New Real Estate Settlement Procedures Act (RESPA) regulations relating to the good-faith estimate (GFE) and HUD-1 forms have caused borrower confusion and increased application timelines, according to a new survey conducted by The Work Number.
Based on the information collected from 105 completed surveys filled out by the company's banking customers, 56% of respondents have adapted to the new RESPA changes and have completely implemented the technology necessary to comply with the regulations. However, while the technology is in place to comply, approximately 72% of respondents stated that they are seeing borrowers confused about the multiple sets of documents they receive for disclosure. Seventy-nine percent say it now takes longer to take an application and disclose to the borrower.
RESPA regulations are having a negative impact on some organizations, The Work Number says. One large financial services provider participating in the survey stated, ‘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. 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 any impact on lenders' volume of applications, 74% of respondents are not seeing any backlog of applications to be processed as a result of the new RESPA regulations. Many lenders are taking fewer applications, but that is due to economic factors (e.g., interest rate and unemployment) rather than any RESPA impact, the survey found.
The Work Number also asked questions about any downstream effects of RESPA on verification of the borrower's application information in underwriting. Lenders stated that the volume of requests for borrower verification of employment and income have not changed for 57% of respondents, but 37% are seeing more requests for verified borrower information.
The timing of these requests has not changed for 66% of respondents, but 23% are performing employment and income verification sooner in the loan process to rapidly mitigate any risk posed by RESPA, allowing for only a credit report at application. Approximately 66% of respondents are requesting the 4506-T, verification of income and verification of employment just prior to underwriting.
SOURCE: The Work Number