The Real Estate Settlement Procedures Act (RESPA) applies to which of the following loans?

• A. A personal loan for improvements
• B. A first mortgage home loan
• C. A line of credit
• D. A cash sale with no financing

Answer: (B)

RESPA covers the settlement process and disclosure obligations for federally related mortgage loans that are secured by real estate and used for residential properties (one-to-four units). A first mortgage home loan fits this exactly: it is a loan secured by the home itself, involved in purchasing or refinancing a residence, and it typically goes through a settlement process with lenders, title, and escrow services. Because of that, RESPA requires borrower disclosures and regulates settlement practices for this type of loan.

Loans that aren’t real estate–secured or don’t involve a real estate settlement don’t fall under RESPA. A personal loan for improvements isn’t secured by the property and isn’t part of a real estate settlement. A line of credit could be related to real estate in some cases, but isn’t automatically a RESPA loan unless it’s a real estate–secured mortgage loan. A cash sale with no financing involves no lender or settlement services, so RESPA wouldn’t apply.