RESPA requires lenders to provide a Loan Estimate within 3 business days of receiving a loan application and a Closing Disclosure at least 3 business days before closing. RESPA prohibits kickbacks—payments for referrals of settlement service business. It requires Affiliated Business Arrangement (AfBA) disclosures when a referring party has a financial interest in the settlement service provider. RESPA also limits the amount lenders can require in escrow accounts for taxes and insurance.
A lender receives a loan application on Monday and must provide the Loan Estimate by Thursday. At closing, if the Closing Disclosure shows that actual costs significantly exceed the estimated costs, certain fees cannot increase at all while others can increase by up to 10%.
Key RESPA timelines for the exam: Loan Estimate within 3 business days of application, Closing Disclosure at least 3 business days before closing. RESPA prohibits KICKBACKS (not just referral fees) and requires AfBA disclosures. RESPA applies to "federally related" mortgage loans—basically most residential loans.
Related Terms
Related Concepts
A conventional loan is a mortgage that is not insured or guaranteed by a government agency such as the FHA, VA, or USDA. It is originated and funded by private lenders and may be conforming or non-conforming.
An FHA loan is a mortgage insured by the Federal Housing Administration that allows lower down payments and credit scores than conventional loans. It is designed to help first-time homebuyers and borrowers with limited resources.
A VA loan is a mortgage guaranteed by the Department of Veterans Affairs available to eligible veterans, active-duty service members, and surviving spouses. It offers no down payment and no private mortgage insurance requirements.
A fixed-rate mortgage has an interest rate that remains constant for the entire term of the loan, resulting in equal monthly principal and interest payments throughout the life of the mortgage.
An adjustable-rate mortgage (ARM) has an interest rate that changes periodically based on market conditions, typically after an initial fixed-rate period. The rate adjustment is tied to a financial index plus a margin.
Frequently Asked Questions
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