What does "RESPA" stand for, and what is its purpose?

The correct answer is that RESPA stands for the Real Estate Settlement Procedures Act, and its primary purpose is to protect consumers in real estate transactions. This federal law was enacted in 1974 to facilitate transparency in the settlement process and to help consumers better understand their rights and responsibilities.

RESPA specifically requires that consumers receive disclosures about the costs associated with the settlement process, such as loan terms, the nature and costs of settlement services, and any affiliations between the real estate agents, lenders, and settlement service providers involved in the transaction. By mandating these disclosures, RESPA aims to eliminate unnecessary increases in the costs of closing a real estate transaction and to prevent practices such as kickbacks and referral fees that could adversely affect consumers.

This law plays a critical role in ensuring that homebuyers and sellers are treated fairly and have the necessary information to make informed decisions, ultimately contributing to a more equitable real estate market.