14.29 Prohibited Settlement Practices: Kickbacks, Fee-Splitting, Unearned Fees

RESPA prohibits anyone from giving or accepting a fee, kickback, or anything of value in exchange for referrals of settlement service business involving a federally related mortgage loan. Some examples of this are:

• Lenders giving a referral fee to a real estate agent for referring a purchaser.

• Title companies giving kickbacks to lenders who refer loans to them in exchange for something of value.

• Appraisers sharing the appraisal fee with the lender who ordered the appraisal for a borrower.

Violations of RESPA’s anti-kickback, referral fees, and unearned fees provisions are subject to criminal and civil penalties. If licensees are to receive fees from lenders, or other service providers involving the settlement process, legal counsel should be engaged to determine whether the fee arrangement meets the requirements of RESPA. For example, a lender may be able to provide a fee to a real estate agent if the agent prepares and collects the initial borrower information and provides this package of information to the lender. However, the rules and regulations regarding this type of activity are very specific and must be followed.