Real Estate Settlement Procedures Act (RESPA)

Quick Takeaways

  • The Real Estate Settlement Procedures Act (RESPA) provides consumers with improved disclosures of settlement costs and to reduce the costs of closing by the elimination of referral fees and kickbacks.
  • After taking effect in 1975, RESPA has gone through a number of changes and amendments. In 2020, the Consumer Financial Protection Bureau (CFPB) updated its guidance on RESPA compliance pertaining to marketing service agreements (MSAs).
  • Both NAR and CFPB have created resources to help professionals understand and comply with RESPA.

Source: RESPA-CFPB Issue Summary (National Association of REALTORS®, 2021)

The Real Estate Settlement Procedures Act (RESPA) provides consumers with improved disclosures of settlement costs and to reduce the costs of closing by the elimination of referral fees and kickbacks.

RESPA was signed into law in December 1974, and became effective on June 20, 1975. The law has gone through a number of changes and amendments since then, all with the intent of informing consumers of their settlement costs and prohibiting kickbacks that can increase the cost of obtaining a mortgage.

RESPA covers loans secured with a mortgage placed on one-to-four family residential properties. Originally enforced by the U.S. Department of Housing & Urban Development (HUD), RESPA enforcement responsibilities were assumed by the Consumer Financial Protection Bureau (CFPB) when it was created in 2011.

The CFPB previously embarked on a broader effort to prohibit the use of marketing service agreements (MSAs), and on October 8, 2015, the CFPB issued Compliance Bulletin 2015-05 addressing MSAs. On October 7, 2020, the CFPB rescinded the 2015 Compliance Bulletin and updated their Frequently Asked Questions (FAQs), recognizing industry best practices and focusing on a facts and circumstances analysis for determining RESPA compliance. The updated guidance includes common scenarios and examples that address RESPA compliance questions related to MSAs, as well as gifts and promotional activities.

NAR continues to work with the CFPB and industry partners to ensure that helpful RESPA guidance is provided to practitioners. NAR published a list of Do’s and Don’ts for real estate professionals when engaging in MSA’s and co-marketing activities via social media and other web-based marketing tools (found under the References tab). These educational resources are intended to help real estate professionals comply with RESPA when co-marketing with other settlement service providers. NAR will also work with Congress to ensure that any future legislative changes improve RESPA without imposing undue burdens on real estate professionals.

See References for more information.

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