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Questions and Answers
What is the primary purpose of the Real Estate Settlement Procedures Act (RESPA)?
Which transactions are excluded from RESPA regulations?
Who was granted rule-making authority under RESPA through the Dodd-Frank Act?
What major change did the CFPB implement regarding disclosures effective October 3, 2015?
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What must lenders subject to RESPA provide to loan applicants?
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Which of the following modifications were included in the 2013 amendments to RESPA regulations?
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Which entities are considered to provide a 'federally-related' mortgage loan under RESPA?
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What is the significance of the $50 threshold in RESPA regarding loan assumptions?
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What is the time frame in which a loan estimator must provide a Loan Estimate to the applicant?
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What document must be used to disclose settlement costs according to CFPB rules?
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What must the Closing Disclosure cover?
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What is a requirement of the Loan servicers regarding an annual escrow statement?
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What does Section 10 of RESPA regulate?
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What is prohibited under RESPA regarding referral fees?
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What information must a mortgage servicing disclosure provide to the buyer?
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What must happen with the Closing Disclosure before closing?
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What type of properties does RESPA apply to when a purchase involves a federally-related mortgage loan?
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What changes were made by the CFPB that took effect on January 10, 2014, regarding servicing policies?
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Which agency was given authority to supervise compliance with RESPA regulations under the Dodd-Frank Act?
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What significant change occurred concerning loan disclosures after October 3, 2015?
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What must a lender provide within three business days after a loan application?
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Which of the following is true regarding the $50 threshold in RESPA?
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What is one of the requirements of the Closing Disclosure form?
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How quickly must lenders provide the CFPB booklet 'Your Home Loan Toolkit' to loan applicants?
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Which of the following is true regarding referral fees under RESPA?
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Which type of mortgage loan is classified as 'federally-related' under RESPA?
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Which statement accurately describes the limitations imposed by Section 10 of RESPA?
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What is the primary aim of the Real Estate Settlement Procedures Act (RESPA)?
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What must a mortgage servicing disclosure inform the buyer about?
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When must the consumer receive the completed Closing Disclosure?
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What is required of loan servicers regarding escrow accounts?
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What does the Closing Disclosure help enforce under RESPA?
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Study Notes
Real Estate Settlement Procedures Act (RESPA)
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A consumer protection statute that aims to clarify settlement costs and eliminate kickbacks and fees that increase costs.
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Applies to transactions involving residential properties, including one to four-family residences, cooperatives, and condominiums.
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Includes first or second mortgage liens financed by federally-related mortgages.
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Does not apply to transactions financed other than a federally related mortgage, except in certain assumption cases.
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Regulated by the CFPB. The Dodd-Frank Act granted rule-making authority to the CFPB to supervise and enforce compliance with RESPA.
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Updated in 2013, adding provisions about escrow payments, force-placed insurance, general servicing policies, early intervention, continuity of contact, loss mitigation, and other provisions.
TRID
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Effective October 3, 2015, the TILA/RESPA Integrated Disclosure Rule (TRID) integrated the disclosure requirements of RESPA and Truth-in-Lending.
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Replacing the old Good Faith Estimate form and HUD-1 Uniform Settlement Statement with a new Loan Estimate form and Closing Disclosure form, respectively.
Loan Application Information
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Lender must provide the CFPB booklet, "Your Home Loan Toolkit", within three days of a loan application.
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Loan Estimate (H-24) must be provided within three business days of application or at the time of application.
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Mortgage servicing disclosure outlining lender intent to service the loan or convey it to another lender must be accompanied by information on resolving complaints.
Closing Information
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Lenders must use the Closing Disclosure (H-25) to disclose settlement costs to the buyer.
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The Closing Disclosure form covers all the buyer's closing costs.
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The consumer must receive the completed form at least three business days before closing and has the right to inspect a revised version one business day before closing.
After Settlement
- Loan servicers must provide borrowers with an annual escrow statement summarizing all inflows and outflows in the prior 12-month period.
Limits and Prohibitions
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Limits the amount lenders can require borrowers to place in escrow for taxes, hazard insurance, and other property expenses.
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Prohibits the payment of referral fees as part of a real estate settlement when no services are actually rendered.
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Business relationships and affiliations between real estate firms, mortgage brokers, title insurance firms, and other companies are permitted, but must be disclosed in writing to the consumer.
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Consumers must be free to go elsewhere for the relevant service, and the companies cannot exchange fees for referrals.
Real Estate Settlement Procedures Act (RESPA)
- Purpose: Enacted in 1974 to protect consumers by clarifying settlement costs and eliminating kickbacks and fees that inflate costs.
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Applies To: Residential property transactions involving a first or second mortgage lien financed by a "federally-related" mortgage loan.
- This includes loans from federally insured lenders, loans insured or guaranteed by the VA or FHA, loans administered by HUD, and loans intended for sale to FNMA, FHLMC, or GNMA.
- Exclusions: RESPA does not apply to transactions financed through other means except in the case of a loan assumption where the terms are modified or the lender charges more than $50 for the assumption.
- Enforced By: The Consumer Financial Protection Bureau (CFPB) received authority from the Dodd-Frank Act of 2010 to supervise and enforce RESPA compliance.
RESPA Regulations
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Substantive Changes (Effective January 10, 2014): Modified servicing transfer notice requirements, implemented new procedures and notice requests.
- Amended provisions encompass escrow payments, force-placed insurance, general servicing policies and procedures, early intervention, continuity of contact, and loss mitigation.
TILA/RESPA Integrated Disclosure Rule (TRID)
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Effective October 3, 2015: TRID combines the disclosure requirements of RESPA and Truth-in-Lending.
- Replaced the Good Faith Estimate and HUD-1 Uniform Settlement Statement forms with the new Loan Estimate and Closing Disclosure.
Loan Estimate (H-24)
- Purpose: Provides an estimate of likely settlement costs based on comparable transactions in the area.
- Timing: Given at the time of application or within three business days.
- Compliance: The Closing Disclosure terms must align with the Loan Estimate within specific limits.
Closing Disclosure (H-25)
- Purpose: Discloses all settlement costs to the buyer, including expenses paid to the lender and other parties.
- Enshrines: RESPA's prohibitions against lenders requiring buyers to deposit excessive amounts into tax and insurance escrow accounts or to use a specific title company.
- Timing: Consumer receives the completed form no later than three business days before closing and has the right to review a revised version one day before closing.
Mortgage Servicing Disclosure
- Requirement: Lenders must disclose to buyers whether they will be servicing the loan or transferring it to another lender.
- Includes: Information on how buyers can resolve complaints regarding the lender's decision.
Loan Servicer Obligations
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Annual Escrow Statement: Loan servicers must provide borrowers with an annual statement summarizing all inflows and outflows within the past year.
- Includes disclosures on account shortfalls or overages and how discrepancies will be resolved.
Escrow Account Limits
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Section 10 of RESPA: Limits the amount lenders can require borrowers to deposit into escrow for taxes, hazard insurance, and other property-related expenses.
- This applies to both initial deposits and subsequent additions.
Referral Fees and Kickbacks
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Prohibited: RESPA prohibits the payment of fees when no services are actually rendered in a real estate settlement.
- Includes referral fees for services such as title searches, title insurance, mortgage loans, appraisals, credit reports, inspections, surveys, and legal services.
Business Relationships and Affiliations
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Disclosure Requirement: Business relationships and affiliations among real estate firms, mortgage brokers, title insurance companies, and other relevant companies involved in a transaction are permitted.
- *Must be disclosed in writing to the consumer, who must be free to seek services elsewhere.
- *Companies must not engage in fee exchanges based on referrals.
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Description
Test your knowledge on the Real Estate Settlement Procedures Act (RESPA) and the TILA/RESPA Integrated Disclosure Rule (TRID). This quiz covers consumer protection statutes relating to residential property transactions, regulatory updates, and compliance requirements. Learn about the significance of these regulations in real estate settlements.
