Hamilton Herald Masthead


Front Page - Friday, August 5, 2022

RESPA protects buyers and sellers

It’s difficult to believe we’re more than halfway through 2022. Vacations are wrapping up, students are returning to school and Tennessee’s primary election is at hand. We’re all dotting our I’s and crossing our T’s as summer nears its end and fall approaches.

Prudent Realtors do this daily as they assist buyers and sellers under the watchful eye of the Consumer Financial Protection Bureau.

The CFPB regulates the Real Estate Settlement Procedures Act, which was signed into law in December 1974 and became effective June 20, 1975. The act requires those who offer real estate settlement services to provide transparency and specific disclosures.

RESPA was introduced to eliminate abusive practices in the settlement process, prohibit illegal referral fees or kickbacks and limit the use of escrow accounts.

In short, RESPA exists to protect consumers who are buying and selling real estate. The rules and regulations are numerous and often confusing – even to those in the industry. Also, many consumers are unaware RESPA exists.

Why should a buyer or seller care about RESPA? Because the act helps to ensure homeownership is affordable. As a consumer protection statute, RESPA helps consumers “shop” for real estate settlement services. Because of disclosure requirements, it also helps to eliminate hidden referral fees that unnecessarily elevate the cost of certain settlement services.

RESPA ensures buyers have choices when it comes to service providers such as title companies and lenders. While a seller might request closing to occur at a specific title company or that a buyer use a preferred lender, RESPA prohibits a seller from requiring a specific person or company be used when the buyer is paying for the service.

RESPA also requires that lenders provide borrowers with timely disclosures designed to spell out the costs associated with the closing, outline the servicing and escrow account practices and describe business relationships between settlement service providers at least three days in advance of closing.

People involved in a real estate transaction often hear of referral fees. A referral fee is a portion of the commission paid to another real estate agent or broker in exchange for a client referral.

Consumers should be aware of laws regarding referral fees, including the Tennessee Real Estate License Law and RESPA. The following explanations are based on information provided by the Tennessee Association of Realtors and the U.S. Department of Housing and Urban Development:

RESPA prohibits anyone from giving or accepting a fee, kickback, or anything of value in exchange for referrals to settlement services (lenders, title companies, closing attorneys, appraisers and so on) in conjunction with a federally related mortgage loan.

It’s important to note that Tennessee Real Estate License Law prohibits a licensee from paying a referral fee to a non-licensee. Consumers sometimes request a fee for referring a prospect to a licensee or for finding available property. Such requests are commonly referred to as birddog fees or finders’ fees – and they’re illegal.

It’s a RESPA violation for someone to receive money or a thing of value solely for sending someone settlement service business. Consumers should consider the following helpful tips:

Compare the costs (fees, interest rate, points and so on) of settlement service providers before agreeing to use one to whom you were referred.

Ask for a good faith estimate before you agree to the loan and paying any fees.

Ask the builder whether you’re required to use a certain service provider in order to get special concessions.

Ask your Realtor to verify the validity of fees being charged.

Ask to see the HUD-1 Settlement Statement before going to closing. Compare the charges with the good faith estimate and ask about any charges that have changed or that you don’t understand.

Forward any tax or insurance bills you receive to your lender (if the lender is supposed to pay the bill).

Check your annual escrow account statement for mistakes.

Make a qualified written request when asking your lender for information or making a complaint.

Make your mortgage payment on time, even if you’ve sent a complaint to your lender.

Lastly, read the FAQs about escrow accounts on www.hud.gov before filing an escrow complaint with a banking or government regulator.

Revisiting these topics is important because buying and selling property is complicated. Thankfully, Realtors work with their clients to help navigate the rules and the real estate transaction so their best interests are met.

Realtors serve their community’s homebuying needs each day. That’s Who We R.

Founded in 1912, Greater Chattanooga Realtors is a regional organization with more than 2,500 members servicing Hamilton and Sequatchie counties in southeast Tennessee and Catoosa, Dade and Walker counties in northwest Georgia. The association is one of approximately 1,100 local associations and boards of Realtors nationwide that comprise the National Association of Realtors. Greater Chattanooga Realtors owns and operates a multiple listing service that’s one of approximately 600 MLSs in the country and services more than 2,700 users.