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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.
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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