The Settlement Process

 

You are protected in the Settlement Process by Federal Government oversight. The term Settlement Process can be defined as the process of executing legally binding documents regarding a lien on property that is subject to a federally related mortgage loan. This process may also be called closing or escrow in different jurisdictions.(1) Also, Peerless Title and Escrow Inc. is licensed and bonded by State Regulators. Its actions are also insured by the Title Insurer's whom we represent.

 

The Settlement Process is governed by the Real Estate Settlement Procedures Act of 1974 and regulations which were promulgated to enforce it ("RESPA"). In 1974 Congress found that significant reforms in the real estate settlement process were needed to insure that consumers throughout the Nation are provided with greater and more timely information on the nature and costs of the settlement process and are protected from unnecessarily high settlement charges caused by abusive practices that developed in some areas of the country.

 

RESPA required in more effective advance disclosure to home buyers and sellers of settlement costs; prohibited kickbacks or referral fees which tend to increase unnecessarily the costs of certain settlement services; reduced the amounts home buyers are required to place in escrow accounts established to insure the payment of real estate taxes and insurance; and provided significant reform and modernization of local recordkeeping of land title information. (2)

 

Most importantly, RESPA provided for the formation of a a standard form for the statement of settlement costs (the "Settlement Statement") which was to be used (with such variations as may be necessary to reflect differences in legal and administrative requirements or practices in different areas of the country) as the standard real estate settlement form in all transactions in the United States which involve federally related mortgage loans (including those loans intended to be sold by an originating lender to the Federal National Mortgage Association, the Government National Mortgage Association, the Federal Home Loan Mortgage Corporation, or a financial institution from which it is to be purchased by the Federal Home Loan Mortgage Corporation (3));. The Settlement Statement must conspicuously and clearly itemize all charges imposed upon the borrower and all charges imposed upon the seller in connection with the settlement and shall indicate whether any title insurance premium included in such charges covers or insures the lender's interest in the property, the borrower's interest, or both. (4)

 

Also, RESPA defines what the various Settlement Services are. According to RESPA, the term "Settlement Services" includes any service provided in connection with a real estate settlement including, but not limited to, the following: title searches, title examinations, the provision of title certificates, title insurance, services rendered by an attorney, the preparation of documents, property surveys, the rendering of credit reports or appraisals, pest and fungus inspections, services rendered by a real estate agent or broker, the origination of a federally related mortgage loan (including, but not limited to, the taking of loan applications, loan processing, and the underwriting and funding of loans), and the handling of the processing, and closing or settlement. (5) The RESPA regulations expand the definitions of the core Settlement Services to be one or more of the following:

 

(1)         Origination of a federally related mortgage loan (including, but not limited to, the taking of loan applications, loan processing, and the underwriting and funding of such loans).

(2)         The rendering of services by a mortgage broker (including counseling, taking of applications, obtaining verifications and appraisals, and other loan processing and origination services, and communicating with the borrower and lender).

(3)         Provision of any services related to the origination, processing or funding of a federally related mortgage loan.

(4)         Provision of title services, including title searches, title examinations, abstract preparation, insurability determinations, and the issuance of title commitments and title insurance policies.

(5)         Rendering of services by an attorney.

(6)         Preparation of documents, including notarization, delivery, and recordation.

(7)         Rendering of credit reports and appraisals.

(8)         Rendering of inspections, including inspections required by applicable law or any inspections required by the sales contract or mortgage documents prior to transfer of title.

(9)         Conducting of settlement by a settlement agent and any related services.

(10)        Provision of services involving mortgage insurance.

(11)        Provision of services involving hazard, flood, or other casualty insurance or homeowner's warranties.

(12)        Provision of services involving mortgage life, disability, or similar insurance designed to pay a mortgage loan upon disability or death of a borrower, but only if such insurance is required by the lender as a condition of the loan;

(13)        Provision of services involving real property taxes or any other assessments or charges on the real property.

(14)        Rendering of services by a real estate agent or real estate broker.

(15)        Provision of any other services for which a settlement service provider requires a borrower or seller to pay. (6)

 

1.  24 Code of Federal Regulations (CFR) Part 3500.2

2.  12 United States Code (USC) Sec. 2601(a)

3.  12 USC Sec.2602 (1)(B)(iii)

4.  12 USC Sec. 2603(a)

5.  12 USC Sec.2602 (3)

6. 24 CFR Part 3500.2

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