Real Estate Settlement Procedures Act - RESPA

DEFINITION of '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.

RELATED TERMS
  1. Good Faith Estimate

    An estimate of the fees due at closing for a mortgage loan that ...
  2. Kickback

    The payment of something of value to an individual with the goal ...
  3. HUD-1 Form

    A form used by a settlement or closing agent itemizing all charges ...
  4. Loan Syndication

    The process of involving several different lenders in providing ...
  5. Temporary Lender

    A mortgage lender that sells the loans it originates into the ...
  6. Consumer Credit Protection Act ...

    Federal legislation that created disclosure requirements that ...
Related Articles
  1. Credit & Loans

    How To Pick The Right Lender When Refinancing A Mortgage

    Refinancing your mortgage has never been easier with the range of lenders and access to information that are available to you.
  2. Credit & Loans

    What Does a Lender Do?

    A lender provides funds to another with the expectation those funds will be repaid with interest.
  3. Credit & Loans

    Mortgage Fees That Can Trash Your Refinance Deal

    Before deciding that refinancing your mortgage at a lower interest rate is a good deal, factor all the fees into your calculations.
  4. Economics

    Explaining Debt

    Debt is any amount a borrower owes a lender.
  5. Home & Auto

    How To Negotiate Your Closing Costs

    Closing costs can't be avoided altogether, but you can lower them. While there are a lot of fixed costs, there are also variable ones you can save on.
  6. Home & Auto

    How to Lower Refinance Closing Costs

    Refinancing a mortgage can save you money but it isn't free. There are closing costs associated with a refinance and how much you pay for them depends on you.
  7. Credit & Loans

    What are the Five C's of Credit?

    The five C’s of credit are what banks and other lenders evaluate about a potential borrower when making a lending decision. The five C’s are Character, Capacity, Capital, Collateral and Conditions. ...
  8. Credit & Loans

    How Regulations Protect Reverse Mortgage Borrowers

    They're complex animals, which is why there are government guidelines in place to protect borrowers.
  9. Personal Finance

    Tips To Improve Chances Of A Small Business Loan

    Enhance your small business loan eligibility by keeping these important tips in mind.
  10. Credit & Loans

    Personal Loans: Consider These Alternative Lenders

    Looking for an alternative source of financing for a personal loan? Take a look at these companies.
RELATED FAQS
  1. Are good faith estimates (GFEs) accurate?

    Learn how federal guidelines regarding good faith estimates protect consumers under the revised 2010 version of the Real ... Read Answer >>
  2. Does inflation favor lenders or borrowers?

    Find out under what circumstances inflation benefits borrowers more than lenders and in which situations inflation can be ... Read Answer >>
  3. What’s the difference between a mortgage lender and a mortgage servicer?

    Buying a home is an exciting and confusing process. Once the loan is secured, it's important to know who gets the payment: ... Read Answer >>
  4. What factors should I consider when shopping for the best mortgage lender?

    Comparing lenders to obtain the best mortgage loan requires research and willingness to shop around for the best loan to ... Read Answer >>
  5. Are APRs different in different countries?

    Learn about the term APR and how it is used in the United States and other countries. Explore why different lenders charge ... Read Answer >>
  6. What is PMI, and does everyone need to pay it?

    Also known as "Primary Mortgage Insurance," PMI is the lenders (banks) protection in the event that you default on your primary ... Read Answer >>
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  3. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  4. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  5. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  6. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
Trading Center