What is the purpose of the RESPA law?

The purpose of the Real Estate Settlement Procedures Act (RESPA) is to help customers understand settlement services. RESPA was enacted to provide significant protections to consumers involved in real estate transactions, especially in the context of mortgage lending. One of its primary objectives is to ensure that borrowers receive clear, accurate, and upfront information regarding closing costs and related fees associated with their mortgage loans. This transparency helps borrowers make informed decisions about their mortgage and understand the various services they may encounter during the settlement process.

By mandating that lenders disclose specific terms and fees associated with the loan, RESPA aims to foster an environment of trust and clarity in the home buying process. It also serves to eliminate kickbacks and referral fees that might otherwise drive up costs for consumers, enhancing their ability to grasp the financial implications of their loan agreements and settlement services.

In contrast, while protecting consumers from discrimination pertains more to the Equal Credit Opportunity Act (ECOA) and similar laws, and regulating interest rates falls under other legal frameworks, the standardization of loan documents is not specifically the focus of RESPA. Rather, RESPA's emphasis is on consumer education and transparency during the mortgage process, making the understanding of settlement services its core purpose.