8/11/2021

RESPA

 


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.
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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.