Majority of Lenders RESPA-Compliant, but Borrowers Confused: Survey

An Equifax survey of 3,000 lenders, brokers, and borrowers shows that the majority of mortgage providers are compliant with the new ""Real Estate Settlement Procedures Act"":http://www.hud.gov/offices/hsg/ramh/res/respa_hm.cfm (RESPA) for loan originations. However, according to the findings, the RESPA changes have caused borrower confusion and increased application time.
[IMAGE] The survey, conducted by ""the Work Number"":http://www.theworknumber.com, an employment and income verification service of Atlanta-based ""Equifax"":http://www.equifax.com, found that 56 percent of respondents have adapted to the new RESPA changes and have implemented the technology necessary to fully comply with the regulations.

While the majority of lenders are ready, the impact of the RESPA changes may be working against the very goal of the revised regulation â€" to provide stronger protections for consumers and help borrowers be better shoppers in the home buying process, as described by HUD.

Approximately 72 percent of those responding to the Work Number survey stated that they are seeing borrowers confused about the multiple sets of documents they receive

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for disclosure, and 79 percent say it now takes longer to take an application and disclose to the borrower.

The new RESPA regulations require lenders and brokers to provide customers with a standard Good Faith Estimate (GFE) that clearly discloses all loan terms and closing costs. Closing agents are then required to provide borrowers with the new HUD-1 Settlement Statement that plainly compares consumers' final costs with the originally quoted charges. As stipulated by the new rule, the final price for most services must be within 10 percent of the quoted price or lenders could face penalties beginning May 1.

RESPA regulations are having a negative impact on some lenders as well. One large financial services provider participating in the survey commented, ""We are experiencing some negative impacts of RESPA. The first is absorbing the cost when we are unable to recoup additional fees from incorrect GFE fee quotes.""

And secondly, the survey respondent said, ""Any disclosure change mandates a waiting period of three-business days before closing. Re-disclosure not only impacts the lender but more so the borrowers on purchases. Usually disclosure errors are found at or just before closing, thus postponing the borrower from taking possession of their new home.""

As to the impact on lenders' volume of applications, 74 percent of respondents are not seeing any backlog of applications to be processed as a result of the new RESPA regulations. The Work Number says many lenders are taking fewer applications, but that is due to economic factors rather than any RESPA impact. The upside, though, is that a downturn in volume is allowing lenders to better manage the new disclosure requirements and implement compliance policies.