Real Estate Settlement Procedures Act: Regulation X

RESPA, which stands for the Real Estate Settlement Procedures Act, is a federal law designed to protect consumers by ensuring transparency in the real estate settlement process, primarily by requiring lenders to disclose all costs associated with a mortgage loan upfront and prohibiting practices like kickbacks and referral fees, ultimately allowing buyers to make informed decisions about their settlement services and costs. 

The Real Estate Settlement Procedures Act (RESPA) of 1974 became effective on June 20, 1975. The Department of Housing and Urban Development (HUD) originally published Regulation X to implement RESPA.

The Real Estate Settlement Procedures Act (RESPA) applies to federally regulated mortgage loans for residential properties. This includes most home purchase loans, refinances, and home improvement loans.As an example it applies to conventional loans to homes occupied by the owner. It covers 1-4 unit owner occupied property, Government Sponsored Loans (FHA, VA loans), reverse mortgages, assumptions, refinances, property improvement loans, and home equity lines of credit(HELOC). 

When Does RESPA Not Apply?

RESPA does not apply to all cash sales, rental properties that are not owner occupied, agriculture properties with 25+ acres of land, vacant land (unless there will be a dwelling placed on the land within 2-years), commercial properties, home-seller take backs, or temporary construction loans.

Section 6 provides borrowers with important consumer protections relating to the servicing of their loans. Under Section 6 of RESPA, borrowers who have a problem with the servicing of their loan (including escrow account questions), must contact their loan servicer in writing, outlining the nature of their complaint. The servicer must acknowledge the complaint in writing within 5 business days of receipt of the complaint. Within 45 days the servicer must resolve the complaint by correcting the account or giving a statement of the reasons for its position. Until the complaint is resolved, borrowers should continue to make the servicer's required payment.

Important Aspects of Section 6 of RESPA

• Forced Placed Insurance
• Qualified Written Request (QWR)
• late payments and Notice of Default (NOD)
  
  

Real Estate Settlement Procedures Act (RESPA) Section 8 prohibits kickbacks, referral fees, and unearned fees in real estate transactions. These practices can lead to unfair advantages for some parties and steer consumers toward specific services.

Section 9 of the Real Estate Settlement Procedures Act (RESPA) prohibits sellers from requiring buyers to use a specific title insurance company. This applies whether the requirement is direct or indirect.

Section 10 of the Real Estate Settlement Procedures Act (RESPA) limits how much money a lender can require a borrower to keep in an escrow account.The purpose of the escrow account is to pay for taxes, hazard insurance, and other property-related charges.

Real Estate Settlement Procedures Act (RESPA) disclosures are provided by lenders, mortgage brokers, and loan servicers to borrowers. These disclosures outline the costs and nature of the real estate settlement process.

• Within 3 days of the completed credit application- Home Loan Toolkit, Loan Estimate (LE), Mortgage Servicing Disclosure Statement (MSDS), list of 10 HUD approved counselors
• Before Settlement - Affiliated Business Agreement Disclosure (AfBA), Closing Disclosure (CD)
• At Settlement - Final Closing Disclosure (CD), Initial Escrow Statement-within 45 day
• After Settlement Annual Escrow Statement, Servicing Transfer Statement (STS)