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Practice of Real Estate term

RESPA

The Real Estate Settlement Procedures Act, a federal law that prohibits kickbacks for referring settlement services.

Why RESPA matters on the exam

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Exam questions using RESPA

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A primary purpose of the Real Estate Settlement Procedures Act (RESPA) is to:

  1. Set the maximum interest rate a lender may lawfully charge on a residential mortgage loan
  2. Guarantee automatic loan approval for every single first-time buyer who ever submits a completed mortgage application
  3. Regulate zoning decisions made by local governments near housing developments that received federal mortgage financing
  4. Require timely disclosure of settlement costs and prohibit certain kickbacks between settlement service providers
Show answer & explanation

Require timely disclosure of settlement costs and prohibit certain kickbacks between settlement service providers — RESPA requires lenders to provide borrowers with timely, standardized disclosures of estimated and actual settlement costs and prohibits unearned kickbacks or referral fees between settlement service providers.

Source: PSI National Real Estate Exam Content Outline §4 Financing

Under RESPA, it is generally illegal for a title company to pay a referring real estate agent a fee simply for:

  1. Referring business to the title company
  2. Closing the transaction on time
  3. Preparing the purchase agreement
  4. Attending the closing
Show answer & explanation

Referring business to the title company — RESPA Section 8 prohibits kickbacks or unearned referral fees paid in exchange for the referral of settlement service business, to prevent inflated costs to consumers.

Source: PSI National Real Estate Exam Content Outline §4 Financing

Under the TILA-RESPA Integrated Disclosure rule, the document that discloses final loan terms and closing costs shortly before closing is the:

  1. Loan Estimate
  2. Closing Disclosure
  3. Good Faith Estimate
  4. Certificate of Eligibility
Show answer & explanation

Closing Disclosure — The Closing Disclosure, which replaced the old HUD-1 and final Truth in Lending disclosure for most loans, must generally be provided to the borrower at least three business days before closing.

Source: PSI National Real Estate Exam Content Outline §4 Financing

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