Real Estate Settlement Procedures Act (RESPA)

RESPA seeks to reduce unnecessarily high settlement costs by requiring disclosures to homebuyers and sellers, and by prohibiting abusive practices in the real estate settlement process.

RESPA requires that lenders give all borrowers of federally related purchase mortgage loans a HUD-prepared booklet with information about real estate transactions, settlement services, and relevant consumer protection laws. When applying for a loan, a borrower must receive a good faith estimate of the settlement costs likely to be incurred. One day before settlement, the borrower may request that the person conducting the settlement provide information on the actual settlement costs. At settlement, both the borrower and the seller, if there is one, are entitled to a settlement statement that itemizes the costs they paid in connection with the transaction.
RESPA prohibits certain abusive practices. Kickbacks, referral fees, and unearned fees are outlawed, sellers may not require borrowers to purchase title insurance from specific companies, and excessively large escrow accounts cannot be required by the loan servicer.
RESPA requires disclosure of the possibility of mortgage servicing being transferred. The statute also provides certain borrower rights if the loan servicer makes errors in paying escrow account expenditures. Finally, RESPA mandates that the servicer provide initial and annual escrow account statements to each borrower.
Applicant Eligibility:RESPA is a regulatory program. It covers virtually all single family loan transactions.
Legal Authority: Real Estate Settlement Procedures Act of 1974 (12 U.S.C. 2601 etseq.). Regulations are at 24 CFR parts 3500 and 3800.
Administering Office: Assistant Secretary for Housing-Federal Housing Commissioner,
U.S. Department of Housing and Urban Development, Washington, DC 20410-8000.
Information Source: Administering office.
On the Web: www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm
Current Status: Active.