Section 4 Unit 2 Introduction to RESPA Flashcards
Real Estate Settlement Procedures Act 1974
RESPA Prohibits the payment of kickbacks or unearned fees between settlement service providers, such as when a lender gives a real estate agent a fee for using the lender or vice versa
Respa insures
that mortgage borrowers know and understand all settlement costs prior to closing
Borrowers must receive loan disclosures at specific times during the transaction process
RESPA Loan Disclosures
It is a consumer protection statute designed to help homebuyers be better informed shoppers.
CFPB renforces RESPA
which requires that consumers receive disclosures or various times in the transaction and outlaws kickbacks that increases the costs of settlement services or limit consumer choice.
RESPA Regulations apply
It applies to loans granted on one to four family residential properties including assumptions, refinances, home improvement loans, and home equity lines of credit (HELOC)
RESPA requires
that the lender provide the borrower with a written disclosure of estimated settlement costs.
Loan Estimate
LE form itemizes these costs at the beginning of the application process
Closing Disclosure (CD)
It provides a precise accounting of costs and is used at closing
Regulation X
A loan application must contain specific pieces of information in ordered to be considered “complete” and subject to RESPA
1. The borrowers’s name
2. Monthly Income
3. SSN to obtain credit report
4. The property’s address
5. An estimate of the property’s value
6. The mortgage loan amount sought
7. Any other information deemed necessary by the loan orgination
Loan applications
It must be in writing or signed as electronic documents`
RESPA Exemptions
Commercial or business loans
Vacant land
Land tracts of 25 acres or larger, with a residence or not
Certain kinds of loan assumptions
Construction only loans
Loans to the government
Quick Recap
RESPA is an important law that applies to mortgage loan transactions:
It ensures that a buyer in a residential real estate transaction financed by a federally related mortgage loan has knowledge of all settlement costs. This knowledge is provided through a series of documents that mortgage brokers or lenders must provide to the borrower
Required Document
The two required documents are the LE (Provided within 3 days of completing the loan application and CD (provided three days prior to closing)
Kickbacks
It expressly prohibits the payment of kickbacks or unearned fees between settlement service providers
Introduction to TILA
The Truth in Lending ACT was created to ensure that consumers have access to all the information they need to make informed decisions about their financing.
