What is the Real Estate Settlement Procedures Act?

The Real Estate Settlement Procedures Act (RESPA) is a federal law that protects borrowers from excessive charges when obtaining a mortgage loan. The law is enforced by the U.S. Department of Housing and Urban Development (HUD) and applies to all real estate transactions in Kansas. RESPA requires lenders to provide borrowers with certain disclosures within a certain time frame. This includes disclosing all settlement costs associated with the mortgage loan and providing an estimate of closing costs within three days of loan application. This helps borrowers compare offers from different lenders and makes sure they are not taken advantage of. RESPA also prohibits the practice of “kickbacks” or “yield spread premiums”, which are fees paid from lenders to brokers in exchange for higher interest rates. This helps ensure that borrowers get the lowest rate available. Finally, RESPA requires lenders to set up escrow accounts for certain taxes and insurance. This helps borrowers avoid large, unexpected bills in the event taxes or insurance premiums increase. In Kansas, RESPA is enforced by the Kansas Department of Financial Institutions. This department monitors lenders to make sure that they comply with all the law’s requirements. If a lender is found to be in violation of the law, it can be fined or shut down by the department.

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What is the Real Estate Settlement Procedures Act?

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