Understanding the Real Estate Settlement Procedures Act (RESPA)

The Real Estate Settlement Procedures Act (RESPA) is federal law (found in 12 U.S.C.A. §§ 2601 et seq.) that pertains to transactions in which there is a “federally related mortgage loan.” RESPA places controls over the settlement process (close of escrow) for residential real estate transactions where the federally related mortgage proceeds are being used to finance the purchase of a unit that was designed principally for the occupancy of from one to four families. RESPA mandates that such loans must be made by a lender whose deposits or accounts are insured by the Federal Savings and Loan Insurance Corporation, the Federal Deposit Insurance Corporation, or any other agency of the federal government, or a lender who is regulated by the Federal Home Loan Bank Board or any other agency of the federal government.