The Basics of RESPA Coverage

April 17, 2012 — 1,573 views  
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The Real Estate Settlement Procedures Act (RESPA) was initially created to prohibit undisclosed kickbacks among real estate agents, lenders and title insurance companies. It ensures consumers are provided with upfront information regarding mortgage details and can avoid being overcharged for mortgage settlements. By making mortgage financing clearer to consumers, it becomes cheaper, explains the U.S. Department of Housing and Urban Development. 

It basically serves to keep the borrower as informed as possible throughout the entire borrowing process. The source explains it requires lenders to be disclosed at various times on information such as consumer costs associated with the settlement and explaining escrow account practices. This can help consumers determine if closing costs are within tolerance requirements, states the department.

RESPA covers the majority of all real estate transactions. Some examples of loans it typically covers include home equity lines of credit, reverse mortgages, lender approved assumptions, home purchase loans, refinance loans, property improvement loans and secured residential loans. RESPA does not apply to loans such as all cash sales, rental property transactions and other business purpose transactions. Construction loans are also not usually covered under RESPA.