RESPA - Real Estate Settlement Procedures Act
Author: Terri Ewing | Date: August 20, 2008 | Filed In: Glossary
RESPA Defined
RESPA stands for Real Estate Settlement Procedures Act. This is a Federal consumer protection law on the books since 1974. It was designed to inform mortgage consumers about costs and require mortgage companies to provide that information in advance.
RESPA also made referral fees illegal. A referral fee is also known as a kickback. If you go to buy a home, the real estate agent usually provides you with names of mortgage originators he or she works with. If you choose one of those originators, the real estate agent cannot accept a referral fee for you because of the RESPA law.
Referral fees are important because if the mortgage originator has to pay a referral fee to the agent, he will pass that cost on to the customer increase the cost of home ownership. You pay more and that is what RESPA tried to eliminate. Wait, don’t get too excited. The only way this works is if the powers that be enforce this law. And they don’t. Illegal referral fees happen and they happen all the time.
Author: Terri Ewing
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