Real Estate Settlement Procedures Act (RESPA)
The Real Estate Settlement Procedure Act (RESPA) is a piece of law passed by the US Congress in 1974 to protect homebuyers and home sellers against bad settlement practices.
The Real Estate Settlement Procedure Act (RESPA) regulates mortgage loans by requiring the lender to disclose certain information about a loan, including the estimated closing costs and annual percentage rate (APR). Its objective is to bring uniformity in real estate settlement practices when “federally related” first mortgage loans are made on one-to-four family residences, condominiums and cooperatives, and also to educate homeowners and prohibit abusive practices like referral fees, kickbacks, and the limitless use of escrow accounts.
Here are some of the things the Real Estate Settlement Procedure Act (RESPA) forces lenders providing mortgages that are secured by federal programs like Ginnie Mae:
- Providing disclosures like the Mortgage Servicing Disclosures, Special Information Booklet, HUD-1/1A settlement, a Good-Faith Estimate of Settlement Costs (GFE), and the ability to compare these last two statements at closing
- Following certain escrow accounting practices
- Prohibiting the payment of kickbacks and referral fees to settlement service providers like appraisers, brokers and title companies
- Stopping foreclosure when the borrower submits a complete application for loss mitigation options.
Enforcement and Administration of the Real Estate Settlement Procedure Act (RESPA) was originally done by the Department of Housing and Urban Development (HUD) but since 2001 became part of the Consumer Financial Protection Bureau (CFPB).
Real Estate Advice:
For Sale By Owners (FSBO) will usually be unaware of the Real Estate Settlement Procedure Act (RESPA) and become easier prey to people that take advantage of loopholes. So beware!
Popular Real Estate Terms
A fixed asset whose utility is derived from its physical attachment to a property and which usually cannot value or damage. A fixture, under the terms of a lease or other agreement, can be ...
The Federal Reserve Bank's regulation applying to the amount of credit that may be advanced by brokers and dealers to customers to buy securities. ...
Bank financing to a homeowner based on his dollar equity in the home. The interest rate typically fluctuates such as being based on the change in the prime interest rate. Interest expense ...
Table demonstrating the relationship between the depth of a building lot form the street frontage and its market value. Street frontage is the greatest asset of a land parcel. The ...
Preference. Precedence. Something given prior attention. Something having a higher level of importance or ranking. Example of when priority apply are a prospective tenant for an ...
Measures looking at the past, current a future direction of the economy. They may have an impact on the real estate market. Each month government bodies, including the Federal Reserve ...
Roof design having two different pitches. See also gambrel roof. ...
Structure of prefabricated units. ...
Uncertainties associated with real property including lack of insurance coverage in the event of fire or injury, high crime area, and environmental problems. This risk may be reduced ...
Have a question or comment?
We're here to help.