Real Estate Terms Glossary
What is the Real Estate Settlement Procedures Act?
Note that the Real Estate Settlement Procedures Act is a federal US law that imposes controls and restrictions on how lenders of federally backed mortgage and home loans operate. RESPA was formally signed into law back in December 1974, becoming effective on June 20, 1975.
The act requires all lenders and banks to provide you with full and transparent disclosure of costs, fees, as well as their affiliated business arrangements. RESPA has been used to regulate mortgage loans attached to 1-to-4 family residential properties.
Examples of the Application of the Real Estate Settlement Procedures Act
- Example 1: Prohibits kickbacks
- Example 2: Limits the use of escrow accounts
Here’s Investopedia’s definition of the Real Estate Settlement Procedures Act (RESPA ).
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