Real Estate Settlement Procedures Act (RESPA)

Definition of "Real Estate Settlement Procedures Act (RESPA)"

Paul  Hummel<br> The Hummel Team real estate agent

Written by

Paul Hummel
The Hummel Team
elite badge icon

Action USA Jay Robert Realtors

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!

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Terms

The angle of a roof in relation to its horizontal axis expressed as a ratio of inches (cmm) per foot of horizontal distance. The sloping of ground, such as sloping ground away from the ...

Interest based on a 360-day year instead of a 365-day year. The former is referred to as simple interest and the latter is termed exact interest. The difference between the two types of ...

Privilege of a real estate investor or lender to participate in the profitability generated from property. This is in addition to any principal, interest, or dividends. ...

To fulfill , complete, implement, perform, or carry out terms of an agreement including completing a signature on a contract and delivering a document to the intended party. ...

First and foremost, the meaning of ‘punitive damages’ defines a financial penalty the defendant has to pay due to their negligent actions. The US legislative branch designed the ...

Appraisal approach where property values are estimated by comparing current comparable sales. See also market approach. ...

Unit of ownership in a real estate investment trust. ...

We know that the board of directors meaning defines a body of high executives who make significant daily decisions. But what is the definition of board of directors precisely? Typically, ...

maintenance procedures conducted to prevent later repairs and furthering a longer useful life. For example, many boilers and burners are cleaned and serviced each year before the winter ...

Popular Real Estate Questions