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I. RESPA Protection Against Illegal Referral Fees
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RESPA was enacted because Congress felt that consumers
needed protection from “…unnecessarily high settlement charges caused by
certain abusive practices that have developed in some areas of the
country.” Some of the
practices Congress was concerned about are discussed below.
Most professionals in the settlement business provide good service
and do not engage in these practices.
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Prohibited Fees: It is illegal under
RESPA for anyone to pay or receive a fee, kickback or anything of value
because they agree to refer settlement service business to a particular
person or organization. For
example, your mortgage lender may not pay your real estate broker $250 for
referring you to the lender. It
is also illegal for anyone to accept a fee or part of a fee for services if
that person has not actually performed settlement services for the fee. For example, a lender may not add to a third party’s fee,
such as an appraisal fee, and keep the difference.
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Permitted Payments: RESPA does not
prevent title companies, mortgage brokers, appraisers, attorney’s,
settlement/closing agents and others, who actually perform a service in
connection with the mortgage loan or the settlement, from being paid for the
reasonable value of their work. If
a participant in your settlement appears to be taking a fee without having
done any work, you should advise that person or company of the RESPA
referral fee prohibitions. You
may also speak with your attorney or complain to a regulator.
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Penalties: It is a crime for someone to
pay or receive an illegal referral fee.
The penalty can be a fine, imprisonment or both.
You may be entitled to recover three times the amount of the charge
for any settlement service by bringing a private lawsuit. If you are successful, the court may also award you court
costs and your attorney’s fees.
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