What is a RESPA violation?

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RESPA, the Real Estate Settlement Procedures Act, is a critical consumer protection law in the real estate industry. It aims to safeguard buyers of residential properties comprising up to four family units by ensuring transparency and fairness in the transaction process.

A RESPA violation arises specifically when a title company, involved in a real estate transaction, holds a financial interest or ownership stake in the deal where the buyer's loan is federally insured. This situation can potentially lead to conflicts of interest and compromise the buyer's best interests.

The primary objective of RESPA is to promote informed decision-making by requiring detailed written disclosures from all parties involved in the residential real estate transaction. These disclosures help buyers understand the various costs and fees associated with the purchase, including those related to mortgages and loans.

To comply with RESPA, title companies and other service providers must refrain from engaging in practices that could influence the buyer's choice of settlement service providers or result in unnecessary costs. This includes refraining from referrals that are not in the buyer's best interest.