If you’ve never heard of the Real Estate Settlement Procedures Act (RESPA), you’re not alone. This law was passed by Congress in 1974 and is instrumental in protecting buyers from abusive real estate practices. Curious about RESPA and how it helps you? Here, we share the key details of this vitally important act.
What is RESPA?
As a buyer, you deserve the real estate transaction process to be completely transparent. That’s what RESPA does: this act exists to protect consumers by restricting kickbacks and limiting the use of escrow accounts. This federal statute falls under the jurisdiction of the Consumer Financial Protection Bureau and is closely regulated to preserve your rights.
RESPA is applicable to several types of real estate transactions, including purchase loans, refinancing, equity lines of credit, and property improvement loans. Under RESPA, mortgage brokers and lenders are legally required to disclose details regarding past transactions, settlement services, and consumer protection laws to buyers.
Additional RESPA Protections
While RESPA is most well-known for safeguarding against practices such as kickbacks and excessive use of escrow accounts, additional protections for the consumer are provided, as well. In the event that your loan is transferred to a new servicer, RESPA allows you a 60-day grace period against late fees. You’ll get a written notification from your current servicer alerting you to the change at least 15 days prior to the transfer date. If you’re accustomed to making payments to your previous servicer or miss the notice, it’s not uncommon to mistakenly send your mortgage payment to your previous servicer. Thanks to RESPA, you’ll benefit from the grace period as long as your payment was submitted to your previous servicer on time or within the allotted 60 days.
This statute curbs a multitude of unethical practices, and plaintiffs have one year from closing to bring forth a lawsuit regarding potential RESPA violations. If you would like to make any disputes regarding your real estate settlement process, your servicer is required to respond within 20 business days. To learn more about your rights under RESPA and view a sample dispute letter, please visit this site.
The Real Estate Settlement Procedures Act plays an essential role in protecting buyers. Purchasing a home is one of the most significant investments one can make, so it’s crucial to know your rights.
By Michaela Phillips. Michaela is the Vice President of Mortgage Lending at Guaranteed Rate, Inc. Contact Michaela at 303.579.5517, e-mail firstname.lastname@example.org or visit michaelaphillips.com.