The Real Estate Settlement Procedures Act (RESPA) is a federal consumer protection law established in 1974 meant to safeguard home buyers from predatory lenders. RESPA ensures that disclosures are given to buyers and sellers during the mortgage application process. It also seeks to safeguard consumers against unethical business practices such as kickbacks, surcharges, and hold lenders responsible for mistakes. RESPA guarantees that all mortgage loans that are subject to federal regulation are in line with RESPA rules. This includes purchases, refinances, loans for home improvements, home equity lines of credit, and land contracts.
RESPA is enforced by the Consumer Financial Protection Bureau (CFPB). In this article, the Columbus RESPA lawyers at Kohl & Cook Law Firm, LLC will discuss RESPA violations and what to do if you have been subjected to a RESPA violation.
Escrow account balances
Section 10 of RESPA lays out restrictions on lenders to protect borrowers. The amount of money a borrower is required to maintain in an escrow account to pay for things like taxes, private mortgage insurance, flood insurance, and other insurance is capped by this provision. Although not all borrowers are required to have an escrow account, an escrow account is only authorized to hold around two months’ worth of escrow payments when they do. RESPA places penalties on loan servicers that breach Section 10 of RESPA.
Loan servicing complaints and responses under RESPA
Under Section 6 of RESPA, borrowers are given consumer protection rights. They can submit complaints to the servicer when they believe their rights have been violated. The servicer must respond to the complaint within 20 days of receiving it. The servicer must also acknowledge and resolve it within 60 days. The servicer is required to respond with either a correction or a statement outlining their defense to the complaint. Borrowers can also bring a private action against the lender alleging RESPA violations within three years of the alleged violation. A judge may grant them damages.
Charges and billing
Section 4 of RESPA prohibits mortgage lenders from overcharging for third-party services that are more expensive than the original cost of the service. This provision only applies to settlement costs listed separately in HUD-1 or HUD-1A settlement statements. These infractions are generally issued by HUD. Businesses can be penalized for overcharging for third-party services.
Estimated settlement costs
Mortgage brokers and lenders are required to present an itemized statement of settlement expenses. The document provides a good faith estimate regarding the approximate costs the borrower should expect to pay during the mortgage settlement process. This includes origination fees, title insurance, service estimates, insurance charges, and escrow deposits.
How to report a RESPA violation
Borrowers can alert the Consumer Financial Protection Bureau of RESPA violations. The CFPB will investigate the complaint and obtain a response from the mortgage lender generally within 15 days. Borrowers are encouraged to speak to a lawyer if they believe their mortgage has been subject to a RESPA violation. The Columbus, OH RESPA violation attorneys at Kohl & Cook Law Firm, LLC can help you stop a foreclosure or recover damages related to a RESPA violation. Call our office today to learn more.
By Kohl & Cook Law Firm LLC | Posted on February 28, 2024
FAQs
Section 8a of RESPA prohibits giving or receiving any referral fees, kickbacks, or anything of value being exchanged for referral of business involving a federally related mortgage loan. The violation applies to verbal, written, or established conduct of such referral agreements.
Which of the following activities would violate Real Estate Settlement Procedures Act requirements? ›
RESPA Violations And Penalties For Lenders. There are several ways mortgage lenders or other service providers can commit a RESPA violation. RESPA violations include inflating costs, using bribes or shell entities, and implementing kickbacks or referral fees. These violations can result in steep fees and even jail time ...
Which of these actions would be considered a violation of RESPA Quizlet? ›
RESPA generally prohibits the payment of referral fees, unearned fees, or kickbacks, as well as the splitting or sharing of fees or charges made or received for providing "real estate settlement services." The terms "federal loan" and "settlement services" are both broadly defined under RESPA.
What is a Section 6 violation of RESPA? ›
Under Section 6 of RESPA, borrowers are given consumer protection rights. They can submit complaints to the servicer when they believe their rights have been violated. The servicer must respond to the complaint within 20 days of receiving it. The servicer must also acknowledge and resolve it within 60 days.
What is a Section 9 violation of RESPA? ›
Section 9 of RESPA prohibits a seller from requiring the use of a particular title insurance company when the buyer will pay for the title insurance. This prohibition applies to any seller, whether a private individual, a home builder, or a lender with REO properties.
What is an example of RESPA in real estate? ›
A former client who previously referred a new client to the agent refers another client who wants to buy/sell a home because the former client was so pleased with the agent's service and prior referral gift. This is a of RESPA, since the former client likely gave the referral in expectation of receiving another gift.
Which of the following is prohibited by RESPA? ›
RESPA generally prohibits kickbacks and offering a thing of value in exchange for the referral of business to a settlement service provider.
What does RESPA not apply to? ›
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.
Which of the following would be illegal according to the Real Estate Settlement Procedures Act? ›
The act requires lenders, mortgage brokers, or servicers of home loans to provide borrowers with pertinent and timely disclosures regarding the nature and costs of the real estate settlement process. The act also prohibits specific practices, such as kickbacks, and places limitations upon the use of escrow accounts.
What are the damages for RESPA? ›
When a consumer proves a violation of RESPA, the consumer is entitled to actual damages, costs of suit and reasonable attorneys fees. If the consumer can prove the loan servicer engaged in an ongoing pattern and practice of violating RESPA, the consumer is entitled to up to $2,000 per violation of the statute.
Section 8 of RESPA prohibits anyone from giving or accepting a fee, kickback or anything of value in exchange for referrals of settlement service business involving a federally related mortgage loan. In addition, RESPA prohibits fee splitting and receiving unearned fees for services not actually performed.
Which of the following is an unlawful kickback under the RESPA? ›
Section 8(a) of RESPA prohibits a person from giving or accepting any fee, kickback, or “thing of value” in exchange for a referral related to a real estate settlement service involving a federally related mortgage loan.
What are the six pieces to trigger RESPA? ›
An application is defined as the submission of six pieces of information: (1) the consumer's name, (2) the consumer's income, (3) the consumer's Social Security number to obtain a credit report (or other unique identifier if the consumer has no Social Security number), (4) the property address, (5) an estimate of the ...
What is Section 6 of the Real Estate Settlement Procedures Act? ›
Section 6 of the Real Estate Settlement Procedures Act (12 U.S.C. 2605) gives certain classes of borrowers rights, regardless of whether the borrowers loan was held by the lender or the loan service was transferred to one or more loan servicing companies.
Which of the following forms of compensation is a violation of RESPA? ›
Which of the following forms of compensation is a violation of RESPA? The answer is a fee paid by a title company to an originator for referral of settlement services. RESPA requires any fees to be "earned." Referral fees are considered a violation.
What is prohibited by RESPA? ›
RESPA generally prohibits kickbacks and offering a thing of value in exchange for the referral of business to a settlement service provider.
What is covered under RESPA? ›
This includes: home purchase loans, refinances, lender approved assumptions, property improvement loans, equity lines of credit, and reverse mortgages.
What does RESPA prohibit a lender from? ›
Real Estate Settlement Procedures Act (``RESPA''), 12 USC § 2607(b), prohibits lenders and others from charging ``unearned, undivided'' fees to borrowers at the closing of a mortgage transaction.
