In the mortgage process, what is a lender not allowed to do according to RESPA?

The correct answer reflects the provisions set forth by the Real Estate Settlement Procedures Act (RESPA), which prohibits lenders from requiring borrowers to use a specific title company as a condition for obtaining a mortgage. This is intended to promote competition and transparency in the settlement process, allowing borrowers the freedom to choose their title insurance provider without being pressured or restricted by the lender.

This regulation ensures consumers have the opportunity to shop around for better rates and services, thereby fostering a more competitive environment in the mortgage industry. The intent behind this rule is to protect consumers from potential conflicts of interest where a lender could benefit from directing business to a particular title company.

The other options relate to standard practices within the mortgage lending process:

• Charging fees for processing a loan is a customary practice as long as the fees are disclosed properly.

• Adjusting interest rates based on application speed can be part of a lender's pricing strategy, depending on market conditions and borrower qualifications.

• Sending the Loan Estimate within three days is a requirement of RESPA to ensure that borrowers receive important costs related to their mortgage in a timely manner.

Understanding these regulations helps protect consumers in the mortgage process, ensuring they are treated fairly and have access to the information they need to make informed decisions.