RESPA — Real Estate Settlement Procedures Act
Master RESPA for the NMLS exam. Learn the key sections, prohibited practices, escrow limits, and how RESPA questions appear on the SAFE MLO test.
Key RESPA Provisions
Special Information Booklet
Lender must provide the Consumer Financial Protection Bureau's (CFPB) "Your Home Loan Toolkit" booklet within 3 business days of receiving a loan application for a purchase money mortgage.
Good Faith Estimate / Loan Estimate
Now integrated with TRID — the Loan Estimate (LE) must be provided within 3 business days of receiving a loan application. The LE replaced the old GFE and initial TIL disclosure.
Title Insurance — No Required Use
The seller cannot require the buyer to use a specific title insurance company as a condition of the sale. Violations can result in penalties up to 3x the title insurance charges.
Qualified Written Requests
Loan servicers must acknowledge a Qualified Written Request (QWR) within 5 business days and provide a substantive response within 30 business days. Protects borrowers during servicing disputes.
Kickback Prohibition (Most Tested)
Prohibits giving or receiving anything of value (kickbacks, referral fees, fee-splitting) for referrals of settlement service business. Violation: up to $10,000 fine and/or 1 year imprisonment per occurrence.
Seller Title Insurance Restriction
Reinforces that sellers cannot require buyers to purchase title insurance from any particular company. Works in conjunction with Section 5.
Escrow Account Limits
Limits escrow account deposits to no more than 2 months' worth of cushion beyond the annual estimated obligations. Prevents lenders from requiring excessive escrow balances.
How RESPA Appears on the NMLS Exam
Section 8 Scenarios
Expect scenarios describing referral arrangements, marketing agreements, or fee-splitting — you must identify whether they violate Section 8.
Escrow Calculations
Questions testing your knowledge of Section 10 escrow cushion limits (2 months max).
Affiliated Business Arrangements
Scenarios where related companies refer business — know the 3 requirements for legal AfBAs.
TRID Timeline Questions
When must the Loan Estimate be delivered? What triggers a new 3-day waiting period for the CD?
Sample RESPA Exam Questions
A real estate agent offers a mortgage broker $500 for every client referred who closes a loan. Under RESPA, this arrangement is:
A) Legal if disclosed to the borrower
B) Legal if the amount is reasonable
C) A violation of Section 8 — kickback prohibition
D) Permitted under the affiliated business arrangement exception
Correct: C — Section 8 of RESPA prohibits all kickbacks, referral fees, and fee-splitting for settlement service referrals, regardless of disclosure or amount. The only exception is for services actually performed.
Under RESPA Section 10, a lender may collect escrow deposits that include a cushion of up to:
A) 1 month of estimated charges
B) 2 months of estimated charges
C) 3 months of estimated charges
D) 6 months of estimated charges
Correct: B — RESPA Section 10 limits the escrow cushion to no more than 2 months (1/6 of the annual estimated charges) beyond the amount needed to cover the annual obligations.
A mortgage company and a title company are owned by the same parent corporation. Under RESPA, this affiliated business arrangement:
A) Is prohibited under Section 8
B) Is permitted if the borrower receives a disclosure and is free to choose another provider
C) Is only permitted with prior CFPB approval
D) Requires a reduction in fees for the consumer
Correct: B — Affiliated Business Arrangements (AfBA) are permitted under RESPA if: (1) the affiliation is disclosed, (2) the borrower is not required to use the affiliated provider, and (3) no referral fees are exchanged beyond the return on ownership interest.
RESPA FAQ
How often does RESPA appear on the NMLS MLO exam?
What is the difference between RESPA and TRID?
What transactions does RESPA cover?
Continue Studying Federal Laws
RESPA is one of several federal laws tested on the NMLS exam. Study all of them to maximize your score.
Practice Exam