Podcast
Questions and Answers
What is the primary purpose of the Real Estate Settlement Procedures Act (RESPA)?
What is the primary purpose of the Real Estate Settlement Procedures Act (RESPA)?
Which types of transactions are specifically excluded from RESPA coverage?
Which types of transactions are specifically excluded from RESPA coverage?
Which service providers are NOT covered by RESPA?
Which service providers are NOT covered by RESPA?
What is a key requirement for lenders under RESPA regarding disclosures?
What is a key requirement for lenders under RESPA regarding disclosures?
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Which of the following loans are generally covered by RESPA?
Which of the following loans are generally covered by RESPA?
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What type of loan is considered exempt from RESPA if the proceeds are not used for construction?
What type of loan is considered exempt from RESPA if the proceeds are not used for construction?
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Within how many business days must a Good Faith Estimate (now Loan Estimate) be provided after receiving a loan application?
Within how many business days must a Good Faith Estimate (now Loan Estimate) be provided after receiving a loan application?
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Which of the following is a service that is typically covered under RESPA regulations?
Which of the following is a service that is typically covered under RESPA regulations?
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What is the minimum application defined as in terms of lender requirements?
What is the minimum application defined as in terms of lender requirements?
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What must the borrower provide within ten days for the application to be binding?
What must the borrower provide within ten days for the application to be binding?
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Which of the following disclosures is required to be provided three business days prior to closing?
Which of the following disclosures is required to be provided three business days prior to closing?
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What is prohibited under RESPA?
What is prohibited under RESPA?
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How long does a servicer have to respond to a Qualified Written Request?
How long does a servicer have to respond to a Qualified Written Request?
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What does a mortgage broker do?
What does a mortgage broker do?
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What is NOT a required disclosure under RESPA?
What is NOT a required disclosure under RESPA?
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How long must a servicer wait before initiating foreclosure proceedings?
How long must a servicer wait before initiating foreclosure proceedings?
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What are bona fide discount points typically paid for?
What are bona fide discount points typically paid for?
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Study Notes
RESPA (Real Estate Settlement Procedures Act) Overview
- RESPA, or Regulation X, was created in 1975 to protect consumers in residential real estate transactions.
- It covers federally-related transactions for 1-4 family homes.
- Includes purchase loans, refinances, and HELOCs.
- Excludes business, commercial, agricultural loans, temporary loans (under 2 years), bridge loans, loans on vacant land, and certain assumption scenarios.
RESPA Coverage
- Covers a broad range of real estate service providers in federally related transactions: real estate brokers, mortgage lenders, third-party settlement service providers, title companies, home warranty providers, insurance agents, appraisers, inspectors, and others involved in closings.
- Notably excludes home improvement contractors, movers, and others who are not directly paid at settlement.
RESPA Disclosures and Requirements
- Lenders must provide timely and accurate disclosures of settlement costs and processes.
- Application disclosures must include a Good Faith Estimate (replaced by the Loan Estimate under TRID), a list of settlement service providers, and other relevant documents within 3 business days of the application (with specific minimum data requirements, Six pieces of borrower information needed for trigger).
- A HUD Special Information Booklet about settlement costs (replaced by the CFPB Homebuyer's Toolkit for purchase transactions).
- Mortgage servicing disclosures, affiliated business disclosures, and homeownership counseling organization lists.
- Closing disclosures (HUD-1 Settlement Statement replaced by Closing Disclosure) required 3 business days before closing.
- Initial Escrow account disclosures, annual escrow statements, and servicing transfer statements (when applicable).
RESPA Prohibitions
- Prohibits kickbacks, unearned fees, forced title insurance purchases from specific companies, fees for required disclosures.
- Specific rules on fees charged during loan origination processes, particularly during closing.
RESPA Definitions
- Defines "Mortgage Broker" as a non-employee intermediary between lender and borrower in federally-related mortgage transactions, including those that close and fund the loan themselves.
- Includes loan correspondents under specific circumstances or exclusive agents who are not lender employees.
RESPA Foreclosure, Servicing, and Collections
- Loan servicers are restricted from excessively large escrow accounts.
- Borrowers can make "Qualified Written Requests" for information or error correction and the servicers must comply within timeframes.
- Servicers must attempt live contact and maintain communication with borrowers, provide written notice of delinquency, and adhere to loss mitigation policies.
- Foreclosure cannot be initiated on loans 120 days delinquent or less.
- Servicers must investigate and rectify legitimate errors identified by those seeking Qualified Written Requests.
Other RESPA Elements
- Includes requirements for disclosures related to transfers of servicing, including timeframes.
- Requires loan originators who are also real estate agents in the same transaction to disclose their dual roles.
- Mortgage brokers are required to disclose they are not lenders.
- "Discount points" are bona fide discount points to reduce interest rate.
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Description
This quiz covers the Real Estate Settlement Procedures Act (RESPA), established in 1975 to protect consumers in residential transactions. It details the types of transactions and service providers covered under RESPA, along with important disclosure requirements for lenders. Test your understanding of this essential regulation!
