RESPA is the abbreviation for the Real Estate Settlement Procedures Act, a federal consumer protection law originally passed by Congress in 1974 and amended many times since. In general, RESPA exists to govern the process of the mortgage and home buying process. RESPA requires that certain disclosures be made to home purchasers so they can make informed decisions, and it prohibits certain unlawful practices by real estate sellers, such as kickbacks and referral fees, that can drive up housing prices for home buyers.
The disclosure requirements created by RESPA ensure that home buyers have accurate information about expected costs, as well as knowledge of any conflicts of interests with the lender.
More importantly than disclosure requirements are the consumer protections enforced by RESPA in Section 6, 8, 9, and 10.
RESPA Section 6
Section 6 protects homeowners against abuse in connection with the servicing of home loans. If a borrower has a problem with the servicing of a loan and contacts the loan servicer in writing, Section 6 requires the servicer to acknowledge the receipt of the complaint in writing within 20 business days of receipt. Within 60 business days thereafter, the servicer must resolve the complaint, either by taking action to address the issues raised in the complaint or giving the reasons for its refusal to do so. Borrowers should make sure to continue to make all required payments until the complaint is resolved. If a servicer violates Section 6, the aggrieved borrower may bring a private lawsuit. If there is a large enough group of borrowers who have been victimized by the same servicer, those borrowers may bring a class action suit.
RESPA Section 8
Section 8 is for most individuals and businesses the most important aspect of RESPA and is the provision which gives rise to the majority of RESPA litigation and RESPA liability. Section 8 prohibits three different types of financial practices by settlement providers: kickbacks, fee splitting, and unearned fees.
Under Section 8, no one may give or accept a fee, a kickback or anything of value in exchange for the referral of settlement business.
Individuals and businesses that violate Section 8 are subject to both criminal and civil penalties. Criminal penalties can include fines of up to $10,000 and imprisonment up to one year. Individuals who have been victimized by a Section 8 violation may bring private civil lawsuits to recover their actual losses, treble damages, attorneys’ fees and costs.
RESPA Section 9
Section 9 of RESPA prohibits the seller of a home from requiring the buyer to use a particular title insurance company. If the seller violates this provision, the buyer may file suit against the seller and recover damages in an amount equal to three times all of the title insurance fees paid by the buyer.
RESPA Section 10
Section 10 of RESPA limits the amounts that a mortgage lender may require a borrower to deposit to an escrow account for the payment of real estate taxes, homeowner’s insurance and other escrow related charges.
If you suspect your mortgage lender has violated your rights under RESPA, contact us today for a free case evaluation. RESPA allows for attorney fees and costs to be recovered from the defendant – you will not pay a dime to pursue your case.