Real Estate Settlement Procedures Act
The Real Estate Settlement Procedures Act (RESPA) , was put into law in 1974 and is a federal disclosure law which helps protect buyers or borrowers who obtain federally realted loans such as FHA,VA or conventional loans that are sold to FNMA, GNMA, or FHLMC. These include most first and second loans , such as purchase loans for homes, refinance loans, land improvement loans, lender-approved assumptions, and equity lines of credit. RESPA apples to all federally related 1-4 unit residential mortage loans. The act specifically requires lenders to give special disclosures and to use special procedures and forms for closing costs on most home loans.
The lender MUST provide a copy of a special information booklet , together with a Good Faith Estimate (GFE) of the amount or range of closing costs to every person from whom the lender receives a written application for any federally realted loan. The Good Faith Estimate provides detailed information on escrow costs so that the borrower can shop around for escrow services.
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