RESPA does not apply to extensions of credit to the government, government agencies, or instrumentalities, or in situations where the borrower plans to use property or land primarily for business, commercial, or agricultural purposes.
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.
Examples of Loans Exempt from RESPA:
Loans on vacant land: These loans do not involve the purchase of a primary residence and thus fall outside the purview of RESPA. Loans made in connection with HUD: Certain loans backed by the Department of Housing and Urban Development may also be exempt.
If the lender issues a commitment for permanent financing, it is covered by the regulation. Any construction loan with a term of two years or more is covered by the regulation, unless it is made to a bona fide contractor. “Bridge” or “swing” loans are not covered by the regulation.
RESPA covers a wide range of mortgage loans, but there are some specific types of loans that are not covered under RESPA. One type of loan that is not covered under RESPA is a business purpose loan. These are loans that are primarily for business or commercial purposes rather than personal or consumer purposes.
In general, RESPA's servicing rules do not apply to HELOCs whenever the Act or rule uses the term “mortgage loan.” The duty to provide a transfer of servicing statement, the 60-day ban on late fees, and the 60-day safe harbor for payments sent to the old servicer do not apply to HELOCs.
RESPA generally prohibits kickbacks and offering a thing of value in exchange for the referral of business to a settlement service provider.
RESPA covers home loans made for residential properties. This includes most home purchase loans in addition to home equity lines of credit (HELOCs), mortgage refinances, and home improvement loans. RESPA protects homebuyers in numerous ways.
Construction loans are not covered by The Real Estate Settlement Procedures Act.
RESPA generally applies to federally related mortgage loans, including those made by banks or other entities like an FHA loan, and loans insured by the FDIC. However, it does not apply to loans for properties of more than four units, nor to commercial or business loans.
All bridge loans are exempt from various Regulation Z provisions, including the prohibition on balloon payments, ability to repay rule, and appraisal requirement. However, depending on the type of property encumbered by the bridge loan, the 3-Day Cancel Rule may or may not apply.
In other words, no income documentation or verification of employment is needed. This also means that DSCR loans are not subject to the TILA-RESPA Integrated Disclosure (TRID) regulations.
Small servicers are exempt from certain rules that larger servicers must follow, such as about how they provide billing statements and contact you about your loan. Also, the rule about whether or not a servicer can charge you for home insurance you didn't choose applies differently to small servicers.
The provisions of the act apply to most types of consumer credit, including closed-end credit, such as car loans and home mortgages, and open-end credit, such as a credit card or home equity line of credit.
No, only a lender or broker who makes or arranges federally-related loans must comply with the requirements of the Real Estate Settlement Procedures Act (RESPA).
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.
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.
Commercial or Business Loans
Normally, loans secured by real estate for a business or agricultural purpose are not covered by RESPA. However, if the loan is made to an individual to purchase or improve a rental property of one to four residential units, then it is regulated by RESPA.
Business Purpose Loans
RESPA and TILA share the same Business Purpose Exemption, which exempts loans for business, commercial, or agricultural purposes from complying with the requirements within both federal statutes.
The TILA-RESPA rule applies to most closed-end consumer credit transactions secured by real property, but does not apply to: HELOCs; • Reverse mortgages; or • Chattel-dwelling loans, such as loans secured by a mobile home or by a dwelling that is not attached to real property (i.e., land).
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.
The following are excluded transactions: 1. A closed-end mortgage loan or an open-end line of credit that a financial institution originates or purchases in a fiduciary capacity, such as a closed-end mortgage loan or an open-end line of credit that a financial institution originates or purchases as a trustee.
Truth-in-Lending Act (TILA) Generally, no. TILA does not apply to business-purpose loans (including loans to acquire, improve or maintain non-owner occupied rental property) or loans made to entities. Real Estate Settlement Procedures Act (RESPA) Generally, no. RESPA does not apply to business-purpose loans.