Will Gus's home equity line of credit be subject to Real Estate Settlement Procedures Act requirements?

The reason why Gus's home equity line of credit will be subject to Real Estate Settlement Procedures Act (RESPA) requirements is that RESPA applies to any residential loan transaction, which includes home equity lines of credit. RESPA is designed to protect consumers during the home purchasing process by requiring lenders to provide certain disclosures and prohibit specific practices, such as kickbacks.

When a homeowner takes out a home equity line of credit, they are engaging in a financial transaction that falls under the scope of residential lending. Even though a home equity line of credit functions differently from a traditional mortgage—being more like a revolving line of credit—it is still a loan secured by the home. Therefore, it must adhere to the regulations that govern residential loan transactions as stipulated by RESPA.

The other options do not fully capture the regulatory framework in which home equity lines of credit operate. For instance, dismissing it as "not a mortgage" does not account for its classification as a secured loan. Similarly, claiming it is only applicable based on the property value overlooks the fact that RESPA is comprehensive in context and applies across various scenarios regardless of the home's value, as long as it meets the residential loan definition. Also, stating it is just a line of credit neglects to