In 1974, the Real Estate Settlement Procedures Act (RESPA) became law with the goals of providing helpful information to consumers about the realistic, forecasted costs of mortgage settlement, and protecting consumers from abusive practices resulting in unnecessarily high settlement charges.
The Consumer Financial Protection Bureau administers and enforces RESPA. Violations of RESPA can be punishable by the law.
RESPA covers loans secured with a mortgage placed on a one-to-four family residential property, including most purchase loans, assumptions, refinances, property improvement loans, and equity lines of credit.
RESPA requires various disclosures at specific points in the loan settlement process. For instance, during loan application mortgage brokers and/or lenders must provide borrowers with a Special Information Booklet, a Good Faith Estimate of settlement costs, and a Mortgage Servicing Disclosure Statement.
RESPA provides consumer protections in the settlement process such as:
- Limiting the amount a borrower can be required to put into an escrow account for property-related charges;
- Prohibiting sellers from requiring buyers to use a particular title insurance company as a condition of the sale; and,
- Prohibiting someone from giving or receiving a fee, kickback, or anything of value in exchange for referrals of settlement service business involving a federally related mortgage loan.
Since 1974, RESPA has been amended several times. The National Affordable Housing Act of 1990 required more detailed disclosures about the transfer, sale or assignment of mortgage servicing. Amendments passed in 1992 and 1996 further refined the law. HUD issued the Reform Rule in 2008 with substantive changes involving the Good Faith Estimate form and a revised HUD-1 Settlement Statement that were required as of January 1, 2010. The Dodd-Frank Act gave rulemaking authority under RESPA to the Consumer Finance Protection Bureau (CFPB). The CFPB became the supervisor and enforcer of compliance with RESPA. The final rule was issued by the CFPB on January 17, 2013 including substantive and technical changes. Three more final rules were issued later in 2013 to further amend RESPA, or Regulation X as it is often called. These regulations continue to strengthen the transparency of real estate settlements and progress toward the goal of lowering settlement costs for consumers.
More information about RESPA is at: http://to.ly/zyC1
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