RESPA Flashcards
What does RESPA mean?
Real Estate Settlement Procedures Act
Purpose of RESPA?
- Require effective advance disclosure of costs
- Eliminate kickbacks and referral fees
- Limit amounts held in escrow or reserve accounts
- Reform recordkeeping of local land title information
Scope of RESPA?
Applies to any transaction involving a federally-related mortgage loan
RESPA’s regulation?
Regulation X
RESPA covered settlement services
- Title searches
- Title examinations
- Title insurance
- Attorney services
- Preparation of documents
- Surveys
- Credit reports
- Appraisals
- Pest inspections
- Real estate services
- Loan origination
- Processing mortgages
- Closing or settling mortgages
RESPA exempt transactions
(AKA: Exempt loans)
- Loans on vacant or unimproved property
- Loans for business, commercial, or agricultural purposes
- Construction loans, unless:
- The lender issues a commitment for permanent financing, or
- They are used to purchase the property
- An assumption of a loan where the creditor’s approval is not required
- The conversion of a federally-related mortgage loan
- The transfer of a loan to the secondary mortgage market
Who regulates RESPA disclosures?
TRID
What are excluded from ownership interest?
- Any payment based on no apparent business motive other than the amount of actual, estimated, or anticipated referrals
- Any payment that varies according to the relative amount of referrals by different recipients of similar payments
- A payment based on an ownership, partnership, or joint venture share that has been adjusted on the basis of previous referrals
Description of a bona fide provider of real estate settlement services
- Sufficient capital to operate
- Its own employees
- Control of its own business affairs
- A separate office
- Assumption of the risks and rewards of a comparable enterprise
- The ability and willingness to perform the services it purports to offer (instead of contracting out the work)
- Agreements to contract certain work to an independent third party
- Proof that it pays an amount that reflects the reasonable value of services performed by a third party
- Evidence that it competes in the market for business
- Business interaction with members of the lending industry other than its affiliates
Criminal penalties for violating RESPA and
Regulation X
May include fines of up to $10,000 and one year in prison
Criminal penalties for violating RESPA Escrow statement requirements
- $115 per failure to issue an escrow statement to a borrower as required
- $230 per intentional failure to issue an escrow statement to the borrower as required
Servicing Transfer Disclosure
- Whether or not the servicing of a mortgage loan may be transferred
- Must be disclosed to the borrower no later than three days after a creditor’s receipt of the application
- Set forth in the Loan Estimate
Initial Escrow cushion
Servicer may collect a cushion:
* two months of taxes, insurance, and mortgage insurance, as applicable,
* one month of escrowed items in each payment, unless there is a shortage in the account.
Aggregate Escrow Analysis
Ensures that the proper amount is being held in escrow or reserve accounts (i.e., accounts to hold funds on behalf of borrowers for the payment of taxes and insurance).
All accounts must be analyzed once every 12 months
Any overage over $50
* refunded to the borrower within 30 days, or
* credited towards the borrower’s escrow payments.
If the account is short by less than one month’s escrow payment, the servicer may
* Do nothing
* Require the borrower to repay the shortage within 30 days, or
* Require the borrower to repay the shortage in two or more equal monthly payments
If the shortage is an amount equal to one month or more of escrow payment, the servicer may:
* Do nothing, or
* Allow the borrower to repay it over a minimum 12-month period
Kickbacks / Referral Fees
- No person may give or receive any thing of value arising from the referral of settlement services that are part of a federally-regulated mortgage settlement.
- A person or entity referring settlement services may not, as part of a mortgage transaction, refer a borrower to a settlement service provider and then receive compensation for the referral from that provider.
A referral
* Any oral or written action directed to a person which has the effect of affirmatively influencing the person’s selection of a settlement service provider when the person will pay for that service or pay a charge attributable in whole or in part for the service.
- Also occurs when a person paying for a settlement service is required to use a particular settlement service provider.
Thing a value may include:
* Money, things, discounts, salaries, commissions, fees, stocks, and dividends
* Distributions of partnership profits
* Franchise royalties
* Services or sales/rentals at special prices or rates
* Trips and/or payments of another person’s expenses
* Credits against existing obligations
[Section 8 of RESPA]
penalty for violating Section 8 is a fine of up to $10,000 and/or up to one year in prison
