers being misinformed and/or uninformed about the mortgage terms, costs and obligations they are taking on. We will outline and briefly explain what you can expect to receive within these disclosures.

These sets of documents, which all borrowers must receive, are known as RESPA and TILA disclosures. We will outline and briefly explain what you can expect to receive within these disclosures.

Real Estate Settlement Procedures Act (RESPA)

Currently, the RESPA disclosure documents are a set of five disclosures that lenders and brokers are required to send borrowers within a certain period of time after taking a loan application, in addition to before and after the loan closing process.

1. Good Faith Estimate (GFE)

  • Received within 3 business days of taking your loan application.
  • List of various estimated charges you have to pay during the loan process.

2. Servicing Disclosure Statement

  • Lenders must tell you if they expect to have a servicing company collect your mortgage payments on their behalf.
  • Received within 3 business days of taking your loan application.

3. Affiliated Business Arrangements

  • If the servicing company designated to collect your mortgage payments on the lenders behalf is a "sister" company, or affiliated with the lender in any way, they must give you a disclosure stating these facts.

4. HUD-1 Settlement Statement

  • Itemizes your service fees and closing costs for the loan.
  • Filled out by a settlement agent (such as the escrow officer).
  • Must be delivered or mailed to you for review before your loan process closes.

5. Escrow Account Operation & Disclosures

  • Must be sent when the lender requires borrowers to have an impound/escrow account to ensure property taxes and homeowners insurance are paid on time.
  • Describes details of initial escrow/impound amount required, and monthly payments to follow.
  • You will pay initial amount to fund the escrow/impound account followed by smaller monthly payments to keep the account funded as the taxes and insurance payments are made on your behalf.
  • Expect to receive these disclosures when your loan closes, up to 45 days after loan closing.

Truth-in-Lending Act (TILA)

The TILA disclosure is a statement that summarizes important terms about your loan which you can reference easily and use to shop with other lenders to make sure you are getting the best possible deal.

This disclosure must be received before you are legally bound to the loan, typically before the closing process of your loan. Often, this document will be given to you along with the loan documents you will sign with a notary.

The important information and terms included in this statement are:

  • Annual Percentage Rate (APR)
  • Monthly Payment
  • Loan amount being financed
  • Loan finance charges
  • Whether or not you will have a Pre-Payment Penalty
  • Total payment amount you will pay during the life of your loan

Changes Coming to RESPA - TILA Disclosures

Beginning August 1, 2015, the RESPA and TILA disclosures borrowers receive from lenders and brokers are changing. These two sets of disclosures we have outlined above will be combined and expanded upon within two sets of new disclosure borrowers will receive at the beginning and end of their mortgage process.

In the beginning of your mortgage process, you will receive a set of disclosures that will be labeled " Loan Estimate." Towards the end of your loan process, you will receive a set of disclosures that will be labeled "Closing Disclosure." This change is meant to give borrowers a better and clearer understanding of the important loan information, fees and costs associated with their mortgage loan.

In our next article, we will describe the specifics of what is to be included in each of these new disclosure documents.

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