HUD has issued a ruling regarding fees paid by Home Warranty companies to real estate agents and mortgage originators. There is nothing new to the intepretation of RESPA, "A referral is not a compensable service for which a broker or agent may receive compensation."
The HUD notice indicated that the ruling was exempt from a requirement for public comment, but they have opened comment on this interpretation through July 26.
Consistent with established interpretation of RESPA rules, any fees paid to a referring agent must be "actual, necessary and distinct from the primary services provided by the real estate broker or agent."
The rule specifically addresses what marketing efforts constitute services that entitle an agent to be compensated by the Warranty Company.
The rule states that "marketing performed by a real estate broker or agent on behalf of an HWC to sell a homeowner warranty to particular homebuyers or sellers is a ‘‘referral'' to a settlement service provider."
The distinction seems to be that a fee paid for referring a specific client to a warranty company is kickback. Marketing that is not directed toward a specific client might qualify for compensation. The ruling gives specific guidance on what is required to qualify for compensation.
This interpretation is effective as June 25, 2010.
Given that this interpretation of RESPA is in no way unusual and that the ruling is specific in addressing fees paid by warranty companies, the practice must have come under close scrutiny by HUD.
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Richard Smith |
American Acceptance Mortgage, Inc |
FHA, VA, Rural Development, Conventional, Jumbo,
Reverse Mortgages, FHA 203k Renovation
Home financing in Tennessee and Georgia.
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