RESPA on a refinance: affiliated title, escrow refunds and servicer duties

With no seller in the deal, RESPA’s weight falls on the title referral, the two escrow accounts you briefly carry, and the notices you receive when the new loan is sold or its servicing transferred.

The title referral is where RESPA bites

On a refinance there is no seller and no real-estate agent, so the only settlement service anyone can steer you toward is title and settlement. If your lender or loan officer refers you to a title company it has an ownership interest in, Regulation X §1024.15 requires a written Affiliated Business Arrangement disclosure at the time of the referral, showing the relationship and the estimated charges, and with narrow exceptions the lender cannot require you to use that affiliate. Section 8 separately bans any fee, rebate or thing of value exchanged for the referral itself. What RESPA does not do is cap the affiliate’s price; that job belongs to the Loan Estimate, because fees paid to a lender affiliate fall in TRID’s zero-tolerance bucket.

Practical moves: ask any title agent for the reissue or refinance rate on the lender’s policy (many states discount it when the existing policy is only a few years old), and compare the settlement fee across two agents before you sign the intent to proceed. Owner’s title insurance is not needed on a refinance; a quote that lists it is padding.

Escrow: two accounts, not one

Refinancing does not move your escrow balance. The new lender collects a fresh initial deposit at closing — RESPA limits it to the amounts needed for the next disbursements plus a cushion of at most two months — and your old servicer must refund whatever sat in the prior account within 20 business days of the payoff under §1024.34(b). Ask the new lender to confirm it used your actual tax and insurance due dates in the aggregate escrow calculation, and expect an initial escrow account statement within 45 days of closing. If the old and new lender are the same institution, ask whether it will net the balances at closing: allowed, not required, and it avoids funding the same taxes twice and waiting for a check.

When the new loan is sold

Most refinances are sold to an investor within weeks, and the servicing often transfers separately. Section 1024.33 requires the old servicer to notify you at least 15 days before the transfer date and the new one within 15 days after (a single combined notice is common), and during the 60 days following the effective date a payment sent to the old servicer on time may not be treated as late. Letters that arrive during this window claiming your “loan has transferred” and giving a new payment address are a known fraud pattern — verify with the phone number on your Closing Disclosure, not the one on the letter.

One more right worth knowing: a written “notice of error” or “request for information” to the servicer must be acknowledged within five business days and answered within 30 business days, and an error in a payoff balance must be corrected within seven. Use it if the payoff of your old loan posted late and interest kept accruing past the funding date.

What to check

• Ask whether the title company on your Loan Estimate is affiliated with the lender, and get the written AfBA disclosure if it is.
• Request the reissue rate on the lender’s title policy and drop any owner’s policy line from a refinance quote.
• Calendar the old escrow refund: 20 business days after payoff, or ask the same-lender refinance to net the balances at closing.
• Keep the servicing transfer notice and pay the old servicer for 60 days if in doubt — that payment cannot be treated as late.

Frequently asked questions

Can the lender make me use its own title company on a refinance?

RESPA generally prohibits requiring the use of an affiliated settlement provider as a condition of the loan, with limited exceptions such as the lender choosing its own attorney or appraiser. It must disclose the affiliation in writing when it refers you. You remain free to shop, and charges from a non-affiliated provider you choose are not subject to the lender’s fee tolerances.

Why did I pay into escrow at closing when my old loan already had an escrow balance?

Because the two accounts are separate. The new lender must fund its own account to cover the next tax and insurance bills plus a cushion, and the old servicer refunds your prior balance within 20 business days of the payoff. The overlap is temporary but real, so include the initial deposit when you compute the cash needed to close.

The rule in full: Real Estate Settlement Procedures Act (RESPA) and Regulation X. The borrower profile: Refinancing homeowners. Related guides: Rate-and-term refinance: when it pays, how to compute the break-even · Cash-out refinance: limits, costs and when it is the wrong tool · Closing costs explained: what is negotiable, what is not · Earnest money explained: how much, who holds it, and how you lose it.

Other federal rules for refinancing homeowners

TILA / Reg Z · TRID disclosures · ECOA · Fair Housing Act · HMDA · SAFE Act / NMLS · ATR / QM · HOEPA · HPA / PMI · Servicing rules · FCRA · Flood insurance · MARS rule · SCRA · LO compensation

RESPA for other borrowers

First-time buyers · Conventional borrowers · Veterans · Self-employed · Investors · Retirees · Bad credit · Foreign nationals · Physicians · Heroes · Rural buyers · Condo & second home