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.
RESPA does not require lenders to impose an escrow account on borrowers; however, certain government loan programs or lenders may require escrow accounts as a condition of the loan. RESPA also prohibits a lender from charging excessive amounts for the escrow account.
Kickbacks & Referral Fees
Section 8a of RESPA prohibits giving or receiving any referral fees, kickbacks, or anything of value being exchanged for referral of business involving a federally related mortgage loan.
The Department of Housing and Urban Development (HUD) originally published Regulation X, which implements RESPA. The Dodd-Frank Wall Street Reform and Consumer Protection Act, P.L. 111–203 (July 10, 2010) (Dodd-Frank Act) granted rule-making authority under RESPA to the Consumer Financial Protection Bureau (CFPB).
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.
RESPA generally prohibits kickbacks and offering a thing of value in exchange for the referral of business to a settlement service provider.
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).
Services that are provided after closing typically are not covered by RESPA and are not considered settlement services. 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.
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.
Explanation: Business purpose loans are exempt from RESPA coverage.
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.
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 does not apply to extensions of credit to government or governmental agencies or instrumentalities. It also does not apply to extensions of credit primarily for business, commercial, or agricultural purposes. 12 USC § 2606. Regulation X, 12 CFR § 1024.5 provides additional limits on the coverage of RESPA.
RESPA covers all federally regulated mortgage loans including purchase loans, refinances, home improvement loans, land contracts and home equity lines of credit (HELOCs).
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.
What Is Not Covered Under TILA? THE TILA DOES NOT COVER: Ì Student loans Ì Loans over $25,000 made for purposes other than housing Ì Business loans (The TILA only protects consumer loans and credit.) Purchasing a home, vehicle or other assets with credit and loans can greatly impact your financial security.
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.
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 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.
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).
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.
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.
All business purpose loans are wholly exempt from TILA/RESPA coverage. All loans to bona fide business entities are wholly exempt from coverage, regardless of purpose.