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HUD introduced RESPA to control and explain home loan closing costs. Loan applicants receive a good faith estimate, a comprehensive list of all closing costs associated with a home loan, to avoid last minute expenses and surprises. RESPA prohibits commissions, referral fees, and kickbacks charged as inflated closing costs. It mandates equal treatment of all loan applicants, regardless of race. Loans for one to four single family homes are regulated by RESPA. The Office of RESPA and Interstate Land Sales enforces RESPA requirements. The act was first passed in 1974 and has been updated several times, with the last revision in November 2008.
The United States Department of Housing and Urban Development (HUD) helps consumers buy homes and ensures fair lending practices. HUD introduced the Real Estate Settlement Procedures Act (RESPA) to help control and explain home loan closing costs. Under RESPA, all loan applicants are required to receive a detailed listing and explanation of all closing costs associated with a home loan.
This list is known as a good faith estimate. Includes all loan settlement costs. The goal of the quote is to avoid any last minute expenses, surprises and make consumers aware of the true cost of a home loan. The Real Estate Settlement Procedures Act also prohibits commissions, referral fees and kickbacks charged as inflated closing costs.
By requiring a comprehensive list of closing costs, the Real Estate Settlement Procedures Act allows consumers to make a fair comparison of all the loan options available to them. The act helps HUD fulfill its mission of providing community members with the information they need to become successful homeowners. RESPA also mandates equal treatment of all loan applicants, regardless of race.
Under the Real Estate Settlement Procedures Act, a lender cannot accept anything of value in exchange for sending an asset to a service provider. This helps control closing costs charged by title insurance companies, real estate agents, home inspectors, appraisers, and others. Also, the seller is unable to require a buyer to purchase title insurance from a specific insurance company under RESPA.
Other information required by the Real Estate Settlement Procedures Act includes a consumer brochure explaining closing costs and a mortgage service disclosure statement. This document explains whether the lender will service the loan or subcontract the servicing of the loan to another financial institution. The lender must provide such communications, together with the good faith estimate, within three days of the loan request date. This information is not required if the lender rejects the application before the end of the three-day period.
Loans for one to four single family homes are regulated by RESPA. These loans include first mortgages, refinancing loans, home improvement loans, and home improvement lines of credit. A special HUD department, the Office of RESPA and Interstate Land Sales, enforces RESPA requirements.
The Real Estate Settlement Procedures Act was first passed in the United States in 1974. The act has since been updated several times by the United States Congress. The last revision was in November 2008. These changes took effect on January 1, 2010.
