Real Estate Settlement Procedures Act - RESPA
What is 'Real Estate Settlement Procedures Act - RESPA'
This act was designed to protect potential homeowners and enable them to become more intelligent consumers. RESPA requires that lenders provide greater amounts of information to prospective borrowers at certain points in the loan settlement process. It also prohibits the various parties involved from paying kickbacks to each other.
BREAKING DOWN 'Real Estate Settlement Procedures Act - RESPA'
Originally passed by Congress in 1974, the latest RESPA regulations were published on November 17, 2008 and were scheduled to go into effect on January 1, 2010. Before this act was created, it was a common practice for a lender to advertise a loan at a certain rate of interest provided the borrower use the lender's title insurance company or other affiliate at a greatly inflated price. The affiliate would then pay the lender a portion of the inflated fee as a kickback.