Which type of loan is NOT covered by RESPA?

Study for the NMLS Hawaii Mortgage Loan Originators State Exam. Use flashcards and multiple-choice questions for effective preparation. Gain insights, hints, and explanations for each question and ensure you’re ready for success!

The type of loan that is not covered by the Real Estate Settlement Procedures Act (RESPA) is commercial loans. RESPA was established to govern residential mortgage loans, specifically those secured by a borrower's residential property. It applies to loans meant for the purchase of single-family homes, multifamily residences, and other types of residential properties.

Commercial loans, however, are used to finance properties for business or investment purposes rather than personal residences. Since RESPA focuses primarily on enhancing transparency in the settlement process and protecting consumers in residential transactions, it does not extend its regulations to commercial lending. Thus, those engaging in commercial loan transactions do not benefit from the same consumer protections that RESPA provides for residential loans.

In contrast, FHA loans and VA loans are types of residential loans that are specifically designed to assist borrowers in purchasing homes, and they fall under the provisions of RESPA. Home equity loans also apply as they are secured by the equity in a borrower's primary residence. Therefore, identifying commercial loans as exempt from RESPA is accurate since it operates outside of the act's intended scope.

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