What does RESPA stand for and what is its purpose?

The correct answer is B, which stands for the Real Estate Settlement Procedures Act. This federal law was enacted to promote transparency in the real estate settlement process. The primary purpose of RESPA is to ensure that consumers are provided with clear and honest information regarding the costs associated with the settlement process involved in obtaining a mortgage.

RESPA mandates that lenders provide borrowers with a Good Faith Estimate of closing costs and other important information about the loan, allowing consumers to compare different options and make more informed choices. Additionally, it prohibits specific practices such as kickbacks, which can lead to inflated costs for consumers. By regulating these fees and promoting disclosure, RESPA aims to prevent practices that could exploit consumers during the home loan process.

Understanding RESPA is crucial for mortgage loan originators as it directly impacts how they interact with clients and disclose important financial information throughout the mortgage application process. The focus on preventing kickbacks and ensuring cost transparency helps create a fairer and more competitive marketplace for consumers seeking loans.