The Real Estate Settlement Procedures Act, known as RESPA, is an act of Congress that requires real estate documentation to clearly show settlement fees and other transaction-related costs. This act also outlawed the practice of giving kickbacks in real estate. Prior to this act’s implementation in 1974, real estate companies often added fees to real estate sales not related to the real costs of the transactions or even a reasonable profit. These activities inflated the cost of real estate and made it difficult for consumers to find the best deal when it came to closing costs. A typical example of what RESPA made illegal was lender kickbacks. A lender would advertise a low mortgage rate, like 6 percent. They told an applicant that to qualify for that rate, they would need to use the lender’s title company and pay $3,000 in fees. The title company got the $1,000, and the lender kept the extra $2,000.
