RESPA

Question 1

What does RESPA stand for?

Answer 1

Real Estate Settlement Procedures Act of 1974

Question 2

What is the purpose of RESPA?

Answer 2

The Real Estate Settlement Procedures Act (RESPA) provides consumers with improved disclosures of settlement costs and to reduce the costs of closing by the elimination of referral fees and kickbacks.

1974
To allow consumers:
-to obtain information on the cost of closing services
-protect consumes from excessive settlement costs and unearned fees.

Only fees for services performed and
No Unearned fees or Fee splitting (kickbacks)

Question 3

What is a Mortgage Broker?

Answer 3

A mortgage broker is a financial intermediary who matches home borrowers with potential lenders in order to obtain the best possible mortgage terms for the borrower. A mortgage broker can save a borrower time and effort during the application process, and potentially a lot of money over the life of the loan.

Question 4

Settlement Services

Answer 4

any service provided in connection with a real estate settlement
ex: appraisers, inspectors, credit reporting agencies, title insurers, loan processors

Question 5

Applicable Loan Types Under RESPA

Answer 5

RESPA applies to federally related mortgage loans
Every home loan secured by a mtg.

Mortgage loans on one-to-four unit residential properties (owner occupied)

Question 6

RESPA Exemptions

Answer 6

• All cash sales
• rental property
• property of 25 acres or more (agricultural)
• vacant land
• commercial properties
• temporary financing (bridge and construction loans)
• sale where home seller takes back the mortgage

Question 7

RESPA Prohibitions

Answer 7

Prohibitions- kickbacks, settlement statement
Criminal 10K or 1 year in jail
Class Action 1Mor 1% net worth the lesser of the two

Question 8

Required information from a borrower that must be included on an application (Regulation X)

Answer 8

ALIENS
Address
Loan Amount
Income
Estimated property value
Name
Social Security
HUMDA reportable application

Question 9

Initial Escrow Disclosure

Answer 9

Disclosure typically given at settlement, but lender has 45 days from settlement to deliver it. The statement must include:

• Amount of mtg. payment and the portion deposited into the escrow account.
• Itemized taxes and insurance to be made from escrow.
• Amount servicer has selected as a cushion
• Projected balance vs. your actual balance
• If service is transferred it is 60 days to send out NEW initial escrow statements.

Question 10

RESPA = Regulation

Answer 10

Regulation X

Question 11

Define: bona fide discount point

Answer 11

discount points paid by the borrower to reduce interest rate

Question 12

Define: fee-splitting and kickbacks

Answer 12

paying or accepting unearned fees or marking up fee for particular settlement service and splitting the overage with another settlement service provider

Question 13

Disclosures Required by RESPA

Answer 13

• Loan Estimate
• Closing Disclosures
• Special Information Booklet
• Affiliated Business Arrangement Disclosure
• Disclosures related to mortgage servicing and escrow accounts
• Good Faith Estimate
• HUD-1 Settlement Cost

Question 14

Foreclosure Process

Answer 14

Loss Mitigation - live contact with delinquent borrower 36th day, written notice 45th day. 90-120 to begin foreclosure with statement urging borrower to contact lender.
Loss Mitigation might ad a modification by adding owed amount to the back of the loan.

Question 15

RESPA Penalties

Answer 15

Civil 10K or 1year jail

Class Action 1M or 1% net worth the lesser of the two

Question 16

RESPA Section 6

Answer 16

Primarily concerned with Mortgage Services and the servicers obligation to correct errors asserted by mortgage loan borrowers.

Question 17

RESPA section 8

Answer 17

Prohibits giving or accepting fees, kickbacks, or any thing of value for referrals of settlement service business.

-prohibits fee-splitting and receiving unearned fees for services not performed (upfront fees or advanced fees)

Question 18

RESPA Section 9

Answer 18

Seller Required Title Insurance

Section 9 prohibits a seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of a sale.

Question 19

RESPA Section 10

Answer 19

Section 10 Limits on Escrow Accounts

• sets a limit on the amount required to be put into an escrow account for the purposes of paying property taxes and insurance.
• Escrow account- holds money that mortgage lenders collect every month.
• RESPA limits the lender to collecting no more than 1/12 of the annual property tax and annual insurance premium each month.