Final answer:
The Real Estate Settlement Procedures Act (RESPA) requires that banks provide clear disclosures to borrowers, prevent discrimination, and ensure transparency in reporting loan data. RESPA also mandates timely responses to borrower inquiries and has specific rules regarding escrow account management.
Step-by-step explanation:
RESPA, which stands for the Real Estate Settlement Procedures Act, places several obligations on banks with regard to mortgages. These obligations are designed to protect consumers and ensure clear communication between lenders and borrowers. Notably, RESPA requires that lenders provide borrowers with disclosures at various times in the transaction, prohibits certain practices like kickbacks and referral fees, and mandates that lenders establish escrow accounts for insurance and tax payments.
Banks must provide a good faith estimate of the costs of the mortgage transaction and a HUD-1 settlement statement that outlines the actual costs at the close of escrow. They must also furnish a booklet that explains the various charges and fees involved in obtaining a mortgage. Additionally, RESPA prevents banks from discriminating against loan applicants based on age, race, sex, or marital status, and requires transparency in the public reporting of loan data to monitor for fair lending practices.
Another aspect of RESPA is the requirement that banks respond to borrower inquiries and complaints in a timely manner. It also limits the amount banks can maintain in escrow accounts for property taxes and insurance. Finally, banks are obligated to provide an annual escrow statement to the borrower that details the account activity and projected charges for the forthcoming year.