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What Loan Types are Not Covered by RESPA?


RESPA, the Real Estate Settlement Procedures Act, regulates the disclosure of costs and affiliated business arrangements or AfBA's in a real estate settlement transaction.

Loan types covered by RESPA are many, but there are specifically exempt loan types. Though it may be good practice to disclose all costs and affiliated business arrangements anyway, it is not regulated by RESPA to do so for these exempted loan types.

Commercial or Business Loans - Normally, loans secured by real estate for a business or agricultural purpose are not covered by RESPA. However, if the loan is made to an individual entity to purchase or improve a rental property of 1 to 4 residential units, then it is regulated by RESPA.

Vacant Land - When a loan is made to purchase vacant land, and none of the proceeds of the loan will be used to construct a covered residential structure, the loan is exempt from RESPA oversight.

Large Land Tracts - Land tracts of 25 or more acres, whether there is a residence or not, are not covered.

Certain Loan Assumptions - When a loan is assumed, and the lender has no rights to approve future persons for assumption, then the loan is not covered.

Construction Only Loans - Unless a loan is made as a construction-to-permanent loan, it is not covered.

Governments - As is usually the case with laws, the government exempted itself and state governments.

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