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
Accruals make up the basis of the accrual accounting method together with deferrals. The accrual method definition explains how the company’s accountant makes modifications for gained ...
Wires, such as for electricity, places beneath the floor of a structure. ...
The initial lessee of rented property who then leases it to a subtenant. ...
Investments, usually in limited partnership, that can protect of defer shelter) part of the income from current taxes. Under current law, passive leases can be applied up to passive income. ...
Ownership by two or more persons that give the right to use the entire property. ...
Home designs developed after World War II incorporating modern technology, materials, and architecture including energy conservation methods to achieve a highly functional structure. ...
Fluctuation in sales, profits, rat of return, etc. Likelihood of declining value. ...
Conversion of a rental apartment house to individual condominium ownership of a portion of the minimum ownership of a portion of the building. Often, the tenant is given an opportunity to ...
Method of construction where part of the structure is supported by a cantilever beam or truss. ...
Have a question or comment?
We're here to help.