Texas Real Estate Brokerage Sales Apprentice Education (SAE) Practice Exam

Which act was created to help consumers understand their rights in real estate settlement and settlement services?

1. The Fair Housing Act

2. The Real Estate Settlement Procedures Act (RESPA)

3. The Mortgage Disclosure Improvement Act

4. The Truth in Lending Act

The correct answer is: The Real Estate Settlement Procedures Act (RESPA)

The Real Estate Settlement Procedures Act (RESPA) was established to provide consumers with information about their rights in the real estate settlement process and to ensure that they receive accurate and timely disclosures when obtaining settlement services. The act aims to prevent abusive practices such as kickbacks and referral fees that can inflate the cost of settlement services. RESPA requires that consumers are provided with a Good Faith Estimate (GFE) of settlement costs and the HUD-1 Settlement Statement, which itemizes all charges involved in the transaction. This transparency empowers consumers to make informed decisions and fosters fair competition among service providers. While the Fair Housing Act focuses on preventing discrimination in housing, the Mortgage Disclosure Improvement Act primarily deals with loan disclosures, and the Truth in Lending Act is concerned with informing consumers about the costs of credit. Each of these acts serves important purposes within real estate and financing, but RESPA is specifically targeted at navigating the complexities of the settlement process, making it the central piece of legislation that directly addresses consumer rights during real estate transactions.