By Dustin R Burke, Adonai Financial
The Real Estate Settlement Procedures Act, (also known as "RESPA"), was an Act passed by Congress in 1974.
RESPA was created because various companies associated with the buying and selling of real estate, such as lenders, real estate firms, appraisers, and title insurance companies, etc., were often engaging in providing undisclosed kickbacks to each other.
It is believed that these kickbacks inflated the costs of real estate transactions and obscured price competition by promoting bait and switch tactics.
For example, a lender advertising a home loan might have advertised the loan with a 5% interest rate, but then when one applies for the loan one is told that one must use the lender's affiliated title insurance company and pay $5,000 for the service (whereas the normal rate is $1,000). The title company would then have paid $4,000 to the lender. This was made illegal.
Section 8 of the Act forbids kickbacks between lenders and third-party settlement service agents in the real estate settlement process. The Act, among other things, requires lenders to provide a good faith estimate for all the approximate costs of a particular loan and finally a HUD-1 (for purchase real estate loans) or a HUD-1A (for refinances of real estate loans) at the closing of the real estate loan. The final HUD-1 or HUD-1A allows the borrower to know specifically the costs of the loan and to whom the fees are being allotted.
The acts full text can be viewed here:
http://www.law.cornell.edu/uscode/html/uscode12/usc_sup_01_12_10_27.html.
The Department of Housing and Urban Development has a RESPA FAQ site that can be viewed here:
http://www.hud.gov/offices/hsg/sfh/res/resconsu.cfm
If you have any general questions on what acts RESPA requires of mortgage business please feel free to send me an email to dustin.burke@adonaifinancial.com.
"Adonai Financial, your friends in the mortgage business!"
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Copyright © 2008 Dustin R Burke | All Rights Reserved
Portions Copyright © 2008 Adonai Financial Corporation | All Rights Reserved
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Adonai Financial Corporation
http://www.adonaifinancial.com/
---The content of this blog is my opinion---
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