What does RESPA stand for and what is its main purpose?

The correct answer is that RESPA stands for the Real Estate Settlement Procedures Act, and its main purpose is to protect consumer rights in real estate transactions. This federal legislation was enacted to ensure that consumers are well-informed about the costs associated with closing a real estate transaction. RESPA mandates that borrowers receive a good faith estimate of settlement costs and provides guidelines designed to eliminate kickbacks and referral fees that could unnecessarily increase the costs of settlement services.

The act's focus on transparency is crucial because it helps consumers understand their financial obligations and the services they are paying for during the closing process. By requiring disclosures and providing the right to review these costs, the law promotes informed decision-making, which is essential in real estate transactions.

Understanding this framework emphasizes the importance of consumer protection in real estate, central to the goals of many real estate professionals aiming to foster fairness and trust in the marketplace.