Finance
What is the primary purpose of the Real Estate Settlement Procedures Act (RESPA)?
ATo set maximum interest rates on residential mortgages
BTo require disclosure of settlement costs and prohibit kickbacks between settlement service providers✓ Correct
CTo establish minimum down payment requirements for FHA loans
DTo regulate the activities of mortgage brokers in Alaska
Explanation
RESPA requires lenders to provide borrowers with disclosures about settlement costs and prohibits kickbacks, referral fees, and other arrangements that could inflate the cost of settlement services. It applies to most residential mortgage loans.
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Key Terms to Know
Private Mortgage Insurance (PMI)
Insurance required by lenders on conventional loans with less than 20% down payment, protecting the lender — not the borrower — against default.
Adjustable-Rate Mortgage (ARM)A mortgage with an interest rate that changes periodically based on a financial index, usually after an initial fixed-rate period.
Discount PointsPrepaid interest paid to a lender at closing to reduce the mortgage interest rate, with each point equal to 1% of the loan amount.
AmortizationThe gradual repayment of a loan through scheduled periodic payments that cover both principal and interest.
Math Concepts
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