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RESPA is the short form of The Real Estate Settlement Procedures Act. This act was enacted in the year 1974 by the United States Congress. The main purpose of this act was to fight the malpractices such as undisclosed kickbacks and inflated transaction costs. A lot of companies that had bought and sold real estate were involved in such misconduct. Below are answers to few of the more common legal questions about real estate settlement laws: What is the meaning of Real Estate Settlement Procedures Act? How can a home owner be benefitted from it?
The main reason for passing the Real Estate Settlement Procedures Act was to give information about mortgage settlement costs to all the consumers across the country. Besides, this act also meant to keep the consumers safe from high settlement charges that resulted from various offensive practices. Thus, according to this act, all the disclosures that are made to the debtor would need to be legal and if any lender does not intend to or fail to abide by the process, a debtor can file a lawsuit against the lender. The lender would have to pay for the damages that he or she has caused to the debtor and would also be fined for conducting illegal and unethical business practices. As per the U.S. Department of Housing and Urban Development, the Real Estate Settlement Procedures Act is meant to protect the consumers and its main purposes are to make the customers a better purchaser for settlement services and to abolish the kickbacks and referral fees that bring about an unnecessary increase in the cost of certain settlement services. Is it regarded as an infringement to the real estate settlement act if a loan officer decides to offer fifty percent of his commission to a non-profit organization? The commission from the loan that he would be donating will be for every loan that would be referred to him by the members of the non-profit organization.
Usually, as per the real estate settlement laws, if a lender or a settlement provider wants, he or she can legally offer an incentive to a borrower for the purpose of attracting the borrower to do business with them. But, if a referral is offered by a lender that is intended to be used for a business purpose, then in that case, the referral would likely be regarded as unlawful. Based on the facts mentioned in your case, if your lender is offering half of his commission to the non-profit organization in return for referrals from that organization, then that would probably be considered as an infringement, according to the real estate settlement laws. How is it possible for the real estate settlement laws to affect investor non-owner occupied loans, if the lender is a private lender?
If a lender has to get the benefits of the provisions of a real estate settlement laws completely, then he or she would need to make more than an amount of $100,000 in loans every year. Besides that, the lender would also need to make sure that the loan should be secured for a residential real property that should primarily be designed for the use of one to four families. This property should include separate housing units of condominiums and cooperatives. In other words, it is not significant for what purpose the loan has been taken. It does not matter if the loan is used for an investment or not. The main thing that you should consider in this case is if the property loan has been secured by a one to four family residential property. With the introduction of the real estate settlement rules, consumers have not only stopped worrying about getting a property settlement but have also become quite sure about its quick resolution process. Usually, besides kickbacks, reciprocal referrals can also be considered as a violation of the law. If you need any clarification about your particular situation on the subject, you may wish to ask a real estate lawyer for legal insight based on an expert evaluation of your circumstances.
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