What Loan Types Are Not Covered by RESPA?

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The Real Estate Settlement Procedures Act (RESPA), regulates the disclosure of costs and affiliated business arrangements in a real estate settlement transaction.

Loan types covered by RESPA are many, but there are several loan types specifically exempt from the law. Although it may be good business practice to disclose all costs and affiliated business arrangements anyway, lenders are not required to do so by RESPA for these exempted loan types.

Key Takeaways

  • The Real Estate Settlement Procedures Act (RESPA) is a federal law that requires lenders to provide specific disclosures to the parties involved in a real estate transaction.
  • RESPA covers “federally-related” real estate transactions for residential units designed for one to four families.
  • Some loans are not covered by RESPA, including loans for business, commercial or agricultural purposes, among other uses.

What Is Respa?

RESPA is a federal law that requires mortgage brokers, lenders, and servicers to provide borrowers with disclosures about costs associated with a loan and what to expect from the real estate transaction process.

Services and costs covered include:

  • Title searches
  • Title examinations
  • Provision of title certificates
  • Title insurance
  • Attorney services
  • Preparation of key documents like property surveys, credit reports, inspections, etc.
  • Mortgage origination

To make it easier for borrowers to understand RESPA disclosures, the Consumer Financial Protection Bureau (the agency that executes the law via regulation) has required that lenders provide prospective borrowers with two disclosure forms to make it easier for them to compare their options: a loan estimate and a closing cost disclosure.

Types of Real Estate Loans Exempt From RESPA Requirements

RESPA applies to federally-backed mortgages for residential properties designed for one to four families. This includes purchase loans, refinances, and reverse mortgage loans. The law does not apply to loans for business, commercial, or agricultural properties, among others.

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 to purchase or improve a rental property of one to four residential units, then it is regulated by RESPA.

Why are commercial or business loans exempt? Commercial business owners are generally much savvier and knowledgeable about real estate transactions. If they aren't, they hire professionals to help them due to the large size of transactions these kinds of real estate purchases involve. There is often a team of professionals involved, from real estate agents to attorneys and project managers. They each have a specific job to do in evaluating a prospective commercial real estate purchase for suitability. 


The relatively greater sophistication of the professional investors, buyers, and sellers are in stark contrast to the first-time homebuyer or someone who has only purchased a couple of homes in their lifetime. Those are the buyers RESPA is meant to protect, not the professionals.

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.

This is another case of the relative experience and knowledge of the participants in the transaction. If a developer is buying land to subdivide it, then they have their subdivision plans, one or more attorneys to deal with the local laws and zoning, and construction people ready to advise in order to get the work of putting in streets and utilities and putting up houses.

If a parcel of vacant land is to be used as the location for an industrial or manufacturing facility, the same expertise and knowledge of the players comes into play. If a large corporation wants a new warehouse or manufacturing facility, they already know precisely what that looks like, the parcel size they need for the facility, parking, and the local zoning laws.

Certain Loan Assumptions

When a loan is assumed, and the lender has no rights to approve future persons for the assumption, then the loan is not covered by RESPA. There aren't many residential assumable loans anymore, but VA loans are a notable exception.

Construction-Only Loans

Unless a loan is made as a construction-to-permanent loan, it is not covered. Often custom homes are to be built and the land is used as collateral for a temporary construction loan to get the home built. When the loan will be paid off and a new permanent mortgage initiated, RESPA isn't involved. However, if the loan is a construction-to-permanent loan in one package, it is subject to RESPA.

The Bottom Line

Laws and regulations are constantly evolving and subject to reinterpretation. Real estate agents should keep abreast of them, at least at the big picture level. Title companies and lenders need to stay much closer to developments, as they have to get the paperwork right.

Frequently Asked Questions (FAQs)

What type of loans are exempt from RESPA?

The Real Estate Settlement Procedures Act (RESPA) covers most federally-related home and real estate loans for consumers. It does not cover loans for business, commercial, or agricultural purposes. It also does not cover loans for vacant land nor construction loans.

Are reverse mortgages covered by RESPA?

Yes, reverse mortgages are covered by RESPA, and lenders must disclose certain details about the loan and its costs to borrowers. Disclosures for the HECM reverse mortgages (the most common type) are made using the HUD-1 Settlement Statement, a different disclosure form than used for traditional loans.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Consumer Financial Protection Bureau. “Know Before You Owe.”

  2. Board of Governors of the Federal Reserve. “Regulation X: Real Estate Settlement Procedures Act,” Pages 2-3.

  3. Consumer Financial Protection Bureau. “§ 1024.5 Coverage of RESPA.”

  4. Consumer Financial Protection Bureau. “§ 1026.33 Requirements for Reverse Mortgages.”

  5. Consumer Financial Protection Bureau. “What Is a HUD-1 Settlement Statement?

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