State and Federal authorities are increasing their enforcement of the Real Estate Settlement and Procedures Act (RESPA).
Why?
Complaints! The increasing rate of foreclosures nationwide has exposed that many entities went "over the line" and put their fees ahead of conducting business according to the spirit and rules of RESPA. Some appear to have lost their moral compass and put people into properties they could not afford and loaded them up with high fees and costs to boot. With so many homeowners scratching their heads and complaining to authorities about their homes being taken away, or the value of their homes being slashed, RESPA violations have come to the surface.
Like the water level in a reservoir -when the water level is high you do not see the stumps. When the water level drops it is pretty clear where they are.
With the drop in the housing market and values in many areas plummeting it is appears that much of the "value" of the home was puffed due to increased fees, expenses,illegal kickbacks and illegal referral fees that were stuck in Buyers' loans and hidden from view.
Many legitimate and "play by the rules" Title Companies, Mortgage Companies, Real Estate Brokers and
Agents have been complaining for years about illegal kickback and unearned referral fees being spread about like candy by illegitimate AfBA's and non-AfBA's (Affiliated Business Arrangements.)
It is illegal to pay fees for the referral of mortgage and title business as well as other settlement services according to RESPA. The "good guys" lost business to the "bad guys" who paid out fees for the referral of business.
The high profile names of very familiar Real Estate franchises, Title Companies, Mortgage Companies and Real Estate Brokerages who have gotten nailed (big $$$$ penalties!) shows the seriousness of HUD and State Regulators. They appear to be aggressively trying to end these practices that hurt Consumers and Settlement Providers who play by the RESPA rules.
The use of "marketing agreements" and "advertising expenses" is under close scrutiny by State and Federal authorities. Many of these agreements are not passing the smell test evidently judging by the enormous fines and penalties incurred by some of the largest entities in the real estate business.
Colorado appears to have taken the lead but many other States are stepping up their enforcement actions as well. There will be many more high profile (and low profile!) actions coming.
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