Compliance Monitoring Software

The Real Estate Settlement Procedures Act (RESPA) was enacted in 1974. A primary rational for the law was to keep settlement costs down by making illegal: unearned fees, splits of fees, referral fees and kickbacks. Section 8 of RESPA states:

1. Section 8 violation. Any violation of this section is a violation of section 8 of RESPA (12 U.S.C. 2607).
2. No referral fees. No person shall give and no person shall accept any fee, kickback or other thing of value pursuant to any agreement or understanding, oral or otherwise, that business incident to or part of a settlement service involving a federally related mortgage loan shall be referred to any person. Any referral of a settlement service is not a compensable service, except as set forth in § 1024.14(g)(1). A company may not pay any other company or the employees of any other company for the referral of settlement service business.
3. No split of charges except for actual services performed. No person shall give and no person shall accept any portion, split, or percentage of any charge made or received for the rendering of a settlement service in connection with a transaction involving a federally related mortgage loan other than for services actually performed. A charge by a person for which no or nominal services are performed or for which duplicative fees are charged is an unearned fee and violates this section. The source of the payment does not determine whether or not a service is compensable. Nor may the prohibitions of this part be avoided by creating an arrangement wherein the purchaser of services splits the fee.
4. Thing of value. This term is broadly defined in section 3(2) of RESPA (12 U.S.C. 2602(2)). It includes, without limitation, monies, things, discounts, salaries, commissions, fees, duplicate payments of a charge, stock, dividends, distributions of partnership profits, franchise royalties, credits representing monies that may be paid at a future date, the opportunity to participate in a money-making program, retained or increased earnings, increased equity in a parent or subsidiary entity, special bank deposits or accounts, special or unusual banking terms, services of all types at special or free rates, sales or rentals at special prices or rates, lease or rental payments based in whole or in part on the amount of business referred, trips and payment of another person's expenses, or reduction in credit against an existing obligation. The term “payment” is used throughout §§ 1024.14 and 1024.15 as synonymous with the giving or receiving of any “thing of value” and does not require transfer of money.
5. Agreement or understanding. An agreement or understanding for the referral of business incident to or part of a settlement service need not be written or verbalized but may be established by a practice, pattern or course of conduct. When a thing of value is received repeatedly and is connected in any way with the volume or value of the business referred, the receipt of the thing of value is evidence that it is made pursuant to an agreement or understanding for the referral of business.

Referrals and endorsements do not violate RESPA if they are FREE. However, because the definition of “things of value” is broad, and there is no “minor, or de-minimus” threshold or exception, it is very hard to identy **. As indicated above, Things of value, includes, but is not limited to:

Violations of Section 8 are subject to criminal and civil penalties. Violators can be fined up to $ 10,000 and imprisoned for up to one year. RESPA provides for a private right of action where the Plaintiff can receive damages for up to three times the amount paid for the service.