United States
Hong KongRESPA, for the NMLS exam
RESPA is Regulation X, at 12 CFR 1024. The exam tests Section 8 kickbacks, the 15-day servicing transfer notice, the 2-month escrow cushion, and the 120-day delinquency rule before a first foreclosure filing.
The Real Estate Settlement Procedures Act became law in 1974 and lives today as Regulation X.
Its purpose is disclosure and the elimination of kickbacks. The exam tests it as a set of deadlines.
Section 8, the famous part
Section 8 prohibits giving or accepting anything of value for the referral of settlement service business, at 12 USC 2607.
The key phrase is "anything of value". It is broad on purpose - not just cash, but tickets, trips, discounted services and marketing paid for by somebody who benefits from your referrals.
What is permitted is payment for services actually performed. A genuine service, genuinely rendered, at a reasonable market rate.
You may refer to an affiliate you have an interest in, provided you disclose the relationship at or before the referral, do not require its use, and the affiliate charges reasonable rates. Under 12 CFR 1024.15.
Servicing
| Requirement | Deadline |
|---|---|
| Servicing transfer notice | 15 days before the effective date |
| Grace period after transfer | 60 days, during which a payment to the old servicer is not late |
| Acknowledge a notice of error | 5 business days |
| Respond to a notice of error | 30 business days |
The 60-day grace period is a favorite. A borrower who pays the old servicer during it has not paid late, and the new servicer cannot treat it as a default.
Escrow
The cushion is capped at two months of escrow payments, under 12 CFR 1024.17(c)(1)(ii). An annual escrow statement is due within 45 days of the end of the computation year.
Loss mitigation and foreclosure
A servicer has 5 business days to acknowledge a loss mitigation application. The first foreclosure filing may not be made until the borrower is more than 120 days delinquent, under 12 CFR 1024.41(f)(1).
That 120-day rule is heavily tested. It exists to give the borrower a window to apply for help before the process begins.
Common questions
What does RESPA cover?
Settlement service disclosures, prohibited kickbacks and referral fees, mortgage servicing, escrow accounts and loss mitigation. It is implemented as Regulation X at 12 CFR 1024.
What does Section 8 of RESPA prohibit?
Giving or accepting anything of value for the referral of settlement service business. Payment for services actually performed is permitted.
How much notice is required for a servicing transfer?
15 days before the effective date, with a 60-day grace period afterwards during which payment to the old servicer is not late.
What is the escrow cushion limit?
Two months of escrow payments, under 12 CFR 1024.17(c)(1)(ii).
When can foreclosure begin?
The first filing may not be made until the borrower is more than 120 days delinquent.