RESPA
Real Estate Settlement Procedures ActKickback or any thing of value
in exchange for referrals of settlement service business involving a federally
related mortgage loan. In addition, RESPA prohibits fee splitting and receiving
unearned fees for services not actually performed.
Violations of Section 8's anti-kickback, referral fees and unearned fees
provisions of RESPA are subject to criminal and civil penalties. In a
criminal case a person who violates Section 8 may be fined up to $10,000 and
imprisoned up to one year. In a private law suit a person who violates Section 8
may be liable to the person charged for the settlement service an amount equal
to three times the amount of the charge paid for the service.
Section 9: Seller Required Title Insurance
Section 9 of RESPA prohibits a seller from requiring the home buyer to
use a particular title insurance company, either directly or indirectly, as a
condition of sale. Buyers may sue a seller who violates this provision for an
amount equal to three times all charges made for the title insurance.
Section 10: Limits on Escrow Accounts
Section 10 of RESPA sets limits on the amounts that a lender may require a
borrower to put into an escrow account for purposes of paying taxes, hazard
insurance and other charges related to the property. RESPA does not require
lenders to impose an escrow account on borrowers; however, certain government
loan programs or lenders may require escrow accounts as a condition of the loan.
During the course of the loan, RESPA prohibits a lender from charging
excessive amounts for the escrow account. Each month the lender may require a
borrower to pay into the escrow account no more than 1/12 of the total of all
disbursements payable during the year, plus an amount necessary to pay for any
shortage in the account. In addition, the lender may require a cushion, not to
exceed an amount equal to 1/6 of the total disbursements for the year.
The lender must perform an escrow account analysis once during the year and
notify borrowers of any shortage. Any excess of $50 or more must be returned to
the borrower.
RESPA ENFORCEMENT
Civil law suits
Individuals have one (1) year to bring a private law suit to enforce
violations of Section 8 or 9. A person may bring an action for violations of
Section 6 within three years. Lawsuits for violations of Section 6, 8, or 9 may
be brought in any federal district court in the district in which the property
is located or where the violation is alleged to have occurred.
HUD, a State Attorney General or State insurance commissioner may bring an
injunctive action to enforce violations of Section 6, 8 or 9 of RESPA within
three (3) years.
Loan Servicing Complaints
Section 6 provides borrowers with important consumer protections relating to
the servicing of their loans. Under Section 6 of RESPA, borrowers who have a
problem with the servicing of their loan (including escrow account questions),
should contact their loan servicer in writing, outlining the nature of their
complaint. The servicer must acknowledge the complaint in writing within 20
business days of receipt of the complaint. Within 60 business days the servicer
must resolve the complaint by correcting the account or giving a statement of
the reasons for its position. Until the complaint is resolved, borrowers should
continue to make the servicer's required payment.
A borrower may bring a private law suit, or a group of borrowers may bring a
class action suit, within three years, against a servicer who fails to comply
with Section 6's provisions. Borrowers may obtain actual damages, as well as
additional damages if there is a pattern of noncompliance.
Other Enforcement Actions
Under Section 10, HUD has authority to impose a civil penalty on loan
servicer's who do not submit initial or annual escrow account statements to
borrowers. Borrowers should contact HUD's Office of Consumer and Regulatory
Affairs to report servicer's who fail to provide the required escrow account
statements.
Filing a RESPA Complaint
Persons who believe a settlement service provider has violated RESPA in an
area in which the Department has enforcement authority (primarily sections 6, 8
and 9), may wish to file a complaint. The complaint should outline the violation
and identify the violators by name, address and phone number. Complainants
should also provide their own name and phone number for follow up questions from
HUD. Requests for confidentiality will be honored. Complaints should be sent to:
Director, Office of RESPA and Interstate Land Sales
US Department of Housing and Urban Development
Room 9154
451 7th Street, SW,
Washington, DC 20410 |
