A Quick Look at What RESPA Applies to and What It Prohibits
The federal Real Estate Settlement Procedures Act (RESPA) covers transactions involving a federally related mortgage loan on residential property.
Transactions covered by RESPA:
- home purchase loans
- lender-approved assumptions
- property improvement loans
- equity lines of credit
- reverse mortgages
Transactions not covered by RESPA:
- an all-cash sale
- a sale where the individual home seller takes back the mortgage
- a rental property transaction
- other business purpose transaction.
Under RESPA, a broker may jointly advertise with a mortgage broker or title company. If a broker chooses to do this, each party should pay a pro rate share of the cost of the advertisement to avoid a potential RESPA violation. For example, if the title company’s portion of the ad is one-third of the page and the Realtor’s information takes up two-thirds of the page, then splitting the cost of the ad 50/50 could be an issue.
For more information, visit NAR's RESPA informational page.