Which loans does the Real Estate Settlement Procedures Act apply to?

The Real Estate Settlement Procedures Act (RESPA) is designed to protect consumers by ensuring transparency in the real estate transaction process, particularly in relation to the costs of closing a real estate loan. The act specifically applies to federally related mortgage loans, which includes loans made by lenders that are insured or guaranteed by a government agency, such as the FHA, VA, or Fannie Mae.

This focus on one- to four-family dwellings means that RESPA governs most residential mortgage scenarios involving these types of properties. The act requires lenders to provide a standard Good Faith Estimate (GFE) of settlement costs and disclosures regarding the loan and the settlement process, ensuring that borrowers are well-informed prior to closing.

Loans for properties other than one- to four-family dwellings, such as commercial properties or larger multi-family units, do not fall under the purview of RESPA. Additionally, private loans between individuals are not covered by this act, as they do not involve federally related financing. Therefore, the correct application of RESPA is specifically linked to federally related loans for one- to four-family dwellings.