Cite for Short Form Servicing Disclosure Statement

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Question:

RESPA - in the answer by Dan Persfull to a question about RESPA forms, he mentions a short form Servicing Disclosure statement. I am aware that several years ago this was proposed, but I did not see a final rule come through the Federal Register. Could Mr. Persfull please provide the cite for the use of the short form disclosure?

Answer:

Answer from Dan: Current statute:
Sec. 2605. Servicing of mortgage loans and administration of escrow accounts

(a) Disclosure to applicant relating to assignment, sale, or transfer of loan Servicing

Each person who makes a federally related mortgage loan shall disclose to each person who applies for the loan, at the time of application for the loan, whether the Servicing of the loan may be assigned, sold, or transferred to any other person at any time while the loan is outstanding.

Amendments:

1996--SubSec. (a). Pub. L. 104-208 amended heading and text of SubSec. (a) generally. Prior to amendment, text consisted of pars. (1) to (3) relating to requirements for lenders of federally related mortgage loans to disclose to applicants whether Servicing of such loan may be assigned, sold, or transferred, directed Secretary to develop model disclosure statement, and required signature of applicant on all such disclosure statements.

Answer:

Answer from Andy: With the cites Dan has provided, the bottom line is that the law has changed, but RESPA has not kept up with it. If you adopt this method of disclosure and are questioned, point out that the Act changed after the regulation. The amendment itself is on HUD's web site under Sec.2103(a).

Additional support for a change in disclosure is in the Federal Register, July 29, 2002 (Volume 67, Number 145) wherein on page 49152, HUD stated "In 1990, Congress amended RESPA to include a disclosure, which informs borrowers that their loan or the servicing of their loan, may be sold. 12 U.S.C. 2605, Public Law 93-533 section 6 (November 28, 1990). In 1997, HUD proposed a rule to implement the amended statute. Many comments were received and the rule was never finalized. 62 FR 25740. The Department plans to finalize the 1997 proposed rule shortly. However, in the meantime, the Section 6 language in the statute may be provided in conjunction with the GFE instead of the language currently indicated in Sec. 3500.21 and Appendix MS-1."

First published on BankersOnline.com 02/27/06