Per RESPA, what does the lender have to do 3 days after application
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RESPA stands for the Real Estate Settlement Procedures Act and it’s a federal law that requires lenders to provide certain disclosures to borrowers throughout the mortgage process. Among other things, RESPA requires lenders to provide borrowers with a Loan Estimate within 3 days of receiving a mortgage loan application.
The Loan Estimate is a detailed document that helps borrowers understand the costs associated with their mortgage loan, such as the interest rate, amount borrowed, and closing costs. The Loan Estimate is designed to be easy to understand and provides clear information about the loan terms and estimated costs over the life of the loan.
In addition, RESPA requires the lender to provide the borrower with a copy of the settlement statement, also known as the Closing Disclosure, at least 3 days before the closing date. The Closing Disclosure provides a detailed breakdown of the final terms of the loan, including the amount borrowed, interest rate, and closing costs.
The three-day period is called the “right of rescission” period, during which the borrower has the right to cancel the loan without penalty. This gives the borrower time to review the loan terms and costs, and decide if they are comfortable with them before proceeding with the loan.
Failure by the lender to provide the Loan Estimate or Closing Disclosure within the required timeline can result in penalties for the lender, which can ultimately benefit the borrower. Therefore, it’s essential for the lender to comply with the requirements of RESPA to make the mortgage process transparent and help borrowers make informed decisions.
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