Real Estate Settlement Procedures Act - Wikipedia, the free encyclopedia

From Wikipedia, the free encyclopedia

The Real Estate Settlement Procedures Act (RESPA), was an act passed by the United States Congress in 1974. It is codified at Title 12, Chapter 27 of the United States Code, 12 U.S.C. §§ 2601 ( /uscode/12/2601.html) –2617 ( .

Full title Acronym Enacted by the Effective

Real Estate Settlement Procedures Act of 1974

1 Purpose 2 Restrictions 3 Account Inquiries — "Qualified written request" 4 Criticisms 5 Sources 6 External links

RESPA 93rd United States Congress Dec. 22, 1974 Citations

Public Law Stat.

P.L. 93-533 88 Stat. 1724 Codification

Title(s) amended U.S.C. sections created

12 2601-2617

It was created because various companies associated with the buying and selling of real estate, such as lenders, real estate agents, construction companies and title insurance companies were often engaging in providing undisclosed kickbacks to each other, inflating the costs of real estate transactions and obscuring price competition by facilitating bait-and-switch tactics.

Legislative history ( /z?d093:SN03164:) Passed the Senate on July 24, 1974 (unanimous consent) Passed the House of Representatives on August 14, 1974 (unanimous consent) Reported by the joint conference committee on Dec. 9, 1974; agreed to by the Senate on Dec. 9, 1974 (unanimous consent) and by the House of Representatives on Dec. 11, 1974 (unanimous consent)

For example, a lender advertising a home loan Signed into law by President Gerald Ford on Dec. 22, might have advertised the loan with a 5% interest 1974 rate, but then when one applies for the loan one is Major amendments told that one must use the lender's affiliated title insurance company and pay $5,000 for the P.L. 94-205, 89 Stat. 1157 (1976) service, whereas the normal rate is $1,000. The Relevant Supreme Court cases title company would then have paid $4,000 to the None lender. This was made illegal. The reason is to make prices for the services clear so as to allow price competition by consumer demand and to thereby drive down prices.

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where a customer can choose to use any service provider for each service. to one where the services are bundled. There have been various proposals to modify the Real Estate Settlement Procedures Act. 2 of 3 10/28/2011 11:05 AM . then at some point non-affiliated service providers would attempt to target consumers directly with lower prices to entice them to choose the unaffiliated provider. amendments to RESPA restrict the amount that fees can increase between the GFE and HUD-1 or HUD-1A. The servicer cannot provide information to any credit agency regarding any overdue payment during the 60 day period. which critics say is essentially a kickback mechanism. while certain third party service providers' fees can increase by no more than 10%. a lender would simply charge higher prices. If the servicer fails to comply with the "qualified written request".org/wiki/Real_Estate_Settlement_Procedures_Act The Act prohibits kickbacks between lenders and third-party settlement service agents in the real estate settlement process (Section 8 of RESPA). the servicer has to provide the name and telephone number of a person with whom the borrower can discuss the matter. and include a statement of reasons why the borrower believes the account is in error. If the borrower believes there is an error in the mortgage account. where if the kickback were forbidden. he or she can make a "qualified written request" to the loan servicer. One proposal is to change the "open architecture" system currently in place.[1] The servicer must acknowledge receipt of the request within 20 business days.[2] However. 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. up to $1000 of additional damages if there is a pattern of noncompliance. The request should include the words "qualified written request". but where the real estate agent or lender must pay directly for all other costs. costs and attorneys fees. The Department of Housing and Urban Development provides a sample letter. 2010. Either way. The request must be in writing. who have more buying power. Origination charges are not allowed to increase. the borrower is entitled to actual damages. Others counter that economically the transaction is a zero sum game. lenders. critics say that kickbacks still occur. Beginning January 1.wikipedia. The servicer has to either provide a written notification that the error has been corrected. It requires lenders to provide a good faith estimate (GFE) 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. would more aggressively seek the lowest price for real estate settlement services. Under this system.Real Estate Settlement Procedures Act . The servicer then has 60 business days (from the request) to take action on the request. but must be on a separate piece of paper. the free encyclopedia http://en. even though they sign documents explicitly stating that they can choose to use any service provider. It cannot be written on the payment coupon. For example. Even reciprocal referrals among these types of professions could be construed in court as a violation of the law of RESPA. or provide a written explanation as to why the servicer believes the account is correct. lenders often provide captive insurance to the title insurance companies they work with. One of the core elements of the debate is the fact that customers overwhelmingly go with the default service providers associated with a lender or a real estate agent. identify the borrower by name and account.Wikipedia. Some say that if the profits of the service providers were truly excessive or if the price of the services were excessively inflated because of illegal or quasi-legal kickbacks.

law. Department of Housing & Urban Development page on RESPA (http://www. a non-profit organization. costs and charges to both the buyer and seller involved in a real estate transaction. Both buyer and seller should know how to properly read a HUD before closing a transaction and at settlement is not the ideal time to discover unnecessary charges and/or exorbitant fees as the transaction is about to be closed. Retrieved 2010-06-28. See Terms of use for details.html) from the Legal Information Institute U.cornell. the free encyclopedia http://en. it is not uncommon to find mistakes on the /hsg/sfh/res/respa_hm.wikipedia. ^ "HUD RESPA Sample Written Complaint to Lender" (http://www. ^ 12 USC 2605(e) Full text of the act (http://www.wikipedia. 1.hud.cfm) . 3 of 3 10/28/2011 11:05 AM .S..cfm) Retrieved from "http://en.Wikipedia. additional terms may apply. Inc. http://www. Wikipedia® is a registered trademark of the Wikimedia Foundation. Buyers or sellers can hire an experienced professional such as an attorney to protect their interests at closing.php?title=Real_Estate_Settlement_Procedures_Act& oldid=451767316" Categories: 1974 in law 93rd United States Congress United States federal housing legislation Real property law This page was last modified on 22 September 2011 at Estate Settlement Procedures Act .gov/offices/hsg/ramh/res/reslettr.hud. Text is available under the Creative Commons Attribution-ShareAlike While both the HUD-1 and HUD-1A serve to disclose all fees.

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