Many people in Minnesota have never heard or RESPA, especially when they are completing a real estate transaction, but it is very important to know what your rights are under it. It is a federal law so states, and cities, like Minneapolis, are not exempt from its rules.

The Real Estate Settlement and Procedures Act was enacted by Congress to keep consumers from unnecessarily high settlement charges. Some companies were abusing people and getting as much money out of them as possible. Here are some things that the Act covers:

• Prohibited Fees - It is illegal for anyone to pay or receive a fee, kickback, or anything of value for referring a real estate client to a particular closing company or business. For example, a title company cannot give me $100 for referring business to them.
  
• Fee for Work- anyone performing work on a closing, like a lender, lawyer, title company, etc can charge a fee for their service. Only when someone tries to collect a fee for doing nothing is it a violation of RESPA.

                                                                                    RESPA Disclosures

There are also disclosures that must be produced during and after settlement. These protect the consumer by keeping them informed at all times on what is "going on" with their loan and the entire closing process.

• Good Faith Estimate - Anytime you apply for a loan, the lender is require to provide you with a good faith estimate of settlement charges you will most likely pay. If a lender refuses to give you one, red flags should go up and you should walk away as fast as possible.
  
• Servicing Disclosure Statement - a lender must tell you in writing, when you apply for a loan, if anyone else will be servicing your loan
  
• Affiliated Businesses - if a lender, title company, or brokerage is affiliated with anyone who will be handling your closing, they must disclose this to you in writing. Many times businesses are owned by the same parent corporation.
  
• HUD - 1 Settlement Statement - it is law that you must be presented with your settlement statement, which lists all the final charges, 1 business day before the closing date. I see many companies violating this rule and getting the document to the consumer the same day as closing. When representing my clients, I make sure they get it 1 day prior no matter what.
  
• Escrow Account Disclosure- most lenders require that an escrow account is established for tax and insurance monies and you will have to pre-pay for two months worth at closing. With in 45 days of closing, you will receive a document that lists all your expected payments for the next year.

One of the best things you can do is ask your Minnesota real estate agent if you have any questions about disclosures you receive during settlement. Your agent will also review the HUD-1 before closing to make sure you are being charged correctly. Here and there I have found mistakes on the HUD that have saved my clients a couple thousand dollars. Another good reason to use an agent!