RESPA – Questioning Its Effectiveness
Hamline Law Review, Vol. 24, p. 68, 2000
21 Pages Posted: 21 May 2012 Last revised: 22 Aug 2015
Date Written: May 20, 2012
Purchasing real estate is a complicated process, especially for the average consumer. The closing procedure alone involves fees and documents that can be confusing to a borrower. The Real Estate Settlement Procedures Act (RESPA) was enacted in 1974 in order to ease some of this confusion. This article discusses the enactment of RESPA and its purpose, which is mainly to "insure that consumers... are provided with greater and more timely information on the nature and costs of the settlement process and are protected from unnecessarily high settlement charges caused by certain abusive practices."
The author discusses disclosure requirements that lenders must comply with, such as delivering to the borrower a good faith estimate, a Special Information Booklet, and a HUD-1 Settlement Statement, and problems associated with those disclosures. Additionally, the article analyzes case law that deals with the legality of certain kickbacks and referral fees under RESPA. The article further discusses reform proposals to RESPA that would better inform consumers of the costs related to their mortgages. The author concludes by suggesting safeguards to help ensure proper disclosures pursuant to RESPA.
Keywords: RESPA, Real Estate Settlement Procedures Act, closing, loan, mortgage, mortgage broker, HUD-1, good faith estimate, settlement statement, yield spread premium, Regulation X
JEL Classification: K11, K29, L85
Suggested Citation: Suggested Citation