HUD Grants Cushion for New Regulatory RESPA Requirements

The US Department of Housing and Urban Development (HUD) announced today that it would instruct the Mortgagee Review Board (MRB) in enforcing the new Real Estate Settlement and Procedures Act (RESPA) requirements during the first four months of 2010. The instruction means that as long as FHA-approved lenders are acting in good faith in the spirit of the new RESPA guidelines, they will hopefully be immune from actions against them. HUD is also asking federal and relevant state agencies to give lenders the same 120-day grace period.

A lender will be considered to be in good faith based upon whether the lender is using the new RESPA guidelines and other FHA materials for guidance and whether they have invested in and committed to the training, technology, and quality assurance necessary to be in compliance.

Given the burden the new RESPA guidelines will place on lenders, it is good of HUD to allow more leniency in punishing lenders for being out of compliance-- at least in the early stages of the new regulations. Changes include the use of a new standardized Good Faith Estimate (GFE) with specific disclosures as to the key loan terms and closing costs. The changes to RESPA go into effect on January 1, 2010. They apply to reverse mortgage lenders as well as traditional mortgage lenders.