What Is RESPA in Real Estate?

Every respa question, answered

Every question above with its correct answer and the reasoning behind it. Read the explanations for the ones you answered correctly too. A lucky guess and knowing the rule look identical on a score report. These are sample questions from our larger bank.

1. 1. A title company pays a listing agent $200 for every closing she refers to it. Under RESPA this is:

   • APermitted if the buyer consents in writing
   • BA prohibited kickback under Section 8correct
   • CPermitted because the agent is not a lender
   • DA permissible marketing expense

   Why: Section 8 of RESPA prohibits giving or accepting any fee or thing of value for referring settlement service business. Consent does not cure it, and the penalty reaches both the payer and the recipient.

   Financing

2. 2. Under TRID, the borrower must receive the Closing Disclosure at least:

   • AThree business days before consummationcorrect
   • BSeven business days before consummation
   • CAt the closing table
   • DOne business day before consummation

   Why: Three business days before consummation, giving the borrower time to compare it against the Loan Estimate. The Loan Estimate itself is due within three business days of application.

   Financing

3. 3. RESPA applies to:

   • ACommercial loans only
   • BCash purchases of residential property
   • CAll real estate transactions without exception
   • DFederally related mortgage loans on residential propertycorrect

   Why: RESPA governs federally related mortgage loans secured by residential property. A cash purchase involves no loan, so RESPA does not reach it.

   Financing

4. 4. Under TRID, the lender must deliver the Loan Estimate no later than:

   • ASeven business days after consummation of the loan
   • BThe moment the borrower arrives at the closing table
   • CThree business days after receiving the borrower’s applicationcorrect
   • DThree business days before consummation of the loan

   Why: The Loan Estimate is due within three business days of application, and no later than seven business days before consummation. The three-days-before-consummation deadline is the Closing Disclosure rule, and mixing the two is the most common error on TRID timing.

   Financing

5. 5. A buyer is financing the purchase with an FHA-insured loan. The seller conditions acceptance of the offer on the buyer purchasing title insurance from a company the seller names. Under RESPA this is:

   • APermitted because the seller is paying for the policy
   • BProhibited when the seller requires use of that particular companycorrect
   • CRequired whenever the seller pays the title premium
   • DPermitted if the buyer receives written disclosure before closing

   Why: RESPA forbids a seller from requiring the buyer to buy title insurance from any particular company as a condition of sale. Recommending a company is fine; conditioning the deal on it is not, and disclosure does not cure it.

   Financing

6. 6. A brokerage owns an interest in a mortgage company and refers its buyers there. RESPA allows this only if:

   • AThe brokerage collects a $300 referral fee from the affiliate for each closing
   • BThe buyer signs a written waiver of RESPA protections
   • CThe referral is limited to buyers paying cash for the property
   • DIt is disclosed, use is not required, and payment is only a return on ownershipcorrect

   Why: An affiliated business arrangement survives RESPA only with written disclosure of the relationship, no required use of the affiliate, and no compensation beyond a return on the ownership interest. A per-closing referral fee is the prohibited kickback.

   Financing

7. 7. Which transaction falls outside RESPA?

   • AA federally related loan secured by a condominium unit
   • BA purchase financed entirely by the seller with no institutional lendercorrect
   • CAn FHA-insured purchase of an owner-occupied duplex
   • DA conventional refinance of a borrower’s primary residence

   Why: RESPA reaches federally related mortgage loans on residential property; a pure seller-financed sale involves no such loan, so no Loan Estimate or Closing Disclosure is required. Every other choice involves an institutional lender and is covered.

   Financing

8. 8. RESPA prohibits a licensee in a federally related mortgage transaction from:

   • Amentioning a lender interest rate in a printed listing flyer
   • Breceiving a fee or thing of value for referring settlement service businesscorrect
   • Ccharging a commission that exceeds the average rate in the local market
   • Daccepting a cooperative split paid by another licensed brokerage

   Why: Section 8 forbids receiving a fee or thing of value for referring settlement service business, and a thing of value includes tickets, trips, and free services. A commission that is simply high is a market and disclosure question, not a kickback.

   Practice of real estate