In order to have continuity in the mortgage process and to protect the rights of borrowers, The Department of Housing and Urban Development (HUD) has developed regulations called RESPA (the Real Estate Settlement Procedures Act) and TIL (the Truth in Lending Act.)
These acts were designed to provide borrowers who are shopping for mortgages with certain information, in a standardized format, so that costs and other information can be compared from lender to lender.
A few of the documents that must be provided to the borrower, either within three days of application or at closing, are listed below:
Good Faith Estimate (GFE)
Regulations require that this document be given to the borrower within three days of application. It discloses rates and fees, including escrow deposits the lender expects to charge and/or collect from the borrower.
Truth in Lending Disclosure (TIL)
This document shows the APR (Annual Percentage Rate). APR is, in effect, the total cost of the loan, expressed as a rate, with the costs of the loan factored in. This is useful for borrowers to understand because lenders who charge the same rate but with different fees will have different APRs. The lower the APR, the lower the total cost.
Escrow Account Disclosure
If the lender is requiring the borrower to have an escrow account from which taxes and/or insurance will be paid the lender is required to notify the borrower within three days of application.
Also known as a Settlement Statement, this HUD paper breaks down for the borrower, at closing, the fees that are being charged in the transaction, as well as payoffs, escrows, etc. The figures here should closely match, and can be compared to, the Good Faith Estimate.