Real Estate Settlement Procedures Act (RESPA): Rules and Rights

The Real Estate Settlement Procedures Act, known as RESPA, is a 1974 federal law that governs how residential mortgages are closed and serviced in the United States. It requires lenders to tell you what your mortgage will cost before you sign, prohibits kickbacks among the companies involved in closing a home loan, limits how much money a lender can hold in escrow for your taxes and insurance, and gives you specific rights to information and error correction once your loan is being serviced. The statute lives at 12 U.S.C. §§ 2601–2617 and is implemented through Regulation X (12 CFR Part 1024), which the Consumer Financial Protection Bureau administers.¹²

Which Mortgages RESPA Covers

RESPA applies to “federally related mortgage loans,” which sweeps in nearly every residential mortgage. A loan qualifies if it is secured by a lien on one-to-four-family residential property, including condominiums, cooperatives, and manufactured homes, and it fits any of several triggers: it is made by a federally regulated lender, insured by a federal agency, tied to a federal housing program, intended for sale to Fannie Mae, Ginnie Mae, or Freddie Mac, or is a reverse mortgage.³

Some transactions sit outside RESPA. Business, commercial, and agricultural loans are exempt. Construction loans and bridge or swing loans are generally exempt, unless a construction loan will convert to permanent financing with the same lender, finances a title transfer to the first buyer, or has a term of two years or more. A loan on vacant land is exempt unless the money will be used to build a home or place a manufactured home on that land within two years. Assumptions where the lender has no right to approve the new borrower are exempt, as are loan conversions that do not require a new note. Bona fide sales of existing loans on the secondary market are exempt, but table-funded mortgage broker transactions are not.⁴

The Disclosures You Should Receive

RESPA is built around the idea that you should know what a mortgage will cost you before closing, not at the closing table. Within three business days of receiving your loan application, the lender must give you a consumer education booklet, now titled “Your Home Loan Toolkit,” that explains settlement services, costs, and your rights.²

Since October 3, 2015, the two central disclosures have been the Loan Estimate and the Closing Disclosure, created by the TILA-RESPA Integrated Disclosure rule (TRID, sometimes called “Know Before You Owe”). The rule combined overlapping requirements from RESPA and the Truth in Lending Act into a single pair of forms.⁵

The Loan Estimate replaces the old Good Faith Estimate and must reach you within three business days after the lender receives your application. Your application is considered received when you have provided six pieces of information: your name, income, Social Security number, the property address, the estimated property value, and the loan amount you are seeking.⁶

The Closing Disclosure replaces the old HUD-1 settlement statement and must reach you at least three business days before the loan closes. If it is mailed rather than hand-delivered, it must be sent at least six business days before closing so that delivery time is accounted for. Only three kinds of last-minute change reset that three-day clock: an increase in the annual percentage rate, a change in the loan product, or the addition of a prepayment penalty. Other revisions get a corrected form but no new waiting period.⁶

The Ban on Kickbacks and Referral Fees

Section 8 of RESPA (12 U.S.C. § 2607) is the law’s sharpest edge. It flatly prohibits two things: giving or accepting anything of value in exchange for a referral of settlement service business, and splitting a fee for a service that was not actually performed.⁷

“Thing of value” is defined broadly. It includes money, stock, commissions, trips, discounts, special loan terms, and “any opportunity to participate in a money-making program.” A referral agreement does not have to be written or even spoken. Regulators and courts can infer one from a pattern of conduct, such as a correlation between payments received and the volume of business sent the other way.⁷

Some payments are still allowed. A person can be paid for services actually performed. Bona fide salaries are fine. Cooperative brokerage arrangements between real estate agents are fine. Normal promotional and educational activities are allowed as long as they are not conditioned on referrals. Employers can pay their own employees for generating referrals.⁷

Affiliated Business Arrangements

Many lenders, real estate brokerages, and title companies are owned by or affiliated with one another. RESPA creates a safe harbor for these arrangements, but only if three conditions are met. The person making the referral must give you a written disclosure explaining the ownership relationship and an estimate of the affiliated provider’s charges. You cannot be required to use the affiliated provider, with narrow exceptions for lender-selected attorneys, appraisers, and credit agencies. And the only financial benefit the referring party may receive from the arrangement is a return on a genuine ownership interest, not a payment tied to how many referrals it sent.⁸ The disclosure documents must be retained for five years.⁹

Escrow Account Limits

Section 9 of RESPA (12 U.S.C. § 2609, implemented at 12 CFR 1024.17) controls how much your servicer can require you to deposit for property taxes and insurance. Each month, the servicer can collect one-twelfth of the total anticipated annual escrow disbursements. On top of that, the servicer can hold a cushion of no more than one-sixth of the annual total. Pre-accrual, where a servicer collects payments before they are needed, is prohibited.¹⁰

Your servicer must run an annual escrow analysis and send you a statement within 30 calendar days of the end of the computation year. If the analysis shows a surplus of $50 or more, the servicer must refund it within 30 days. If there is a shortage, the servicer may let you repay it in equal installments over at least 12 months.¹⁰

Your Rights After the Loan Closes

RESPA does not stop working once you sign. Its servicing rules, expanded in 2013 and again in 2016, control how your mortgage servicer must communicate with you afterward.

You can send your servicer a Qualified Written Request (QWR) to ask for information about your loan or to say the servicer has made an error. The servicer must acknowledge your request within five business days and respond substantively within 30 business days. A 15-day extension is possible, but only if the servicer notifies you in writing before the initial deadline runs out. The servicer cannot charge you a fee for responding.¹¹¹²

Other servicing rules require disclosures when your loan is transferred to a new servicer, restrict force-placed insurance, mandate early intervention with delinquent borrowers, and require continuity of contact so you have a designated person to speak with. The loss mitigation rules also restrict a servicer from advancing a foreclosure while your application for help is under review.¹³ A 2016 rule extended these protections to successors in interest, such as surviving spouses and heirs, and to borrowers in bankruptcy or who have invoked cease-communication rights under the Fair Debt Collection Practices Act.¹⁴

What You Can Recover if RESPA Is Violated

Penalties depend on which provision was broken.

For kickback and referral-fee violations under Section 8, criminal exposure runs up to $10,000 in fines and up to one year in prison. On the civil side, violators are jointly and severally liable for three times the amount you were charged for the tainted settlement service. Courts may also award attorney fees and costs to the prevailing party.¹⁵ If a seller required you to use a particular title insurance company, the same treble-damages exposure applies, calculated on the total title insurance charges.¹⁶ The statute of limitations for a private Section 8 claim is one year from the date of the violation, though courts have held that the deadline can be equitably tolled when a borrower had no reasonable opportunity to discover the wrongdoing.¹⁷

For servicing violations, you can recover your actual damages. If the servicer engages in a pattern or practice of noncompliance, a court may award additional damages of up to $2,000 per borrower. In a class action, total additional damages are capped at the lesser of $500,000 or one percent of the servicer’s net worth. The limitations period for servicing claims is three years.¹⁶

Who Enforces RESPA

Rulemaking and enforcement authority moved from HUD to the Consumer Financial Protection Bureau under the 2010 Dodd-Frank Act. The CFPB now writes the rules under Regulation X, investigates violations, and brings enforcement actions.² Borrowers can also enforce many parts of the statute directly through private lawsuits, and RESPA does not preempt state laws that give consumers more protection than the federal rules. Under 12 U.S.C. § 2616 and 12 CFR 1024.5(c), a state law is preempted only if it is inconsistent with RESPA, and a state law that offers greater protection is not treated as inconsistent.⁴

What Is Pending Now

The most significant change on the horizon is a proposed rule the CFPB published on July 24, 2024, titled “Streamlining Mortgage Servicing for Borrowers Experiencing Payment Difficulties.” It would replace the current application-based loss mitigation framework with one built around foreclosure procedural safeguards. Instead of requiring you to submit a “complete” application before the servicer will evaluate options, the servicer could review you for available options sequentially, and during that review cycle the servicer could not initiate or advance a foreclosure. The proposal also includes a Spanish-language translation requirement for certain written communications and would exclude small servicers.¹⁸

Separately, an interim final rule effective July 15, 2025, rescinded the temporary COVID-19 servicing protections that had been added to Regulation X in 2021, on the grounds that those provisions had already expired by their own terms.¹⁹

1
Office of the Law Revision Counsel. Real Estate Settlement Procedures Act, Chapter 27
2
NCUA. Real Estate Settlement Procedures Act, Regulation X
3
FDIC. Real Estate Settlement Procedures Act (RESPA)
4
CFPB. Regulation X, Section 1024.5
5
National Association of Realtors. TRID (TILA-RESPA Integrated Disclosure)
6
North Carolina Real Estate Commission. New TILA-RESPA Integrated Disclosure Rules
7
CFPB. Regulation X, Section 1024.14
8
CFPB. Regulation X, Section 1024.15
9
Cornell Law Institute. 12 CFR 1024.15, Affiliated Business Arrangements
10
CFPB. Regulation X, Section 1024.17
11
CFPB. What Is a Qualified Written Request?
12
CFPB. Regulation X, Section 1024.36
13
OCC. Comptrollers Handbook, RESPA
14
CFPB. Regulation X, Real Estate Settlement Procedures Act
15
Office of the Law Revision Counsel. 12 USC 2607, Prohibition Against Kickbacks and Unearned Fees
16
Board of Governors of the Federal Reserve. Consumer Compliance Handbook, RESPA
17
U.S. Court of Appeals for the Ninth Circuit. RESPA Section 8 Equitable Tolling Decision
18
Federal Register. Streamlining Mortgage Servicing for Borrowers Experiencing Payment Difficulties, Regulation X
19
Federal Register. Protections for Borrowers Affected by the COVID-19 Emergency Under RESPA