Chapter 20 – Closing the Real Estate Transaction

The 15th Edition of Modern Real Estate Practice in Texas was published in November 2011.     Updates to the content of Chapter 20 include:

No RESPA Violation for Closing Discount.  A federal appellate court affirmed an earlier ruling that offering a discount to a buyer if the buyer uses the developer’s lender does not violate RESPA (2011).

Supreme Court:  RESPA Does Not Cover Unsplit Fees.  In a unanimous opinion in May 2012, the U.S. Supreme Court ruled that RESPA does not cover unearned unsplit fees charged by a single settlement service provider. In Freeman v. Quicken Loans, three couples claimed that loan “discount fees” charged by Quicken did not provide them with lower interest rates and that Quicken had charged them fees for which no services were rendered, violating Section 8(b) by charging a fee that exceeds the reasonable value of goods, facilities or services provided.  The Court ruled that a settlement service provider’s splitting a fee with one or more other persons would be a violation of RESPA but a single provider’s retention of an unearned fee was not a violation.

RESPA Disclosures: As mandated by the Dodd-Frank Act of 2010, the Truth in Lending Disclosure form and the Good Faith Estimate are being combined into one simpler consumer form.  The combined form will be called a “loan estimate,” which must be given to consumers within three days of application.  To replace the HUD-1 settlement statement at closing, the CFPB is creating a “closing disclosure form,” which must be given to borrowers three days prior to closing.  If there is an increase in closing costs at closing as compared with the loan estimate, in most cases the consumer gets to pay the lower fees.  Disclosure trials using the new forms will be conducted in 2013.  The new disclosure forms may not be finalized until 2014.  (John McDermott.  “Get Ready for Multiple Changes in Disclosure Forms,” Origination News, September 2012.  Brian Collins.  “CFPB to Test Disclosures,” Origination News, January 2013.)

Page updated:  April 20, 2013

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© 2009 Cheryl Nance. All Rights Reserved.

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