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Refresh Yourself on RESPA...True or False..?

By Hans Iduma

Mortgage and Lending

June 30, 2008 12:02 PM

I sent my realtor flowers to thank her for the client she recently referred to me. RESPA violation? True or False? See answer below.

Feel a bit rusty when it comes to the Real Estate Settlement Procedures Act (RESPA)? Congress passed RESPA in 1974 to protect consumers and ensure fair competition in the mortgage shopping process. It may be time for a refresher course, especially since the U. S. Department of Housing and Urban Development (HUD) continues to strictly enforce its laws and provisions.

RESPA covers many subjects. The most important subject deals with compensation agreements that involve giving or accepting anything of value for referrals associated with federally-related mortgage loans. Section 8 of RESPA strictly prohibits kickbacks, fee-splitting and unearned fees. Violators are subject to fines up to $10,000 and one-year imprisonment. If a private lawsuit is filed, the defendant can be liable for an amount equal to three times the charge paid for the service.

Home sellers cannot require buyers to purchase settlement services from a particular company---directly or indirectly---as a condition of sale. If found in violation, section 9 allows the purchaser to sue the seller for an amount equal to three times all charges made for the title insurance. To stay current on all RESPA rules, regulations and guidelines, visit the HUD website at: www.hud.gov/offices/hsg/sfh/res/respa_hm.cfm.

True. You can not give something of value for a client referral. Flower is considered something of value and hence, RESPA law prohibits gifting something of value in consideration of a mortgage loan referral.

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Glenn Sanford

eXp Realty & Working The Magic, LLC - Bellingham, WA

I know talking with the Title and Escrow companies that they have cut back on the things they do for agents. It used to be that you get in the business and the marketing folks from the Title and Escrow company would bring over calendars, pens, pads, and other materials which one might need in the business. They all had their names on them so it was a form of marketing, but now they don't provide any valuable services. It's almost like they got a law put in place so that they wouldn't have to market... Make them more profitable in the process...

Of course as agents we aren't supposed to direct business, however our clients have no clue and those who are top of mind in our minds are typically the ones who get the business.

Jun 30, 2008 12:13 PM

Michael Johnson

Carolina One Real Estate - Goose Creek, SC

Metro Charleston SC

There is a difference between sending someone flowers for referrals and just sending flowers. Intent is very hard to prove...unless it is in writing.

Jun 30, 2008 12:18 PM

Fran Gaspari

Patriot Land Transfer, Inc. - Limerick, PA

"The Title Man" - Title Insurance - PA & NJ

Hans,

Nice post! Too many real estate service providers take RESPA too casually...and it is written for the consumer...I for one like the way it was originally written...not the CBA loopholes of the late 80s!!! Thanks, Fran

Jun 30, 2008 12:24 PM

Adam Brett

The Adam and Eric Group - Fullerton, CA

The Adam and Eric Group, Fullerton's Finest

False. Flowers are not an item of value as they cannot be exchanged for cash or credit. This is a little grey but I doubt you would go to jail.

Jun 30, 2008 03:43 PM

Hans Iduma

Gaithersburg, MD

Certified Mortgage Planning Specialist

Glenn---I guess the Title & Escrow companies are simply cutting back on expenses and that really does not have anything to do with RESPA.

Michae---If you read closely, it says sending flowers to thank her for the client she recently referred to you. Obviously, the intent is there.

Fran---Ha, ha, ha.. you are right on the money.

Adam---I doubt any one would send you to jail for flowers, but it is considered an item of value and exhibiting a patern could open up a can of worm for the violator. This example is used quite a bit in RESPA trainings.

Jun 30, 2008 03:56 PM

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Hans Iduma

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