Real estate brokers should become familiar with the federal Real Estate Settlement Procedures Act of 1974 which becomes effective on June 20, 1975.

The purpose of the Act is to effect certain changes in the settlement process for residential real estate that will result (1) in more effective advance disclosure to home buyers and sellers of settlement costs; (2) in the elimination of kickbacks or referral fees that tend to increase unnecessarily the costs of certain settlement services; (3) in a reduction in the amounts home buyers are required to place in escrow accounts established to insure the payment of real estate taxes and insurance; and (4) in significant reform and modernization of local record-keeping of land title information.

Under the Act, any lender agreeing to make a federally related mortgage loon in connection with residential real property is required to furnish the buyer and seller an itemized statement disclosing each charge arising in connection with the settlement at the time of the loon commitment but no later than 12a, days prior to settlement upon a standard form developed by the Department of Housing and Urban Development (HUD).

Lenders will be required to furnish loan applicants a booklet developed by HUD which will contain (1) a description and explanation of the nature of each cost incident to a real estate settlement; (2) an explanation and sample of the standard real estate settlement form; (3) 0 description and explanation of escrow accounts used in connection with real estate loans; (4) an explanation of the choices available to buyers in selecting persons to provide necessary services incident to a real estate settlement; and (5) on explanation of the unfair practices and unreasonable and unnecessary charges to be avoided by the buyer.

Settlement services include title searches, title examinations, the provision of title certificates, title insurance, services rendered by an attorney, the preparation of documents, property surveys, the rendering of credit reports or appraisals, pest and fungus inspections, services rendered by a real estate agent or broker, and the handling of the processing, and closing or settlement.