Real Estate Settlement Procedures Act RESPA

Some of the main objects behind the Real Estate Settlement Procedures Act, 1974 are:

  • Bring more effective advance disclosure of settlement costs;
  • Eliminate fees that tended to increase the cost of settlement services & buyers and sellers of property;
  • reduce sums that home buyers were required, by lenders, to place in insure payment of real estate taxes and insurance; and
  • Significantly reform and modernize local record keeping of land title information.

Real Estate Settlement Procedures Act (RESPA) does not create a private cause of action for violation.

Let us consider some of the judicial pronouncements in the light of scope, limitations of RESPA:

  • Congress enacted the Real Estate Settlement Procedures Act (RESPA) to protect home buyers from inflated prices in the home purchasing process, to increase the supply of information available to mortgage consumers about the cost of home loans in advance of settlement, and to eliminate abusive practices such as kickbacks, referral fees, and unearned fees. (See In Re Thorian case)
  • In Briggs v. Countrywide Funding Corp. it was held that Real Estate Settlement Procedures Act (RESPA) does not pre-empt state statute that provides that no separate disclosure of financial charges such as yield spread premiums is required; thus, state law claims based on alleged non disclosures regarding payments made by lender to mortgage broker in connection with mortgage loan were eliminated.
  • In Arnett v. Bank of America, N.A. the court went on to say that “Real Estate Settlement and Procedures Act (RESPA) did not apply to mortgagee’s alleged forced placement of flood insurance on mortgagors’ property approximately two years after the mortgagors closed on their home loan”.
  • Mc Ananey v. Astoria Financial Corp the court emphasizing on fees related to RESPA went on to say “Facsimile fees, attorney document preparation fees, and recording fees charged by mortgagees at time mortgagors prepaid their mortgage loans were not fees for “settlement services” prohibited by RESPA; disputed fees all related to actions that occurred well after the property transfer between the buyer and the seller”.

Add on:

  • According to section 5 (a) the Director’s duties is to prepare a book let that is useful for the home buyers. It is also mandatory for the director to publish the booklets in different languages and make available for every person who invests.

Uniform settlement statement as described in sec.4 is also considered as a major add on. As it directs the bureau to publish a single/uniform disclosure for mortgage loan transactions.