RESPA

What RESPA Covers

RESPA applies to most residential mortgage loans secured by a lien on one-to-four-unit residential properties. The law is implemented through Regulation X, enforced by the Consumer Financial Protection Bureau (CFPB). RESPA's core provisions address three areas: disclosure requirements, prohibited practices, and loan servicing rules.

Key Provisions

• Settlement cost disclosures: Lenders must provide a Loan Estimate within of receiving a mortgage application (this requirement is now administered under the TRID rule, which integrated RESPA disclosures with TILA disclosures).
• Anti-kickback provisions (Section 8): RESPA prohibits any person from giving or accepting a fee, kickback, or thing of value for referrals of settlement service business. This prevents, for example, a lender paying a real estate agent for directing clients to their loan products.
• Prohibition on excessive escrow deposits (Section 10): Limits the amount a lender can require a borrower to deposit into an escrow account to a cushion of no more than of escrow payments beyond the anticipated annual disbursements.
• Servicing transfer notices (Section 6): Loan servicers must provide borrowers with written notice at least before the effective date of a servicing transfer.

Why RESPA Matters

RESPA protects borrowers from inflated settlement costs and conflicts of interest that could arise from hidden compensation arrangements between service providers. Understanding RESPA helps borrowers recognize their right to shop for settlement services, question unexplained fee increases between the Loan Estimate and Closing Disclosure, and file complaints with the CFPB if they believe a violation has occurred.