Real Estate Settlement Procedures Act Overview

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Questions and Answers

Which of the following transactions is NOT covered by RESPA?

A loan assumption where lender approval is required (correct)

A conversion (modification) of a loan to different terms, where a new note is not required

A purchase loan for a 2-family home

A mortgage refinance for a 4-family home

Which of the following service providers is covered under RESPA?

Appraisers (correct)

Other providers of services to buyers and sellers who are not paid at settlement

Movers

Home improvement contractors

What is the primary purpose of RESPA?

To protect consumers from unfair and dishonest treatment in real estate transactions (correct)

To regulate the pricing of real estate services

To make sure that all real estate transactions are completed in a timely manner

To ensure the safety of real estate transactions

Which of the following statements about the Good Faith Estimate (GFE) is TRUE?

The GFE is no longer required under TRID. (B) Signup and view all the answers

What is the minimum number of family units a property must have to be covered by RESPA?

1 (C) Signup and view all the answers

Which of the following types of loans is NOT specifically covered by RESPA?

Bridge loans (C) Signup and view all the answers

Which of the following types of transactions is covered by RESPA?

A sale of a 3-family home (B) Signup and view all the answers

Which of the following is NOT a requirement for RESPA disclosure?

Confidentiality (B) Signup and view all the answers

What is the minimum number of pieces of information a lender needs to collect before triggering the 3-day disclosure requirement?

6 (B) Signup and view all the answers

What is the timeframe a borrower has to respond with a statement of intent to proceed after receiving a minimum application disclosure?

10 days (A) Signup and view all the answers

Which of the following disclosures is NOT required under the Real Estate Settlement Procedures Act (RESPA)?

HUD 1 Settlement Statement (A) Signup and view all the answers

What is the purpose of the CFPB Homebuyer's Toolkit?

To provide information specifically for purchase transactions (B) Signup and view all the answers

What is the timeframe a lender must provide a Closing Disclosure to the borrower before closing?

3 business days (C) Signup and view all the answers

Which of the following practices is PROHIBITED under RESPA?

Charging fees for preparing required Federal disclosures (A) Signup and view all the answers

What is the definition of a 'Mortgage Broker' as defined by RESPA?

A person or entity that originates loans and serves as an intermediary between a lender and borrower (C) Signup and view all the answers

What is a 'Qualified Written Request'?

A written request sent to the servicer requesting information or correction of an error (A) Signup and view all the answers

What is the maximum timeframe a servicer has to respond to a Qualified Written Request?

30 days (C) Signup and view all the answers

What is the minimum number of days a loan must be delinquent before a servicer can initiate foreclosure?

120 days (A) Signup and view all the answers

Study Notes

RESPA (Real Estate Settlement Procedures Act) Summary

Purpose: Protect consumers in federally related residential real estate transactions (1-4 family homes) ensuring fair and honest treatment from service providers. Covers purchase loans, refinances, and HELOCs.
Exclusions: Business/commercial/agricultural loans, temporary loans (construction loans under two years excluded), bridge/swing loans, loans on vacant land, loan assumptions without lender approval, loan modifications without new note, bona fide secondary market transactions.
Covered Entities: Real estate brokers/agents, mortgage lenders/brokers, title companies, home warranty providers, insurance agents, appraisers, inspectors, and other service providers related to closings (flood certification, tax services).
Excluded Entities: Home improvement contractors, movers, other providers not paid at settlement.
Disclosure Requirements: Lenders must provide accurate, timely disclosures regarding settlement costs and the process.
- Good Faith Estimate (GFE): Replaced by Loan Estimate (LE) under TRID, required within 3 business days of loan application. Minimum application includes borrower's name, income, SSN, property address, value, and loan amount.
- HUD Special Information Booklet: Replaced by CFPB Homebuyer's Toolkit (for purchase transactions only).
- Mortgage Servicing Disclosure: Lender's intent about servicing.
- Affiliated Business Disclosure: Information relating to lenders/affiliated businesses.
- Closing Disclosure (CD): Replaced by HUD-1 Settlement Statement, required 3 business days prior to closing.
- Initial Escrow Account Disclosure: Provided after initial closing disclosures.
Prohibited Practices: Kickbacks, unearned fees, requiring specific title insurance, charging for required federal disclosures.
Mortgage Broker Definition: A person/entity (not a lender employee) acting as an intermediary between lender and borrower for federally related mortgages (includes loan correspondents and exclusive agents).
Foreclosure and Servicing Practices: Loan servicers cannot require excessively large escrow accounts. Borrowers can make Qualified Written Requests for information/error correction. Servicers must acknowledge within 5 days and respond within 30 days. Servicer must contact borrower, provide delinquency notices, follow a loss mitigation policy, and investigate alleged errors within timeframes. Foreclosure may not initiate on loans 120 days or less delinquent.
Servicing Transfers: RESPA provides processes, disclosures, and timeframes for transferring servicing.
Additional Requirements: State or particular transaction requirements may apply. Loan originators also acting as real estate agents must disclose. Mortgage brokers must disclose they are not lenders. Discount points are bona fide if they reduce interest rate.

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Description

This quiz covers the essential aspects of the Real Estate Settlement Procedures Act (RESPA), focusing on its purpose, exclusions, covered entities, and disclosure requirements. Test your knowledge on how RESPA protects consumers in residential real estate transactions and what it entails for various service providers.