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.
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.
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).
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.
Explanation: Business purpose loans are exempt from RESPA coverage.
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, a rental property transaction or other business purpose transaction.
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.
TILA applies to “open-end credit,” such as credit cards, with repeat transactions and unspecified end dates for repayment. It also applies to “closed-end credit,” such as auto loans, with set terms and payment structures if the closed-end product has a finance charge or at least four installments.
Kickbacks & Referral Fees
Section 8b of RESPA prohibits giving or receiving any portion or percentage of a fee received for real estate settlement services unless it's for services actually performed. These fees must be split between two or more persons for it to be a direct violation of the law.
RESPA applies to home loans made for residential properties designed to accommodate one to four families. These loans include most home purchase loans as well as home equity lines of credit (HELOCs), mortgage refinances and home improvement loans.
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.
According to RESPA Section 8(c), acceptable payments and arrangements include attorney fees, fees paid by a title company and fees paid by a mortgage lender, all covering services that were actually performed.
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.
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.
Final answer: RESPA prohibits kickbacks, referral fees, and surreptitious payments, but reasonable fees and premiums are not prohibited.
RESPA Section 8 does not prohibit a lender or other settlement service provider from giving a consumer a gift or an incentive (e.g., a discount, refund of fees, chance to win a prize, etc.)
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.
Unlike standard mortgage loans, bridge loans aren't covered by the Real Estate Settlement Procedures Act (RESPA), which sets standards for informing consumers about settlement costs and how lenders are paid.
Bridge loans are typically used in real estate transactions when a person needs to purchase a new home before selling their current home. Because bridge loans are meant to be short-term and temporary, they are not subject to RESPA regulations.
RESPA also governs the form of closing documents that can be used. The purpose of the law is to protect homebuyers from being deceived and buying a house that is dangerous or uninhabitable. RESPA does not apply to commercial real estate transactions.
RESPA Section 8(a) prohibits the giving and accepting of kickbacks (e.g., cash or other “things of value” as defined in RESPA and Regulation X) pursuant to any agreement or understanding to refer settlement service business or business incident to a real estate settlement service in connection with those loans.