Does RESPA apply to all residential real estate transactions?

The correct response is that RESPA applies only to federally regulated financed transactions. The Real Estate Settlement Procedures Act (RESPA) was established to facilitate transparency in the settlement process for residential properties that involve federally related mortgage loans. This includes loans backed by federal entities such as FHA, VA, or those sold to Fannie Mae or Freddie Mac.

RESPA mandates that borrowers receive information concerning settlement costs and prohibits certain practices, such as kickbacks and referral fees that could increase the cost of real estate settlement services. It ensures that applicants receive good faith estimates of closing costs and disclosures about their mortgage servicing.

The act does not govern all residential transactions universally, as it specifically relates to those that involve federally regulated financing. Therefore, transactions that do not involve federal loans, such as cash purchases or loans from private lenders, would not fall under RESPA's purview.

Understanding this scope helps clarify that RESPA's primary purpose is to protect consumers when they engage in financing that is associated with federally regulated banks and lending institutions, thereby distinguishing it from state-regulated transactions or commercial deals which have different regulatory frameworks.