Ch. 3: RESPA

exceptions to RESPA

- loans on property of 25 acres or more - loans for business, commercial, or agricultural purposes - temporary construction loans - loans on vacant land - assumption without lender approval - conversion of a federally-related mortgage loan to different terms, if a new note is not required - transfer of a loan in the secondary market

What is the official name of the RESPA/TILA form that serves as the closing statement? A. TILA Disclosure B. Closing Disclosure C. Good Faith Estimate D. HUD-1 Disclosure

B. Closing Disclosure

Do RESPA requirements apply when a purchase is financed by a loan insured by the FHA? A. Yes, but only if the loan is intended to be sold by the lenders to Fannie Mae, Ginnie Mae, or Freddie Mac. B. Yes, loans insured by the FHA are included. C. No, the loan must be guaranteed by the VA. D. No, the purchase must be financed by a federally related mortgage loan.

B. Yes, loans insured by the FHA are included. RESPA requirements apply when a purchase is financed by a federally related mortgage loan. Federally related loans include loans made by banks, savings associations, FHA loans, VA loans, and others.

According to RESPA guidelines, if an escrow account contains an amount more than $50 in excess of the allowable limit, the lender: A. must return that amount to the borrower within 10 days B. must return that amount to the borrower within 30 days C. can return that amount to the borrower or apply it to future required payments D. must notify the borrower and give them the option of a refund or credit

B. must return that amount to the borrower within 30 days another escrow rule: On the other hand, if the borrower owes the lender less than one month's escrow payment, the lender may request that the funds be paid within 30 days. Otherwise, the lender must spread the repayment over a 12-month period, thereby increasing the monthly escrow payment.

Can a seller ever require a buyer to purchase title insurance from a specific title company? A. Yes, in order to purchase the property offered for sale. B. No, unless they have family ties at the title company. C. No, unless they pay for all costs for themselves and the buyer. D. No, never.

C. It is a violation of RESPA for a seller to require a buyer to purchase title insurance from a specific title company in order to purchase the property offered for sale. However, if the seller were to pay for all the costs for themselves and the buyer, then the seller would be free to choose the title company with whom they wish to do business.

RESPA's prohibition against kickbacks (section 8a)

RESPA explicitly prohibits the payment of kickbacks, or unearned fees, in any real estate settlement service. It prohibits referral fees when no services are actually rendered. ex. A mortgage lender would be prohibited from giving money or anything of value to a real estate agent for the agent's referring one of their customers to the lender. A 2010 RESPA rule prohibits a broker or agent from receiving a fee for referring a particular homebuyer or seller to a home warranty company; such a payment would be an illegal kickback.

closing disclosure/ closing statement

a form used to itemize services and fees charged to the borrower by the lender when applying for a real estate loan The creditor is generally required to ensure that the consumer receives the Closing Disclosure no later than three business days before consummation of the loan. ***** To be clear: the Closing Disclosure is the official name of the RESPA/TILA form that serves as the closing statement, which is still sometimes called the settlement statement.

Real Estate Settlement Procedures Act (RESPA)

an act designed to protect consumers from predatory lending by requiring lending instruments to disclosure pertinent information on the real estate settlement process - helps educate consumers about closing and settlement services - protects consumers from abusive lending practices - help consumers become better shoppers for settlement (loan closing) services by requiring disclosures that spell out the costs associated with closing - eliminate kickbacks and unearned referral fees that unnecessarily increase the costs of closing a transaction 💰 **** For a loan to fall under RESPA, it has to be what is called a federally related mortgage loan.

loan estimate

an estimate of what the terms of the loan will be and how much it will cost - It must contain a good faith estimate of credit costs and transaction terms. - The creditor must deliver or place it in the mail no later than the third business day after having received the consumer's application. - It must also be delivered or placed in the mail no later than the seventh business day before consummation of the transaction.

affiliated business arrangement (ABA)

exists when a real estate brokerage provides services related to closing transactions via subsidiary companies that operate under the corporate umbrella of that brokerage previously known as a controlled business arrangement In order to operate within the RESPA regulations, an affiliated business arrangement must: - provide consumers with written disclosure of the affiliation - provide consumers with estimated charges for provided services - communicate to consumers that they are free to obtain services elsewhere - refrain from charging or paying referral fees among the subsidiary companies

What loans are covered by RESPA?

most loans that are secured by a mortgage lien placed on a one-to four-family residential property These loans include: - purchase loans - assumptions - property improvement loans - refinancing loans and equity lines of credit (generally)

Marketing Services Agreement (MSA)

often involves providers of settlement services in a mortgage loan transaction, such as a lender, real estate agent or broker, or a title company. MSAs are usually framed as payments for advertising or promotional services, but in some cases the payments are actually disguised compensation for referrals — which is what Section 8 is attempting to regulate against.

True or false: A federally related loan is one that is directly or indirectly supported by federal regulation, insurance, guarantees, supplements, or assistance.

true