Escrow & Title
The Real Estate Settlement Procedures Act (RESPA) prohibits:
ACharging origination fees on residential loans
BKickbacks, referral fees, and unearned fees in settlement services✓ Correct
CHolding escrow accounts for longer than 30 days
DRequiring title insurance on government-backed loans
Explanation
RESPA prohibits kickbacks, fee-splitting, and referral fees between settlement service providers for federally related mortgage loans. It is designed to protect consumers from inflated settlement costs resulting from undisclosed business relationships.
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Key Terms to Know
Title Insurance
Insurance protecting against financial loss from defects in a property's title that existed before closing but were unknown at the time of purchase.
EscrowA neutral third-party arrangement where funds, documents, and instructions are held until all conditions of a real estate transaction are satisfied.
Closing CostsFees and expenses paid by the buyer and/or seller at the closing of a real estate transaction, in addition to the property's purchase price.
Short SaleA sale of real property where the sale proceeds are less than the outstanding mortgage balance, requiring lender approval.
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