Key Takeaways
RESPA prohibits loan servicers from demanding excessively large escrow accounts and restricts sellers from mandating title insurance companies. A plaintiff has up to one year to bring a lawsuit to enforce violations where kickbacks or other improper behavior occurred during the settlement process.
RESPA prohibits any person from giving or receiving a fee, kickback, or "a thing of value" for referring business to a mortgage broker or banker, or a title company.
A “bridge loan” or “swing loan” in which a lender takes a security interest in otherwise covered 1- to 4-family residential property is not covered by RESPA and this part.
NAR's Legal Affairs staff explains the Real Estate Settlement Procedures Act (RESPA) and how it affects REALTORS®. RESPA generally prohibits kickbacks and offering a thing of value in exchange for the referral of business to a settlement service provider.
The following transactions are not covered by RESPA: An all-cash sale; • A sale where the individual home seller takes back the mortgage; and • Business, Commercial, or Agricultural purpose loans. RESPA requires disclosures to be given to applicants for a federally related mortgage loan.
“And all five of those elements need to be present in a fact pattern in order for there to be a Section 8 violation.” Those elements are a federally related mortgage loan, settlement service business, a referral, a Thing of value, and an agreement or understanding.
An application is defined as the submission of six pieces of information: (1) the consumer's name, (2) the consumer's income, (3) the consumer's Social Security number to obtain a credit report (or other unique identifier if the consumer has no Social Security number), (4) the property address, (5) an estimate of the ...
RESPA violations include bribes between real estate representatives, inflating costs, the use of shell entities and referrals in exchange for settlement services.
(5) The federal Real Estate Settlement Procedures Act (RESPA) creates general rules for fair negotiation of settlement services, prohibits kickbacks and specifically prohibits a seller in a federally related transaction from requiring a buyer to purchase title insurance from a particular insurer.
However, some specific categories of loans are excluded from the rule. Specifically, the TILA- RESPA rule does not apply to HELOCs, reverse mortgages or mortgages secured by a mobile home or by a dwelling that is not attached to real property (i.e., land).
RESPA allows lenders and loan servicing providers to collect funds to pay property taxes, homeowners insurance and escrow account costs. However, it limits the amount lenders and providers can add to these accounts.
RESPA is a federal law that requires lenders to provide information about the settlement costs and services involved in a mortgage transaction. The TILA-RESPA Integrated Disclosure (TRID) rule requires two forms: the Loan Estimate and the Closing Disclosure.
Examples of RESPA violations
Your real estate agent refers you to an attorney and gets a portion of the fee you pay for those legal services. An appraiser gives a mortgage broker courtside tickets to a professional basketball game in exchange for business.
Under RESPA section 8a, giving gifts or kickbacks in exchange for business is illegal. Specifically, it prohibits any “unearned” fees or bonuses paid for services that weren't performed.
Final answer: Out of steering, paying of kickbacks, blockbusting, and redlining, the Real Estate Settlement Procedures Act (RESPA) directly prohibits the paying of kickbacks. Other acts are prohibited under Fair Housing Act and the Community Reinvestment Act.
Section 8 of RESPA prohibits a person from giving or accepting any thing of value for referrals of settlement service business related to a federally related mortgage loan. It also prohibits a person from giving or accepting any part of a charge for services that are not performed.
MDIA. Timing Requirements – The “3/7/3 Rule” The initial Truth in Lending Statement must be delivered to the consumer within 3 business days of the receipt of the loan application by the lender. The TILA statement is presumed to be delivered to the consumer 3 business days after it is mailed.
RESPA Section 9: Section 9 prohibits home sellers from requiring home buyers to purchase title insurance from a particular company either directly or indirectly, as a condition of sale. Buyers may sue a seller who violates this provision for an amount equal to 3x all charges made for title insurance.
Current RESPA GFE—Section 1024.7
The tolerances for fees that are included in the GFE are set forth in 12 C.F.R. 1024.7(e) and different fees are subject to zero tolerance, ten percent tolerance, or no tolerance limit.
Final answer: RESPA applies to a variety of real estate transactions but generally does not apply to a seller-financed loan when the seller does not regularly extend credit. It covers transactions such as condominium purchases, second mortgages, and federally-insured loans.
RESPA explicitly states that sellers cannot require a homebuyer to use a specific title insurance company or lender as a condition of the sale. Builders are allowed to suggest their preferred lenders, and they often do because of established relationships or financial incentives.
Final answer: A violation of RESPA occurs when a lender fails to provide a borrower with the required Special Information Booklet (SIB) within three business days of receiving a mortgage loan application.
Final answer: The false statement about the Real Estate Settlement Procedures Act (RESPA) is that it covers all residential mortgages.