Chap 12: The Real Estate Settlement Procedure Act (RESPA)

Question 1

RESPA

Answer 1

Passed in 1975 to provide sellers and buyers with complete settlement disclosures.
RESPA eliminate fraudulent and deceptive practices in the real estate settlement process. Restrict the use of an unlimited number of escrow accounts and prohibit kickbacks
It is a federal statute now regulated by the Consumer Financial Protection Bureau (CFPB).
It applies to most financial transactions, refinances, purchase loans, home equity lines of credit, and property improvement loans.

Question 2

`RESPA 2

Answer 2

Bars lender from asking for large escrow accounts and limits sellers from mandating title insurance companies.
Victims have up to 12 months to file lawsuit.
the Plaintiff has up to 36 months to file lawsuit against their service provider.
The Legal duties are assumed by CFPB because the Consumer Protection Act and Dodd Frank Wall Street Act.
Educate consumers regarding the costs of settlement, referral fees and getting rid of kickback practices.

Question 3

RESPA requirements

Answer 3

1. Requires all mortgage brokers, lenders, and service loan to fully disclose to the borrower all information about the loans for a home.
2. The disclosure should include relevant consumer protection laws, settlement services and all other financial information about the loans for a home
3. Any business relationships between other parties and closing service providers connected to the settlement process must be disclosed to the borrower.

Question 4

RESPA

Answer 4

RESPA does permit an exception where agents and brokers can exchange reasonable fees in return for services and goods provided by other settlement service providers as long as these transactions are legally compliant.

Question 5

Marketing

Answer 5

It does not bar joint marketing between a lender and real estate broker as long as the advertising costs paid by each party are related to the value of the service. of goods.

Sponsoring events where one party advertises its services is also prohibited.

Lenders are not permitted to force borrowers to use a specific affiliate settlement service provider unless the borrower is provided with financial incentive like a discounted rate.

Question 6

Types of Real Estate Loans exempt from RESOA requirements

Answer 6

It covers all loans backed by the government. for 1-4 families. Purchase loans, refinances, and reverse mortgages.

RESPA does not apply to loans for commerce, business and agriculture properties, investments.

If a loan is obtained to purchase vacant land, but none of the loan proceeds are used to contract a covered residential structure, the loan is exempt from RESPA oversight.

Question 7

Certain Loan Assumptions

Answer 7

When a loan is assumed, the bank or lender has no authority to approve future individuals for the assumption. Only VA loans are assumable.

Question 8

Construction Loans

Answer 8

In most cases, RESPA does not cover construction loans.

Question 9

Are reverse mortgages covered by RESPA

Answer 9

Reverse mortgages like the primary mortgages are covered by RESPA.

All disclosures for the most common type of reverse mortgage (HECM) have to be done with HUD-1 settlement statement.