Final answer:
RESPA protects consumers in the real estate market by providing transparency on the costs associated with buying a home, prohibiting unethical practices such as kickbacks, and mitigating discriminatory lending practices.
Step-by-step explanation:
The Real Estate Settlement Procedures Act (RESPA) is a federal law that helps protect consumers when they purchase homes. Specifically, RESPA ensures that homebuyers are provided with greater transparency during the homebuying process and have an understanding of the costs associated with real estate transactions. It requires lenders to provide disclosures to buyers including the Good Faith Estimate of closing costs and the HUD-1 Settlement Statement, which are designed to prevent any surprises at the closing table.
Under RESPA, lenders are also prohibited from engaging in certain practices, such as kickbacks or referral fees, that could increase the costs of real estate services. Moreover, RESPA addresses the issue of escrow accounts, where lenders are required to provide clear information on how the borrower's property taxes and insurance premiums are being paid. The act also contributes to the end of racially discriminatory practices, by ensuring that loans are not denied or made unduly expensive for borrowers based on race, sex, or other prohibited factors.