The Real Estate Services Providers Council Inc. (RESPRO) has developed a model good faith estimate (GFE) cost-indemnification agreement and a model services agreement for its members to use when the Department of Housing and Urban Development's (HUD) new Real Estate Settlement Procedures Act (RESPA) disclosures take effect on Jan. 1, 2010.
‘RESPRO's new model RESPA agreements are designed to reduce our members' up-front legal costs when they implement HUD's new RESPA disclosures and requirements on January 1,’ states RESPRO Executive Director Sue Johnson.
HUD's new RESPA disclosures will, for the first time, subject mortgage originators to liability if certain final closing costs exceed those estimated on the GFE, which is provided three days after the loan application, RESPRO notes.
When a loan originator permits a borrower to shop for third-party settlement services, HUD requires the loan originator to provide the borrower with a written list of settlement service providers along with the GFE. If the borrower uses a settlement service provider on this list, the final cost for that service cannot exceed 10% of the estimated cost on the GFE.
RESPRO's model GFE cost-indemnification agreement identifies the responsibilities of both the loan originator and the third-party settlement service provider if the final cost of a settlement service subject to HUD's new 10% tolerance requirement exceeds the new limit. The agreement is an alternative form that can be used in states with laws and/or regulations that restrict indemnifications.
RESPRO members can download the documents at the association's Web site.