What Is RESPA (Real Estate Settlement Procedures Act)?

RESPA is a federal law that protects you during the mortgage process by requiring lenders to clearly disclose settlement costs and prohibiting hidden fees or kickbacks between service providers. Enacted in 1974 and now enforced by the CFPB, it applies to most residential mortgage loans.

For example, RESPA requires your lender to provide a Loan Estimate within three business days of receiving your application, itemizing expected closing costs. It also caps your escrow cushion at two months of payments and bans your lender from receiving referral fees for steering you to a particular title company. If a lender violates RESPA, you may be entitled to damages up to three times the amount of the overcharge.

Key Facts

• Enacted: 1974, originally enforced by HUD, transferred to CFPB in 2011
• Loan Estimate timing: Lenders must deliver a Loan Estimate within 3 business days of your application
• Kickback prohibition: Referral fees and unearned fees between settlement service providers are illegal
• Escrow cushion cap: Lenders can hold a maximum of 2 months’ worth of escrow payments as a cushion
• Penalty for violations: Borrowers can recover up to 3× the overcharge plus attorney fees in RESPA cases
• Applies to: Most federally related residential mortgage loans, including purchase and refinance

Frequently Asked Questions

How does RESPA protect me as a homebuyer?

RESPA ensures you receive clear, upfront information about your settlement costs so there are no surprises at closing. It also prevents lenders and service providers from inflating costs through kickbacks or referral fees, keeping your closing costs fair and transparent.

What should I do if I suspect a RESPA violation?

You can file a complaint with the CFPB online or by phone. Common violations include undisclosed fees, kickbacks between service providers, and escrow overcharges. You may also consult a real estate attorney, as RESPA allows you to recover damages and legal costs.