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
Special court for the purpose of providing fast, inexpensive and informal settlement of small financial claims between plaintiff and defendant. The parties represent themselves. A landlord ...
The term lock-in clause is used in an agreement that prescribes a period of time within which either of the parties that signed a contract cannot terminate the contract. In case one of the ...
The real and personal assets of a person at the date of death. The distribution of the assets to the heirs depends on the provision of the will. If no will exists, the distribution is based ...
Is a stockholder-owned corporation known as Freddie Mac. Freddie Mac purchases investment-quality mortgage from lenders and packages from lenders and packages them as securities which are ...
What is real estate speculation? The term real estate speculation may have a difficult definition, but explaining it may be easier. Think of the stock market, buying stocks when they are ...
Same as term insured loan: A loan indemnified against default by the borrower. Such loans may be a mortgage loan insured by a standard mortgage insurance policy or by FHA mortgage ...
Arrears is a legal and financial term used to describe payments in regards to their due dates. While the term is more often used to refer to a contractual obligation or liability that was ...
The addendum definition is an attachment, clause, or section added to an agreement or contract specifying additional terms, conditions, or requirements to the original agreement or ...
Branch of economics that applies the tools of economic reasoning to the analysis and solution of urban economic problems. ...
Have a question or comment?
We're here to help.