RESPA Servicing Disclosure
The RESPA Servicing Disclosure form informs the borrower of the intentions of the lender to keep the loan or transfer/sell it to a third party.
The Real Estate Settlement Procedures Act (RESPA) requires the lender to disclose to the borrower their intentions to keep the loan or transfer it to someone else. This form contains the following information:
* Transfer Practices and Requirements;
* Complaint Resolution; and
* Servicing Transfer Estimates.
Let's discuss each one briefly.
Transfer Practices and Requirements
The Transfer Practices and Requirements tells the borrower his rights if the loan is transferred to a new service provider.
Many times, the loan is sold to a third party or the lender hires a "service provider" to handle collection of the payments. Because these transfers are so prevalent today, the law requires some disclosure of what happens upon transfer.
Basically, if the loan is transferred, the lender must:
# Send written notice 15 days before the transfer telling the borrower of the sale or transfer;
# New service provider must also give the borrower 15 days notice prior to the transfer (although these 2 notices may be combined into one notice);
# The notice must contains:
- Effective date of transfer; and
- Name, address, toll free or collect call number of the new provider.
It should be noted that during a 60 day period following the date of transfer, if the borrower mails his payment to the first provider instead of the new provider, the payment cannot be considered late.
The RESPA Servicing Disclosure also contains a section on Complaint Resolution. This allows the borrower to send a "qualified written request" to the servicer. The servicer is then required to respond within 20 days.
After the response from the service provider, the provider has 60 business days (days they are normally open for business) to correct the situation or provide you with written explanation regarding the dispute.
During this 60 day period, the lender may not report any payment history to a credit agency.
Servicing Transfer Estimates
The section gives the borrower estimates of whether the lender intends to keep, sell, assign or transfer the loan to a third party. It has 3 subsections that tell the borrower:
1. Lenders estimate of whether they will keep or assign the note;
2. Statement showing what percentage of loans the lender has transferred during the previous 12 months; and
3. A list showing the percentage of loans they have transferred during the previous 3 years.
All of this is intended to show the borrower the chances of the loan being transferred. Many times, the lender has not decided or has not yet sold the loan. So this information give the borrower a fairly accurate estimate of the chances of transfer to a third party.
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