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Questions RESPA Laws

The Real Estate Settlement Procedures Act (RESPA) was passed in 1974 by the United States Congress. It was created to fight such malpractice as undisclosed kickbacks and inflated transaction costs that many companies that bought and sold real estate engaged in. If you have a property related question and would like to know more about how RESPA works, Real Estate Lawyers on JustAnswer can help.

Listed below are a few questions they have answered on issues that deal with RESPA.

What does RESPA mean? How does it benefit a home owner?

The Real Estate Settlement Procedures Act (RESPA) came into being to ensure consumers all over the country were given information about mortgage settlement costs and were kept safe from high charges of settlement brought about by abusive practices. Basically, RESPA ensures that all disclosures made to the debtor are legal and lenders or parties who do not comply with processes can be sued for damages and fined for illegal and unethical business practices.

According to the U.S. Department of Housing and Urban Development (HUD),

”The Real Estate Settlement Procedures Act (RESPA) is a consumer protection statute, first passed in 1974. The purposes of RESPA are:
  1. 1. to help consumers become better shoppers for settlement services and
  2. 2. to eliminate kickbacks and referral fees that unnecessarily increase the costs of certain settlement services.”
Learn more on the HUD website:
http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/ramh/res/respamor

If a loan officer donates half his commission to a non-profit organization for every loan referred to him by the non-profit members, can it be considered a RESPA violation?

According to RESPA rules, lenders or settlement providers are not prohibited from offering a borrower an incentive for doing business with them.

However, if a lender offers something of value for a business referral, it is likely to be considered illegal. With the details mentioned in your case, donating to the non-profit organization in exchange for referrals from that organization might fall into this category and be considered a violation of RESPA.

For a private lender, how does RESPA affect investor non-owner occupied loans?

A lender who is making more than $100,000 in loans annually secured by “residential real property (including individual units of condominiums and cooperatives) designed principally for the occupancy of from one to four families,” is subject to the entirety of RESPA provisions. For more information, see 12 U.S.C. 2602(1)(B)(iv):
http://www.law.cornell.edu/uscode/text/12/2602

To put it differently, whether the loan is for investment purposes or not is irrelevant. What really counts is if the property loan is secured by a one to four family residential property.

When the bank tries to reduce your commission during negotiations on a short sale, does it count as a RESPA violation?

RESPA does not prohibit the bank from reducing a commission charged for negotiating a short-sale. You can get more information on this by visiting the links below:
http://www.hud.gov/offices/hsg/sfh/res/respa_st.cfm
http://www4.law.cornell.edu/uscode/html/uscode12/usc_sup_01_12_10_27.html

Does RESPA require a lead provider to be licensed as a “lead provider” in order to purchase leads from that company?

RESPA should not interfere with the purchasing of leads.

For a consumer, property settlements have become easier to settle thanks to RESPA rules. Apart from kickbacks, even reciprocal referrals can be construed as violation of the law. If you have questions regarding RESPA, Real Estate Lawyers on JustAnswer can help to answer them both quickly and affordably.
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