Common Violations Of The Real Estate Settlement Procedures Act (RESPA)
The Real Estate Settlement Procedures Act (RESPA) is a federal consumer protection law established in 1974 meant to safeguard home buyers from predatory lenders. RESPA ensures that disclosures are given to buyers and sellers during the mortgage application process. It also seeks to safeguard consumers against unethical business practices such as kickbacks, surcharges, and hold lenders responsible for mistakes. RESPA guarantees that all mortgage loans that are subject to federal regulation are in line with RESPA rules. This includes purchases, refinances, loans for home improvements, home equity lines of credit, and land contracts.
RESPA is enforced by the Consumer Financial Protection Bureau (CFPB). In this article, the Columbus RESPA lawyers at Kohl & Cook Law Firm, LLC will discuss RESPA violations and what to do if you have been subjected to a RESPA violation.
Escrow account balances
Section 10 of RESPA lays out restrictions on lenders to protect borrowers. The amount of money a borrower is required to maintain in an escrow account to pay for things like taxes, private mortgage insurance, flood insurance, and other insurance is capped by this provision. Although not all borrowers are required to have an escrow account, an escrow account is only authorized to hold around two months’ worth of escrow payments when they do. RESPA places penalties on loan servicers that breach Section 10 of RESPA.
Loan servicing complaints and responses under RESPA
Under Section 6 of RESPA, borrowers are given consumer protection rights. They can submit complaints to the servicer when they believe their rights have been violated. The servicer must respond to the complaint within 20 days of receiving it. The servicer must also acknowledge and resolve it within 60 days. The servicer is required to respond with either a correction or a statement outlining their defense to the complaint. Borrowers can also bring a private action against the lender alleging RESPA violations within three years of the alleged violation. A judge may grant them damages.
Charges and billing
Section 4 of RESPA prohibits mortgage lenders from overcharging for third-party services that are more expensive than the original cost of the service. This provision only applies to settlement costs listed separately in HUD-1 or HUD-1A settlement statements. These infractions are generally issued by HUD. Businesses can be penalized for overcharging for third-party services.
Estimated settlement costs
Mortgage brokers and lenders are required to present an itemized statement of settlement expenses. The document provides a good faith estimate regarding the approximate costs the borrower should expect to pay during the mortgage settlement process. This includes origination fees, title insurance, service estimates, insurance charges, and escrow deposits.
How to report a RESPA violation
Borrowers can alert the Consumer Financial Protection Bureau of RESPA violations. The CFPB will investigate the complaint and obtain a response from the mortgage lender generally within 15 days. Borrowers are encouraged to speak to a lawyer if they believe their mortgage has been subject to a RESPA violation. The Columbus, OH RESPA violation attorneys at Kohl & Cook Law Firm, LLC can help you stop a foreclosure or recover damages related to a RESPA violation. Call our office today to learn more.
