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.
Transactions generally not covered under RESPA include: “an all cash sale, a sale where the individual home seller takes back the mortgage, a rental property transaction or other business purpose transaction.” “The sale of a loan after the original funding of the loan at settlement is a secondary market transaction.
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.
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.
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.
RESPA covers loans secured with a mortgage placed on one-to-four family residential properties.
RESPA eliminates abusive practices, such as kickbacks and referral fees, which increase the costs paid by consumers. RESPA reduces the amounts that homebuyers must place in escrow accounts.
However, reasonable fees paid for services performed are not prohibited by RESPA. These fees are legitimate payments for services rendered by professionals involved in the real estate transaction, such as appraisers, lawyers, and inspectors.
RESPA covers all federally regulated mortgage loans including purchase loans, refinances, home improvement loans, land contracts and home equity lines of credit (HELOCs).
RESPA, however, does not apply to credit transactions involving extensions of credit primarily for business, commercial, or agricultural purposes or extensions of credit to government or governmental agencies. 12 USC § 2606(a).
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 ...
The following transactions are not covered by RESPA: an all cash sale, a sale where the individual home seller takes back the mortgage, a rental property transaction or other business purpose transaction.
The TILA-RESPA integrated disclosure rules and forms do not apply to HELOCs. Lenders are not required to provide the good faith estimate (HUD-1) described in Regulation X. Instead HELOCs are only subject to the special HELOC requirements in Regulation Z, which are substantially less consumer-friendly.
Explanation: Business purpose loans are exempt from RESPA coverage.
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.
RESPA does not apply to what kinds of loans? - Loans secured by mobile homes or other dwellings that are not real property, if the dwelling is not attached to real estate. - Loans made by persons who are not considered "creditors" because they make five or fewer mortgages per year.
A charge by a person for which no or nominal services are performed or for which duplicative fees are charged is an unearned fee and violates this section. The source of the payment does not determine whether or not a service is compensable.
Final answer: The statement that is not a requirement of RESPA is that loan advertisements must include the annual percentage rate, which is actually a requirement of TILA, not RESPA.
The new rules, which would modify RESPA and Regulation X's existing mortgage servicing framework, are designed to streamline the process for obtaining mortgage assistance, and incentivize servicers to prioritize borrower aid over foreclosure.
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.
The Act requires lenders, mortgage brokers, or servicers of home loans to provide borrowers with pertinent and timely disclosures regarding the nature and costs of the real estate settlement process. The Act also prohibits specific practices, such as kickbacks, and places limitations upon the use of escrow accounts.
RESPA applies only to "federally related mortgage loans." 2 These are generally home loans to consumers that are also covered by the Truth in Lending Act. Mortgage loans made for business purposes are not covered by RESPA.
CFPB considers a RESPA violation when the costs of services for a third party closing or services rendered are inflated. For example: Mortgage brokers are prohibited from charging a buyer for a credit report at closing more than what the mortgage broker paid to obtain the credit report.