What Is RESPA?

Elimination of Kickbacks and Referral Fees

One of the primary goals of RESPA is to eliminate unfair practices such as kickbacks and referral fees between real estate professionals. Under the law, service providers like lenders, title companies, and real estate agents cannot receive or offer payments in exchange for referrals. This helps keep costs honest and ensures that consumers are not being steered toward services simply because of behind-the-scenes financial agreements.

By removing these hidden incentives, RESPA helps maintain a level playing field for all service providers and ensures that your choices are based on quality and transparency, not financial rewards between professionals.

Requirement for Disclosure Documents

RESPA requires lenders and settlement agents to provide key documents that outline the terms of the mortgage and the closing costs associated with the transaction. These documents include the Loan Estimate, the Closing Disclosure, and the Affiliated Business Arrangement Disclosure.

The Loan Estimate gives you a breakdown of estimated interest rates, monthly payments, and closing costs within three days of applying for a loan. The Closing Disclosure, which must be provided at least three days before closing, lists the final costs and compares them to the initial estimate. If a real estate agent or broker refers you to an affiliated service provider, the Affiliated Business Arrangement Disclosure must explain that relationship clearly.

Escrow Account Regulation

RESPA also regulates the use of escrow accounts. When you take out a mortgage, your lender may require you to pay property taxes and homeowner’s insurance through an escrow account. The law limits how much the lender can collect upfront and requires annual statements that show how the funds are being managed.

This regulation ensures that you are not overcharged and gives you a clearer view of how your money is being used to cover these essential expenses.

Who Is Subject to RESPA?

RESPA applies to most residential real estate transactions involving federally related mortgage loans. This includes loans made by banks, credit unions, and other financial institutions that are insured or regulated by the federal government.

Lenders, mortgage brokers, title companies, real estate agents, and attorneys involved in the settlement process are all required to follow RESPA rules. However, the law does not apply to every real estate transaction. For example, all-cash purchases, commercial real estate deals, and certain types of loan assumptions are typically exempt.

RESPA and the Closing Process

At Crescent Title, we work hard to make sure your closing process complies with RESPA every step of the way. From the preparation of the Loan Estimate to the delivery of your final Closing Disclosure, we focus on accuracy, fairness, and clarity.

Our role as a title company involves more than just paperwork. We help ensure that the settlement process is transparent, that fees are properly disclosed, and that no unauthorized charges or hidden relationships affect your transaction. RESPA gives us a framework to provide you with the confidence you deserve when buying or refinancing your home.