RESPA
covers a one- to four-family structure is located or is to be constructed and manufactured
homes. IT does not cover raw land, exceeds 25 acres, agricultural land or
business property.
RESPA
is the Real Estate Settlement Procedures Act, a federal consumer protection law
originally passed by Congress in 1974 and amended many times. RESPA exists to
govern the process of the mortgage and home buying process. RESPA requires that
disclosures be made to home purchasers so they can make informed decisions, and
it prohibits certain unlawful practices by real estate sellers, such as
kickbacks and referral fees, that can drive up housing prices for home buyers.
The
disclosure requirements created by RESPA ensure that home buyers have exact information
about expected costs, as well as knowledge of any conflicts of interests with
the lender.
Disclosure requirements are the consumer protections enforced by RESPA covered in
Section 6, 8, 9, and 10.
RESPA
Section 6
Section 6 protects homeowners against abuse in connection with the servicing of
home loans. Section 6 requires the servicer to acknowledge the receipt of the
complaint in writing within 20 business days of receipt. Within 60 business
days thereafter, the servicer must resolve the complaint, either by taking
action to address the issues raised in the complaint or giving the reasons for
its refusal to do so. Borrowers should make sure to continue to make all
required payments until the complaint is resolved. If a servicer violates
Section 6, the borrower may begin a lawsuit..
RESPA Section 8
Section 8 prohibits three different types of financial practices by settlement
providers: kickbacks, fee splitting, and unearned fees.
Under Section 8, no one may give or accept a fee, a kickback or anything of
value in exchange for the referral of settlement business.
Individuals and businesses that violate Section 8 are subject to both criminal
and civil penalties. Criminal penalties can include fines of up to $10,000 and
imprisonment up to one year. Individuals who have been victimized by a Section
8 violation may bring private civil lawsuits to recover their actual losses,
treble damages, attorneys’ fees and costs.
RESPA Section 9
Section 9 of RESPA prohibits the seller of a home from requiring the buyer to
use a particular title insurance company. If the seller violates this
provision, the buyer may file suit against the seller and recover damages in an
amount equal to three times all of the title insurance fees paid by the buyer.
RESPA Section 10
Creditors are obligated
to maintain copies of all Closing Disclosures provided by third party
settlement agents for how long?
1 year
5
years
36 months
12
years
Section 10 of RESPA limits the amounts that a mortgage lender may require a
borrower to deposit to an escrow account for the payment of real estate taxes,
homeowner’s insurance and other escrow related charges.
Regarding
impounds for hazard insurance and property taxes: the lender may require a borrower to pay
into the escrow account no more than 1/12 of the total of all disbursements
payable during the year, plus an amount necessary to pay for any shortage in
the account. In addition, the lender may require a cushion, limited to no more
than 1/6 of the total disbursements for the year. ny excess of $50 or
more must be returned to the borrower. total amount of items paid
out of the account, or approximately two months of escrow payments. If state
law or mortgage documents allow for a lesser amount, the lesser amount prevail
Penalties
and Liabilities (§ 3500.21(f)) Failure to comply with any provision of section
3500.21 of Regulation X will result in actual damages and, if there is a
pattern or practice of noncompliance, any additional damages in an amount not
to exceed $1,000. In class action cases, each borrower will receive actual damages
and additional damages, as the court allows, up to $1,000 for each member of
the class, except that the total amount of damages in any class action may not
exceed the lesser of $500,000 or 1 percent of the net worth of the servicer. In
addition, in any successful action, the entity that failed to comply will be
liable for the costs of the action and reasonable attorney’s fees.
