Real Estate News  

Perhaps Its Time for Some RESPA Reminders


Written By: Bob Hunt
Monday, December 17, 2018

In 1974 Congress enacted the Real Estate Settlement and Procedures Act, commonly known as RESPA. The provisions of RESPA were intended to protect consumers during the home purchase process. Its two main areas of emphasis were 1 the provision of disclosures regarding settlement closing costs, and 2 the prohibition of kickbacks or referral fees that unnecessarily increase closing costs. Section 8 of RESPA makes it illegal, except for limited specified exceptions, to give someone money or any other thing of value for the referral of a real estate settlement service. For example, if I received money, or anything of value, for referring someone to an escrow company, in most every case that would be a violation of section 8 of RESPA.

While the Department of Housing and Urban Development has for a long time been the chief enforcer of RESPA provisions, that has, since 2011, become the province of the Consumer Financial Protection Bureau CFPB. It has become an active enforcer and agents should be aware.

Fortunately, the National Association of Realtors, keeps track of RESPA activity and of the ever-on-going issues of interpretation. In what follows, we will look at a sample of issues featured on NARrsquo;s web page regarding frequently-asked RESPA questions.

Question 1

A real estate agent is sponsoring an open house for other agents. A local title agency reimburses the real estate agent for the cost of a luncheon and the title agency does not market its title services at the open house. Is this a violation of Section 8 of RESPA?

A: Yes, this is a violation of RESPA. By reimbursing the real estate agent for the cost of the luncheon, the title agency has given the real estate agent a thing of value in consideration for the referral of business. Both the title agency and the real estate agent could be held responsible for the RESPA violation. If, however, the title company attends the open house to make a presentation or to otherwise market its services, such payments may be lawful under RESPA.

Question 2

A real estate broker and a mortgage lender agree to jointly place a full-page advertisement in a local newspaper. Each company gets exactly one-half of the page to advertise its services. Each company pays one-half of the cost of the advertisement. Is this a violation of Section 8 of RESPA?

A: No, this appears to comply with RESPA. As long as the advertising costs paid by each party are reasonably >

Question 3

A real estate broker pays its real estate agents 20 for each referral the agents make to the real estate brokerrsquo;s affiliated mortgage company. Is this a violation of Section 8 of RESPA?

A: Yes, this is a violation of RESPA. Although RESPA provides an exception for payments made from an employer to its employees, payments between a real estate broker and its salespeople do not qualify for this exception. Real estate professionals are considered independent contractors, rather than employees of the real estate broker. As a result, the 20 payments described above constitute payments in return for the referral of business in violation of RESPA.

As previously mentioned, the NAR website contains a large amount of information, including regular columns, regarding RESPA Moreover, most of these pages are on the ldquo;publicrdquo; side. That is, you donrsquo;t have to log in with a user name and password. Readers are encouraged to take a look for themselves, and to become familiar ndash; if they arenrsquo;t already ndash; with the highly >

A few of the more accessible and >

RESPA Quiz

RESPA FAQ

Window to the Law: RESPA video

Happy reading



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