Buying Your Home:
Settlement Costs and Information
II. Buying and Financing a Home
RESPA protection against illegal referral fees
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.
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.
Permitted Payments. RESPA does not prevent title companies,
mortgage brokers, appraisers, attorneys, 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 listed in the Appendix to this Booklet.
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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