Because of the recent heightened focus on consumer protection, mortgage professionals are subject to a number of stricter federal laws and regulations. While laws such as the Real Estate Settlement Procedures Act have been around for years, recent revisions have concentrated on more streamlined processes to facilitate the protection of borrowers throughout the loan origination process. It is extremely important for mortgage professionals to be aware of all federal laws and regulations pertaining to the mortgage business so that they may conduct business fairly and effectively, while also protecting themselves from the penalties associated with noncompliance.
Overview of the Real Estate Settlement Procedures Act (RESPA)
The Real Estate Settlement Procedures Act (RESPA) was enacted in 1974 in order to provide protection for consumers throughout the loan origination process, during closing, and after closing. RESPA assists consumers in selecting appropriate settlement services, as well as eliminating fraudulent costs associated with settlement services such as kickbacks and referral fees. RESPA deals with loans secured with mortgages on one-to four-family residential properties including most purchase loans, assumptions, refinances, property improvement loans, and equity lines of credit.
In order to maintain a firm standard of consumer protection, new RESPA regulations were published November 17, 2008, and the last of the proposed changes took effect January 1, 2010.