What are the principals of RESPA?

RESPA is defined as The Real Estate Settlement Procedures Act.

RESPA was developed in 1974 to protect buyers at closing.  It is an Act that requires the disclosure of the types of charges that a buyer will incur when purchasing a property.  It also requires an explanation of the amounts of costs that will be charged to the buyer.

There are six sections to this Act.

They are as follows:

1. Is a rule that states that the closing agent must provide/use a HUD-1 form to provide the buyer with all the costs incurred to the buyer and seller at the closing table.  It is typically known as the "Uniform Closing Statement".  This is a requirement in Florida.

2. Requires the buyer be provided with a "Special Information Booklet" that must be given to the buyer at the time the buyer makes application for a loan, or which must be provided within 3 days of application for a loan.

3. Is a GFE or what is know as a "Good Faith Estimate".  This also as above must be provided at loan application or within 3 days of said application.  This is a document that will show an itemization of the costs that are known by the lender to be costs incurred by the buyer.

4. Specifies that the lender has to disclose the relationship, if any that they currently have with the closing agent/title company. That is, if say for example, you are buying an REO (bank owned) property and they require you to use their title company/closing agent.

5. Kickbacks are not allowed unless disclosed to all persons and that performance of a service was actually performed. Referral fees between cooperating brokers are allowed in Florida.

6. Sellers may not mandate that a buyer use a specific company to buy Title Insurance.  This can not be a "condition" of the sale.

For more information for consumers, you can follow the link below.

More information can be viewed at the U.S. Department of Housing and Urban Development at:

www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm

It's very important to be aware of RESPA.  There are many other specific rules under these basic definitions to always educate yourself on when dealing in a real estate transaction.

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