What does "Real Estate Settlement Procedure Act (RESPA)" mean?

Definition

RESPA is a federal law that requires lenders to provide borrowers with clear and complete information about the costs of a mortgage. This helps protect consumers from hidden fees and surprises.

Understanding RESPA's Role

RESPA first appears when you apply for a mortgage. It ensures transparency from lenders about costs. This helps you understand fees like origination charges and closing expenses. In simple terms, RESPA requires lenders to give a clear breakdown of these costs before you finalize the loan. Example: If a loan has $3,000 in closing costs, RESPA mandates this be disclosed upfront. It's not just about keeping track of fees; it also prevents unfair practices. A common misconception is that RESPA limits how much lenders can charge. It doesn't set price limits but ensures all fees are clearly communicated.

People Want To Know

What does the Real Estate Settlement Procedures Act (respa) require?

The Real Estate Settlement Procedures Act (RESPA) requires lenders to provide borrowers with a Good Faith Estimate (GFE) of mortgage costs within three business days of receiving a loan application. It mandates disclosures about settlement services and prohibits kickbacks for referrals. RESPA also ensures that borrowers receive a final settlement statement at least one day prior to closing.

What are the 5 elements that may cause a RESPA violation?

RESPA violations can occur due to the following five elements: 1) Failure to provide a Good Faith Estimate (GFE) within three business days of application, 2) Not disclosing all settlement service providers, 3) Accepting kickbacks for referrals, 4) Charging unearned fees, and 5) Failing to provide a HUD-1 Settlement Statement at least one day before closing.

What are the 6 RESPA triggers?

The six RESPA triggers are: 1) a federally related mortgage loan; 2) a purchase transaction; 3) a refinancing of a loan; 4) a home equity loan; 5) a loan secured by a property in a residential area; and 6) the use of a lender, broker, or servicer in the transaction.

What are two things RESPA prohibits?

RESPA prohibits kickbacks and referral fees that can increase the cost of settlement services. It also prohibits lenders from requiring borrowers to use a specific title insurance company as a condition for obtaining a mortgage.

Flip the Script - Master mortgage objections

More From The Mortgage Glossary

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